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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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Prudential — Insurance Business Module (PIN) [VER15/01-18]
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  • PIN 2 Management and Control of Risk

    • PIN 2.1 Introduction

      • PIN 2.1.1

        This chapter applies to every Insurer.

        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.1.1 Guidance

          1. All Authorised Firms are subject to the systems and controls provisions of GEN chapter 5. This chapter expands on the relevant requirements of GEN as those provisions apply in the context of an Insurer.
          2. PIN App2 contains guidance for Insurers in respect of specific areas of risk management that are of particular relevance to Insurers.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

    • PIN 2.2 Risk management

      • PIN 2.2.1

        An Insurer's risk management systems must:

        (a) be appropriate to the size, business mix and complexity of the Insurer's operations;
        (b) address all material risks, financial and non-financial, to which the Insurer is likely to be exposed;
        (c) describe the relationships between the Insurer's risk tolerance limits, its capital requirements, economic capital and the processes and methods for monitoring risk; and
        (d) be supported by adequate risk management policies and procedures which explain the risks covered, the measurement approaches used, and the key assumptions made.
        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
        [Amended] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

      • PIN 2.2.2

        The risk management systems maintained by an Insurer must include:

        (a) a written risk management strategy approved by senior management, which in the opinion of senior management addresses all material risks to which the Insurer is likely to be exposed;
        (b) risk management policies and procedures that in the opinion of senior management are adequate to identify, assess, mitigate, control, monitor and report on the material risks to which the Insurer is exposed; and
        (c) clearly identified managerial responsibilities and controls, designed to ensure that the policies and procedures established for risk management are adhered to at all times.

        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.2.3

        Subject to PIN Rule 2.2.4, where an Insurer is a member of a Group, the Insurer must take reasonable actions to ensure that the Group as a whole complies with the requirements of PIN Rule 2.2.1 and PIN Rule 2.2.2 as though the Group as a whole were an Insurer.


        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.2.4

        PIN Rule 2.2.3 does not apply in respect of a Group where the Insurer is not the Holding Company and where the Holding Company of the Group is:

        (a) another Insurer; or
        (b) a Subsidiary of another Holding Company.
        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.2.4 Guidance

          1. The effect of PIN Rule 2.2.4 is to avoid duplication arising from complex Group structures. If an Insurer is a member of a Group whose Holding Company is another Insurer, the first Insurer need not apply PIN Rule 2.2.3 in respect of that Group, because the Insurer that is the Holding Company is already required to apply that Rule. Where an Insurer is a member of two or more Groups that are also sub-groups of a single Group, the Insurer may consider that single group as a whole for the purposes of this section. An Insurer that is a Holding Company is however still required to apply PIN Rule 2.2.3 in respect of any Group of which the Insurer is the Holding Company.
          2. An Insurer should describe how its risk tolerance limits described in PIN Rule 2.2.1(c) link with its corporate objectives, business strategy and current circumstances. An Insurer is expected to embed its risk tolerance limits into its day-to-day operations and its risk management policies and procedures.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

    • PIN 2.3 Management of particular risks

      • PIN 2.3.1

        An Insurer must develop, implement and maintain a risk management system to identify and address balance sheet and market risk, including but not limited to:

        (a) reserving risk;
        (b) investment risk (including risks associated with the use of derivatives);
        (c) underwriting risk;
        (d) claims management risk;
        (e) product design and pricing risk; and
        (f) liquidity management risk.

        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.3.2

        An Insurer must develop, implement and maintain a risk management system to identify and address credit quality risk.


        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.3.3

        An Insurer must develop, implement and maintain a risk management system to identify and address the non-financial or operational risk of that Insurer, including but not limited to:

        (a) technology risk (including processing risks);
        (b) reputational risk;
        (c) fraud and other fiduciary risks;
        (d) compliance risk;
        (e) outsourcing risk;
        (f) business continuity planning risk;
        (g) legal risk; and
        (h) key person risk.

        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.3.4

        An Insurer must develop, implement and maintain a risk management system to identify and address reinsurance risk. Reinsurance risk refers to risks associated with the Insurer's use of reinsurance arrangements as cedant.


        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.3.5

        Without limiting the generality of PIN Rule 2.3.4, an Insurer's risk management system in respect of its use of reinsurance arrangements must include the development, implementation and maintenance of a written reinsurance management strategy, appropriate to the size and complexity of the operations of the Insurer, defining and documenting the Insurer's objectives and strategy in respect of reinsurance arrangements.


        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.3.6

        An Insurer must develop, implement and maintain a risk management system which includes an explicit asset-liability management (ALM) policy, which must clearly specify the nature, role and extent of ALM activities and their relationship with product development, pricing functions and investment management.

        [Added] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

        • PIN 2.3.6 Guidance

          1. An Insurer's ALM policy should be appropriate taking into account the nature, scale and complexity of its ALM risks.
          2. The ALM policy should include details as to how:
          (a) the investment and liability strategies adopted by the Insurer allow for the interaction between assets and liabilities;
          (b) the correlations are taken into account;
          (c) the liability cash flows will be met by cash inflows; and
          (d) the valuations of assets and liabilities will change under an appropriate range of different scenarios.
          [Added] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

      • PIN 2.3.7

        For the purposes of PIN Rule 2.3.6, an Insurer may:

        (a) take into account:
        (i) its position within the Group,
        (ii) the materiality of the risk to which it is exposed because of its membership of the Group, and
        (iii) the access that it has to the systems and controls of other members of its Group and any information produced by them or by Associates; and
        (b) consider together Groups whose Holding Companies are all members of the same Group, except for any Group of which the Insurer is the Holding Company.
        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
        [Deleted] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 2.3.7 Guidance

          The effect of PIN Rule 2.3.7(b) is that, where an Insurer is a member of two or more Groups that are also sub-Groups of a single Group, the Insurer may consider that Group as a whole for the purposes of this section. An Insurer that is a Holding Company is however still required to give specific consideration to the risks to which it is exposed as Holding Company.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Deleted] RM46/2007 (Made 5th July 2007). [VER6/07-07]

    • PIN 2.4 Record-keeping

      • PIN 2.4.1

        An Insurer must maintain records adequate to enable it to:

        (a) fulfill its obligations under Contracts of Insurance effected by it; and
        (b) demonstrate that it complies with the Rules in PIN.

        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

    • PIN 2.5 Insurers that undertake surety insurance business

      • PIN 2.5.1

        This section applies only to Insurers that undertake Insurance Business in Class 7(b).

        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIB 2.5.2

        An Insurer that undertakes Insurance Business in Class 7(b) must ensure that:

        (a) in any reporting period, the amount of its Gross Written Premium attributable to Class 7(b) does not exceed 5% of its total Gross Written Premium in all classes of non-life insurance;
        (b) the Person insured under any Contract of Insurance in Class 7(b) is:
        (i) a Body Corporate; or
        (ii) if not a Body Corporate, a Financial Institution;
        (c) at the time of effecting a Contract of Insurance in Class 7(b), the Person insured under that contract has a rating of BBB or better; and
        (d) the maximum period of any Contract of Insurance in Class 7(b) does not exceed twenty years.
        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 2.5.3

        PIN Rule 4.1.4 applies in respect of determination of ratings for the purposes of PIN Rule 2.5.2(c).

        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 2.5.4

        An Insurer that is a Protected Cell Company that undertakes Insurance Business in Class 7(b) must comply with PIN Rule 2.5.2 in respect of each Cell to which such business is attributable.

        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 2.5.5

        (1) An Insurer intending to undertake Insurance Business in Class 7(b) must:
        (a) notify the DFSA in writing of its proposal to undertake such business; and
        (b) give to the DFSA a business plan for the business intended to be undertaken.
        (2) The DFSA may object to a proposal made by an Insurer under (1).
        (3) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under (2).
        (4) If the DFSA decides to exercise its power under (2), the Insurer may refer the matter to the FMT for review.
        (5) An Insurer must not effect any contract of insurance in Class 7(b) if the DFSA has objected to a proposal it has made under (1).
        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
        [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

        • PIN 2.5.5 Guidance

          1. If all the information required is provided to the DFSA relating to the proposal to effect Contracts of Insurance in Class 7(b), generally, it will take about 45 days for the DFSA to be able to determine whether an Insurer should be allowed to conduct this type of business. An Insurer may commence a reference to the FMT in relation to a decision of the DFSA to object to a proposal.
          2. The current requirements relating to Class 7(b) do not cater to monoline specialist financial guarantee insurers. However, if such an Insurer wishes to operate in the DIFC, the DFSA will consider what requirements should apply to it. In doing so, the DFSA will consider capital adequacy and other requirements that are generally applied to such specialist Insurers in other jurisdictions.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
          [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]