Entire Section

  • PIN 3 PIN 3 Long-Term Insurance Business

    • PIN 3.1 PIN 3.1 Introduction

      • PIN 3.1.1 PIN 3.1.1

        This chapter applies to all Insurers.

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

        • PIN 3.1.1 Guidance

          1.  This chapter sets out requirements in respect of Long-Term Insurance Business. An Insurer is required to maintain a separate fund in respect of Long-Term Insurance Business or to subject itself to the same restrictions as apply to a Long-Term Insurance Fund.
          2.  Requirements in this section that are not specified as applying to Direct Long-Term Insurance Business apply to all Long-Term Insurance Business.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]
          [Amended] DFSA RM56/2008 (Made 1st July 2008). [VER10/07-08]

    • PIN 3.2 PIN 3.2 Establishment of long-term insurance funds

      • PIN 3.2.1

        An Insurer that is required, under the provisions of PIN section 3.3, to establish or maintain a Long-Term Insurance Fund in respect of a part of its business must identify separately in its books and records the assets, liabilities, revenues and expenses attributable to that business. Those assets, liabilities, revenues and expenses must be recorded separately and accounted for as a Long-Term Insurance Fund.


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

      • PIN 3.2.2

        Where an Insurer that is not a Protected Cell Company carries on Long-Term Insurance Business that, under the provisions of PIN section 3.3, must be attributed to a Long-Term Insurance Fund, it must either:

        (a) establish one or more Long-Term Insurance Funds; or
        (b) notify the DFSA in writing that the Insurer is deemed to constitute a single Long-Term Insurance Fund.

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

      • PIN 3.2.3 PIN 3.2.3

        When an Insurer that is a Protected Cell Company carries on, through a Cell, Long-Term Insurance Business that, under the provisions of PIN section 3.3, must be attributed to a Long-Term Insurance Fund, it must either:

        (a) establish, in respect of that Cell, one or more Long-Term Insurance Funds; or
        (b) notify the DFSA in writing that the Cell is deemed to constitute a single Long-Term Insurance Fund.
        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.2.3 Guidance

          Because of the prohibition set out in COB part 1, Insurance Business of an Insurer that is a Protected Cell Company can only be carried out through its Cells.


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

      • PIN 3.2.4

        An Insurer that is subject to a regulatory requirement in another jurisdiction to arrange its affairs or any part of its affairs in a manner that is equivalent or substantially equivalent to the maintenance of a Long-Term Insurance Fund required by this section, may make a written application to the DFSA for that arrangement of its affairs or that part of its affairs to be deemed for the purposes of these Rules to constitute a Long-Term Insurance Fund. If the DFSA approves that application, it must inform the Insurer in writing, and must state in its notice to the Insurer the manner in which the arrangement will be deemed for the purpose of these Rules to constitute a Long-Term Insurance Fund.

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

      • PIN 3.2.5

        An Insurer, or a Cell of an Insurer, that is deemed in accordance with PIN Rule 3.2.2(b) or PIN Rule 3.2.3(b) to constitute a single Long-Term Insurance Fund, shall be treated for all purposes relating to these Rules as though the Insurer had established a Long-Term Insurance Fund to which all of the assets and liabilities of the Insurer or of the Cell are attributed.


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

      • PIN 3.2.6

        Notwithstanding anything to the contrary contained in the above provisions, the DFSA may, at its sole discretion, direct that an Insurer which conducts Long-Term Insurance Business establish one or more Long-Term Insurance Funds in respect of its Long-Term Insurance Business or any part of such business. An Insurer shall establish one or more Long-Term Insurance Funds where so directed by the DFSA.

        [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
        [Amended] DFSA RM50/2007 (Made 1st October 2007). [VER7/10-07]

    • PIN 3.3 PIN 3.3 Attribution of contracts to a fund

      • PIN 3.3.1

        All contracts of Long-Term Insurance effected by a DIFC Incorporated Insurer must be attributed to a Long-Term Insurance Fund.


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

      • PIN 3.3.2

        All contracts of Long-Term Insurance effected by an Insurer that is not a DIFC Incorporated Insurer through an establishment in the DIFC must be attributed to a Long-Term Insurance Fund.


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

      • PIN 3.3.3

        Except as allowed in PIN Rule 3.3.4, an Insurer may not attribute General Insurance contracts to a Long-Term Insurance Fund.


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

      • PIN 3.3.4

        An Insurer may attribute insurance contracts in General Insurance Class 1 or Class 2 to a Long-Term Insurance Fund.


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

    • PIN 3.4 PIN 3.4 Segregation of assets and liabilities

      • PIN 3.4.1

        All assets, liabilities, revenues and expenses in respect of a Contract of Insurance that is attributed to a Long-Term Insurance Fund must be recorded as assets, liabilities, revenues and expenses of that Long-Term Insurance Fund.


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

      • PIN 3.4.2 PIN 3.4.2

        An Insurer may at any time attribute any of its assets to a Long-Term Insurance Fund that were not previously attributed to such a Long-Term Insurance Fund.

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

        • PIN 3.4.2 Guidance

          A transaction described in PIN Rule 3.4.2 is sometimes described as a transfer of capital into the Long-Term Insurance Fund.


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

      • PIN 3.4.3

        All revenues and expenses arising by way of earnings, revaluation or other change to the assets and liabilities of a Long-Term Insurance Fund must be recorded as revenues and expenses, or movements in capital, of that Long-Term Insurance Fund.


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

      • PIN 3.4.4

        An Insurer which is required to maintain a Long-Term Insurance Fund must maintain adequate accounting and other records to identify the contracts and the assets, liabilities, revenues and expenses attributable to the Long-Term Insurance Fund.


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

    • PIN 3.5 PIN 3.5 Limitation on use of assets in long-term insurance fund

      • PIN 3.5.1

        Except as provided in this section, assets that are attributable to a Long-Term Insurance Fund must be applied only for the purposes of the business attributed to the Long-Term Insurance Fund.


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

      • PIN 3.5.2

        Assets attributable to a Long-Term Insurance Fund may not be transferred so as to be available for other purposes of the Insurer except:

        (a) where the transfer constitutes appropriation of a surplus determined in accordance with PIN section 7.3, provided that the transfer is performed within four months of the Reference Date of the actuarial investigation referred to in that Rule;
        (b) where the transfer constitutes a payment of dividend or return of capital, in accordance with Rules PIN 3.5.3 and PIN 3.5.4;
        (c) where the transfer is made in exchange for other assets at fair value;
        (d) where the transfer constitutes reimbursement of expenditure borne on behalf of the Long-Term Insurance Fund, and in respect of expenses attributable to the Long-Term Insurance Fund; or
        (e) where the transfer constitutes reattribution of assets attributed to the Long-Term Insurance Fund in error.
        Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
        [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 3.5.3

        Assets attributable to a Long-Term Insurance Fund must not be distributed by way of dividend or by way of return of capital, except by an Insurer or a Cell that is deemed to constitute a single Long-Term Insurance Fund.


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

      • PIN 3.5.4

        A dividend or return of capital by an Insurer or a Cell that is deemed to constitute a single Long-Term Insurance Fund may only be made where the dividend or return of capital constitutes appropriation of a surplus determined in accordance with PIN section 7.3, and:

        (a) if the payment is made within four months of the Reference Date of the actuarial investigation determining that surplus, the payment does not cause the total aggregate amount of the dividends or returns of capital made by the Insurer or the Cell since that Reference Date to exceed the amount of that surplus; or
        (b) If the payment is made more than four months after the Reference Date of the actuarial investigation determining that surplus, the payment does not cause the total aggregate amount of the dividends or returns of capital made by the Insurer or the Cell since that Reference Date to exceed 50 per cent of the amount of that surplus.

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

      • PIN 3.5.5 PIN 3.5.5

        Assets attributable to a Long-Term Insurance Fund must not be lent or otherwise made available for use for any other purposes of the Insurer or any purposes of any party Related to the Insurer.


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

        • PIN 3.5.5 Guidance

          PIN Rule 3.5.5 operates to prohibit, among other things, lending between Long-Term Insurance Funds of the same Insurer. Assets must not be organised in such a manner as to create indebtedness between Long-Term Insurance Funds.

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

      • PIN 3.5.6 PIN 3.5.6

        An Insurer may not enter into any arrangement, whether or not described as a contract of reinsurance, whereby a Long-Term Insurance Fund of the Insurer stands in the same relation to the Insurer as though the Insurer were the reinsurer in a contract of reinsurance in which the Long-Term Insurance Fund is the cedant.

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

        • PIN 3.5.6 Guidance

          PIN Rule 3.5.6 operates to prohibit reinsurance between Long Term Insurance Funds of the same Insurer, as well as arrangements of the nature of internal contracts of reinsurance where the cession transaction is attributed to a Long-Term Insurance Fund but the corresponding reinsurance acceptance transaction is not.


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

    • 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]