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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Recognised Jurisdictions and Funds
Declaration Notices
Financial Markets Tribunal
Archive
Rulebook Modules
Prudential — Insurance Business Module (PIN) [VER15/01-18]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices

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  • PIN App3 Calculation of Adjusted Capital Resources

    • PIN A3.1 Purpose and general provisions

      • PIN A3.1.1

        This appendix applies to all Insurers to which PIN section 4.3 applies.

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

        • PIN A3.1.1 Guidance

          1. This appendix sets out the manner in which an Insurer that is not a Protected Cell Company is required to calculate its Adjusted Capital Resources. The equivalent provisions for Insurers that are Protected Cell Companies are set out in PIN App5.
          2. The Adjusted Capital Resources are calculated by making adjustments to the Insurer's equity as at the Solvency Reference Date.

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

    • PIN A3.2 Adjusted capital resources

      • PIN A3.2.1

        An Insurer must calculate its Adjusted Capital Resources according to the formula:

        ACR = AE – HCA

        where:

        ACR means the Insurer's Adjusted Capital Resources;
        AE means the Insurer's adjusted equity; and
        HCA means the Insurer's hybrid capital adjustment.


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

      • PIN A3.2.2

        Adjusted equity is calculated as set out in PIN section A3.4. The hybrid capital adjustment is set out in PIN section A3.5.


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

    • PIN A3.3 Base capital

      • PIN A3.3 Guidance

        The commencement point for calculating an Insurer's adjusted equity is the Insurer's base capital.


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

      • PIN A3.3.1

        Subject to Rules PIN A3.3.2, PIN A3.3.3 and PIN A3.3.4, an Insurer's base capital consists of the following capital instruments and equity reserves of the Insurer:

        (a) paid-up ordinary shares, except for shares referred to in PIN Rule A3.5.1(d);
        (b) general reserves;
        (c) in the Insurance Fund of a Takaful Insurer, amounts provided from the Owners' Equity by loan to the Insurance Fund and not repaid as at the Solvency Reference Date;
        (d) retained earnings;
        (e) current year's earnings after tax; and
        (f) hybrid capital, as defined in PIN Rule A3.5.1.

        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
        [Amended] DFSA RM50/2007 (Made 1st October 2007). [VER7/10-07]

      • PIN A3.3.2

        Where an Insurer is not a DIFC Incorporated Insurer, base capital may include capital instruments and equity reserves that are approved in writing by the DFSA as equivalent to the capital instruments and equity reserves described in PIN Rule A3.3.1.


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

      • PIN A3.3.3

        Owner's Equity in a Takaful Insurer other than amounts referred to in PIN Rule A3.3.1(c) must be classified as hybrid capital for the purposes of this section if:

        (a) under the constitutional documents of the Insurer or the terms of insurance contracts or both, participation in the surpluses and losses of Takaful business is limited to the policyholders of the Insurer; and
        (b) the Owners' Equity is available for loan to the Insurance Fund of the Insurer.

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

      • PIN A3.3.4

        Hybrid capital having a term to maturity of less than five years may only be included in base capital with the written consent of the DFSA.


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

    • PIN A3.4 Adjusted equity

      • PIN A3.4.1

        An Insurer must calculate its adjusted equity by adding items to and deducting them from its base capital, as set out in this section.

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

        • PIN A3.4.1 Guidance

          The purpose of these adjustments is to provide a consistent basis for the determination of the Insurer's Adjusted Capital Resources and to exclude from those resources assets that may not be readily realisable for the purposes of meeting Insurance Liabilities of the Insurer.


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

      • PIN A3.4.2

        The following items must be added to base capital, to the extent that the Insurer has excluded them in determining its base capital:

        (a) any minority interests in companies that are Subsidiaries of the Insurer; and
        (b) any amount in respect of dividends to be paid by the Insurer in the form of shares.

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

      • PIN A3.4.3

        The following items must be deducted from base capital, to the extent that the Insurer has not excluded them in determining its base capital, or has added them to base capital under PIN Rule A3.4.2:

        (a) any amounts in respect of appropriations to be made from profit in respect of the reporting period most recently ended, including dividends, distributions by Takaful Insurers of surplus, bonuses, pensions and welfare charges that are determined on the basis of the profit of that reporting period, whether or not the amounts have been approved by the Insurer for payment;
        (b) Owners' Equity in a Takaful Insurer that does not, under the constitutional documents of the Insurer or the terms of insurance contracts or both, participate in the surpluses and losses of Takaful business;
        (c) the amount of any investment by the Insurer or by a Subsidiary of the Insurer, in the Insurer's own shares;
        (d) the amount of any tax liability that would be attributable to unrealised gains on investments, if those gains were realised;
        (e) the amount of deferred acquisition costs;
        (f) the amount of any deferred tax asset;
        (g) the amount of any asset representing the value of in-force Long-Term Insurance Business of the Insurer;
        (h) the amount of any goodwill, patents, service rights, brands and any other intangible items;
        (i) the amount of any Zakah or charity fund of a Takaful Insurer;
        (j) the amount of any operating assets, including inventories, plant and equipment, and vehicles; and
        (k) the amount of any other assets that may not be applied to meet Insurance Liabilities of the Insurer.

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

      • PIN A3.4.4

        PIN Rule A3.4.3(1) does not require an Insurer to exclude assets attributable to a Long-Term Insurance Fund maintained by the Insurer.


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

    • PIN A3.5 Hybrid capital adjustment

      • PIN A3.5 Guidance

        1. This section acts to limit hybrid capital to 15% of an Insurer's adjusted equity.
        2. The purpose of the hybrid capital adjustment is to limit the extent to which an Insurer may rely for its Adjusted Capital Resources on instruments that do not or may not constitute permanent capital of the Insurer. Such instruments include share capital contributed by a Holding Company, where the Holding Company's investment is financed by debt rather than by its own capital.

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

      • PIN A3.5.1

        Hybrid capital includes the following items:

        (a) subordinated debt;
        (b) preference shares;
        (c) Owners' Equity in a Takaful Insurer, of the type described in PIN Rule A3.3.3; and
        (d) ordinary shares issued by an Insurer to a Holding Company whose own paid-up ordinary share capital, taken together with its general reserves, is lower than that of the Insurer.

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

      • PIN A3.5.2

        Subject to PIN Rule A3.5.3, an Insurer must calculate its hybrid capital adjustment as the amount by which the total amount of hybrid capital exceeds 15% of adjusted equity.


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

      • PIN A3.5.3

        The DFSA may at its discretion and on the application of an Insurer, permit that Insurer to apply PIN Rule A3.5.2 as though the figure of 15% was replaced with a higher figure approved in writing by the DFSA. The approved figure may not be more than the actual percentage which the hybrid capital represents of adjusted equity, and may not in any case exceed 30%.


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