Entire Section

  • PIN 3.6 PIN 3.6 Other requirements

    • PIN 3.6.1 PIN 3.6.1

      (1) Except as permitted in this Rule, a DIFC Incorporated Insurer must not effect any Direct Long-Term Insurance contract the terms of which include any of the following:
      (a) investment components of Policy Benefits, that are wholly or partly guaranteed;
      (b) options to receive Policy Benefits on expiry, maturity or surrender as annuities, where annuity rates are wholly or partly guaranteed at the inception of the contract;
      (c) bonuses on participating contracts where those bonuses become vested Policy Benefits or guaranteed by the Insurer at a date prior to expiry, maturity or surrender; or
      (d) other options or discretionary Policy Benefits that expose the Insurer to investment, expense or other risk that is not readily definable at the inception of the contract.
      (2) An Insurer may request the permission of the DFSA to effect Direct Long-Term Insurance contracts with features of the kind referred to in (1). A request must be made in writing and must include:
      (a) details of the terms of the proposed contracts;
      (b) an explanation of how the Insurer intends to price such contracts, and to value them for the purposes of its capital adequacy calculations; and
      (c) an explanation of how the Insurer intends to quantify, monitor and manage the risks to its capital adequacy represented by such features of contracts.
      (3) The DFSA may give an Insurer permission to effect Direct Long-Term Insurance contracts having one or more features of the kind referred to in (1). Permission shall be given in writing and shall be subject to such terms or conditions as the DFSA may specify in its notice giving permission. Where any terms and conditions are imposed on the Insurer, the Insurer shall comply with such terms and conditions.
      (4) The DFSA may on its own initiative at any time vary or revoke permission given under (3) above. Variation or revocation shall be communicated to the Insurer in writing.
      (5) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under this Rule not to give permission or to impose conditions or restrictions or to vary or revoke permission.
      (6) If the DFSA decides to exercise its power under this Rule not to give permission or to impose conditions or restrictions or to vary or revoke permission, the Insurer may refer the matter to the FMT for review.
      [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
      [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

      • PIN 3.6.1 Guidance

        1. The features described in PIN Rule 3.6.1(1) have the potential to expose an Insurer to risks that are not adequately provided for in the capital adequacy framework set out in this Rulebook. The DFSA retains the power to prohibit or limit the inclusion of such features in a Long-Term Insurance contract where it is of the view that the inclusion of such features may have a materially adverse impact upon the long term viability of the Insurer. It is natural for Insurers to seek to stimulate a market by offering features such as guarantees or options. However, the solvency of Insurers could be threatened if they have not adequately valued, stress-tested and set aside adequate capital to service such features. Therefore, the DFSA will expect Insurers seeking permission to write contracts with such features to demonstrate that these steps have been undertaken, and that their procedures provide adequately for ongoing monitoring of the associated risks. Permission to undertake such business may be subject to conditions, for example, a requirement to maintain additional capital, or to restrict business of this nature by reference to total business. The DFSA may also as a condition of granting permission require additional information relating to the business in question to be reported to the DFSA in the Insurer's periodic regulatory returns, or in the Actuary's report referred to in PIN Rule 7.3.4.
        2. If all the information required is provided to the DFSA relating to a request for permission under PIN Rule 3.6.2, generally, it will take about 45 days for the DFSA to be able to determine whether an Insurer should be permitted to effect Direct Long-Term Insurance contracts with features of the kind referred to in that Rule.
        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
        [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

    • PIN 3.6.2 PIN 3.6.2

      A DIFC Incorporated Insurer which undertakes Direct Long-Term Insurance Business must supervise adequately the conduct of its Direct Long-Term Insurance Business in each jurisdiction in which that business is undertaken.

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

      • PIN 3.6.2 Guidance

        1. In order to demonstrate compliance with PIN Rule 3.6.2, the senior management of a DIFC Incorporated Insurer should have mechanisms in place such that adequate information, in appropriate detail, is reported internally to senior management on a timely basis, and that this information is appropriately considered and acted upon.
        2. In discharging its responsibilities under PIN Rule 3.6.2, and under the high level requirements to which it is subject under GEN Rule 5.3.1, senior management will need to consider specific risks to which the Insurer is exposed as a consequence of its activity within each jurisdiction. Internal governance procedures such as Internal Audit should include examination of non-DIFC activities. Compliance procedures should be designed to ensure that the Insurer complies with any domestic regulation to which it may be subject in the jurisdiction in which it is doing business. Insurers are also expected to ensure that conduct of business by them in other jurisdictions does not pose any risk to the reputation of the DIFC. Consequently, senior management should ensure that adequate standards of customer protection are adopted by the Insurer's operation in each jurisdiction. Senior management should have regard to the provisions of GEN section 4.2 and in particular Principles 6, 7, 8 and 9 in considering whether standards of consumer protection are adequate. Review of persistency statistics may assist in identifying problems in the area of conduct of business.
        3. PIN Rule 3.6.2 does not preclude the establishment of appropriate local management structures with responsibility for the Insurer's business in the jurisdiction in question. However, the overall responsibility for ensuring compliance with domestic and DIFC regimes rests with the senior management of the Insurer.
        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]