PIN A4.5 PIN A4.5 Investment volatility risk component
PIN A4.5 Guidance
The purpose of the investment volatility risk component is to require an
Insurerto set aside capital to cover the risk of deterioration in the values of Invested Assets. Invested Assetsthat are linked to liabilities of Investment-Linked Insurancecontracts are exempted from the calculation, since there is a direct correlation between the values of the assets and the values of the liabilities to which they are linked.
Subject to PIN Rule A4.5.2, an
Insurermust calculate its investment volatility risk component as the sum of the amounts obtained by multiplying the value of each Invested Assetwith the relevant percentage applicable to that asset as set out in the following table. Asset % (a) All bonds up to 1 year to maturity 1.0 (b) Bonds between 1 and 2 years to maturity 2.0 (c) Bonds between 2 and 5 years to maturity 4.0 (d) Bonds between 5 and 10 years to maturity 6.0 (e) All other bonds 8.0 (f) Equity investments* 15.0 (g) Preference shares 6.0 (h) Land and buildings 18.0 *Note: Item (f) includes equity shares, participations in collective investment schemes (whether or not the underlying investments are themselves equity investments), participations in joint ventures, and certificates of Mudaraba and Musharaka.
No amount must be included in the calculation of the investment volatility risk component in respect of:(a) investments that are linked to liabilities of
Investment-Linked Insurancecontracts; or(b) assets referred to in PIN Rule A4.4.7(b).
Where a Captive Insurer provides an intra-group loan to a member of its Group, it shall apply the same percentage factor for that intra-group loan as is applicable for a bond with an equivalent maturity as set out in PIN A4.5.1.Derived from DFSA RMI296/2021 (Made 24th February 2021). [VER17/04-21]