Entire Section
PIN 9 PIN 9 Insurers in Run-off
PIN 9.1 PIN 9.1 Introduction
PIN 9.1.1
Subject to PIN Rule 9.1.2, chapter applies to all
Insurers .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.1.2 PIN 9.1.2
In the case of an
Insurer that is not aDIFC Incorporated Insurer , this chapter applies only in respect ofInsurance Business carried on by theInsurer through an establishment in theDIFC .Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.1.2 Guidance
1. This chapter sets out prudential provisions applying toInsurers that cease to carry onInsurance Business , either wholly or in respect of a particularClass of Business . The provisions are also applicable toCells andLong-Term Insurance Funds ofInsurers , but do not (because of the effect of PIN Rule 9.1.2) apply to non-DIFC Insurance Business ofInsurers that are notDIFC Incorporated Insurers .2. Sections PIN 9.2 and PIN 9.3 set out actions that anInsurer is required to take when it decides to cease to effect or carry outContracts of Insurance . Sections PIN 9.4, PIN 9.5 and PIN 9.6 give theDFSA specific powers relating to the supervision of suchInsurers .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.1.3 PIN 9.1.3
For the purposes of this chapter, in determining whether an
Insurer is effectingContracts of Insurance , or has ceased effectingContracts of Insurance , includingContracts of Insurance effected through aCell or aLong-Term Insurance Fund ,Contracts of Insurance effected under a term of an existingContract of Insurance must be ignored.Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.1.3 Guidance
The effect of PIN Rule 9.1.3 is to disregard, for the purposes of determining whether the chapter applies,
Contracts of Insurance that are effected by theInsurer , as a consequence of a term of an existingContract of Insurance . A contract will normally only be regarded as being effected under a term of an existing contract if theInsurer does not have discretion to decline to effect the new contract, or if it would be unreasonable for theInsurer , having regard to the interests of the policyholder, to decline to effect it.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.1.4
In this chapter:
(a) anInsurer in run-off means anInsurer that has ceased to effectContracts of Insurance in respect of the whole of itsInsurance Business (or, in the case of anInsurer that is not aDIFC Incorporated Insurer , the whole of itsInsurance Business carried on through an establishment in theDIFC ), and aCell in run-off and aLong-Term Insurance Fund in run-off are construed accordingly; and(b) going into run-off or placingInsurance Business into run-off means ceasing to effectContracts of Insurance , and placing aCell or aLong-Term Insurance Fund into run-off are construed accordingly.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.2 PIN 9.2 Insurers ceasing to effect contracts of insurance in a class of business
PIN 9.2.1
This section applies to an
Insurer that ceases or decides to cease to effect newContracts of Insurance :(a) in aClass of Business in which theInsurer has previously carried onInsurance Business ; or(b) in respect of aCell or aLong-Term Insurance Fund , in aClass of Business in which theInsurer has previously carried onInsurance Business through thatCell orLong-Term Insurance Fund .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.2.2
An
Insurer to which this section applies must, within 28 days of a decision to cease to effect newContracts of Insurance in aClass of Business , notify theDFSA of its decision, in a written notice specifying the following details:(a) the effective date of the decision to cease effectingContracts of Insurance ;(b) theClass of Business to which the decision relates; and(c) where relevant, theCell orLong-Term Insurance Fund to which the decision relates.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.2.3
An
Insurer which has provided a notice to theDFSA in accordance with PIN Rule 9.2.2 must not effect anyContracts of Insurance in thatClass of Business without the written permission of theDFSA . Where the notice referred to in PIN Rule 9.2.2 relates to aCell orLong-Term Insurance Fund of theInsurer , the restriction set out in this rule applies only to thatCell orLong-Term Insurance Fund .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3 PIN 9.3 Run-off plans
PIN 9.3.1
This section applies to:
(a)Insurers that are in run-off or that maintainCells orLong-Term Insurance Funds that are in run-off;(b)Insurers that go into run-off or that placeCells orLong-Term Insurance Funds into run-off;(c)Insurers that make a decision to go into run-off or to place aCell orLong-Term Insurance Fund into run-off; and(d)Insurers whose permission to effectContracts of Insurance in respect of their entireInsurance Business or in respect of the entire business of aCell orLong-Term Insurance Fund is withdrawn by theDFSA .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.2
If an
Insurer takes a decision to go into run-off or to place aCell or aLong-Term Insurance Fund into run-off, theInsurer must, at the same time as the notice referred to in PIN Rule 9.2.2, provide theDFSA with a written run-off plan in respect of theInsurance Business being placed into run-off.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.3
If the
DFSA withdraws anInsurer's permission to effectContracts of Insurance in respect of theInsurer's entireInsurance Business or the entireInsurance Business of aCell orLong-Term Insurance Fund , theInsurer must, within 28 days of the written notice of withdrawal of permission (or, if later, the period specified in that notice), provide theDFSA with a written run-off plan in respect of thatInsurance Business .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.4
A run-off plan provided to the
DFSA in accordance with this section must cover the period until all liabilities to policyholders relating to theInsurance Business in run-off are met and must include:(a) an explanation of how, or to what extent, all liabilities to policyholders will be met in full as they fall due;(b) an explanation of how, or to what extent, theInsurer will maintain its compliance with the requirements of PIN chapter 4 until such time as all liabilities to policyholders are met;(c) a description, appropriate to the scale and complexity of theInsurer's business, of theInsurer's business strategy;(d) financial projections showing, in a form appropriate to the scale and complexity of theInsurer's operations, the forecast financial position of theInsurer as at the end of each reporting period during the period to which the run-off plan relates; and(e) an assessment of the sensitivity of the financial position of theInsurer to stress arising from realistic scenarios relevant to the circumstances of theInsurer .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.5
Where an
Insurer's Insurance Business in run-off relates to aCell or aLong-Term Insurance Fund of thatInsurer , the run-off plan must deal with the matters set out in PIN Rule 9.3.4 so far as they relate to thatCell orLong-Term Insurance Fund .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.6 PIN 9.3.6
An
Insurer that has provided a written run-off plan to theDFSA must monitor the matters contained in the run-off plan and must notify theDFSA promptly and in writing of any significant departure from the run-off plan.Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.6 Guidance
An
Insurer should decide whether a matter constitutes a significant departure from a run-off plan, having regard to the nature and size of the matter and its materiality relative to the size and complexity of theInsurer and, where relevant, the size and complexity of theCell orLong-Term Insurance Fund concerned. The following matters will normally be considered as representing a significant departure from a run-off plan:a. significant revision of theInsurer's strategy for managing risks, and in particular its strategy for the use of reinsurance;b. a significant deterioration in theInsurer's claims experience, financial position or solvency position (the amount by which theInsurer's capital resources, determined in accordance with the provisions of PIN chapter 4 relevant to thatInsurer , exceed the applicable minimum capital requirements set out in that chapter); orc. any other transaction or circumstance that is likely to have a material effect upon theInsurer's solvency position.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.3.7
Where an
Insurer has notified a matter to theDFSA in accordance with PIN Rule 9.3.6, theDFSA may by notice in writing require theInsurer to provide an amended run-off plan. TheInsurer must provide an amended run-off plan within 28 days of receipt of the notice, unless the notice specifies a longer period.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4 PIN 9.4 Requirements for collateral for insurers in run-off
PIN 9.4 Guidance
This section contains provisions that enable the
DFSA to require anInsurer that is in run-off or going into run-off to post collateral assets or make equivalent arrangements by letter of credit, to support theInsurance Liabilities andMinimum Capital Requirements applicable to theInsurer . In considering whether to exercise the powers in this section, theDFSA will have regard to the circumstances of theInsurer and the interests of policyholders.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.1
This section applies only to an
Insurer that:(a) is in run-off as regards its entireInsurance Business or the entireInsurance Business of aCell orLong-Term Insurance Fund ;(b) has provided a notice to theDFSA in accordance with PIN Rule 9.2.2 in respect of its entireInsurance Business or the entireInsurance Business of aCell orLong-Term Insurance Fund ; or(c) has received a written notice from theDFSA withdrawing theInsurer's permission to effectContracts of Insurance in respect of its entireInsurance Business or the entireInsurance Business of aCell orLong-Term Insurance Fund .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.2
The
DFSA may, by written notice (referred to in this chapter as a 'collateral notice') require anInsurer to make available assets:(a) of a type and in a manner described in PIN Rule 9.4.6; and(b) having a value, determined in accordance with the provisions of PIN chapter 5, of the lower of:(i) the amount, if any, specified in the notice; and(ii) the amount determined in accordance with PIN Rule 9.4.5.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.3
An
Insurer must comply with the requirements of a collateral notice within the period (if any) specified in the notice, or within two months of the date of the notice, whichever is the longer.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.4
The
DFSA may at any time, by written notice to theInsurer , vary or revoke a collateral notice issued under PIN Rule 9.4.2.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.5 PIN 9.4.5
The amount referred to in PIN Rule 9.4.2(b)(ii) is calculated as follows:
(a) in the case of anInsurer that is not aDIFC Incorporated Insurer , the amount of the assets that theInsurer is required by PIN Rule 4.7.2 to make available;(b) in the case of aCell of anInsurer , the sum of the following two amounts:(i) theInsurance Liabilities attributable to thatCell ; and(ii) theMinimum Cellular Capital Requirement applicable to thatCell .(c) in the case of aLong-Term Insurance Fund , subject to (e) and (f), the sum of the following two amounts:(i) theInsurance Liabilities attributable to thatLong-Term Insurance Fund ; and(ii) theMinimum Fund Capital Requirement applicable to thatLong-Term Insurance Fund ;(d) in the case of anInsurer that is aDIFC Incorporated Insurer and that is not aProtected Cell Company , the sum of the following two amounts:(i) theInsurer's Insurance Liabilities ; and(ii) theInsurer's Minimum Capital Requirement .(e) in the case of anInsurer to which (a) and (c) both apply, the amount set out in (a); and(f) in the case of anInsurer to which (c) and (d) both apply, the amount set out in (d).Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
[Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]PIN 9.4.5 Guidance
PIN Rule 9.4.5 describes the maximum amount of assets that the
DFSA may require to be made available as collateral. TheRule includes provisions to avoid imposing multiple collateral requirements on the sameInsurer in respect of the sameInsurance Business in run-off.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.6
The assets referred to in PIN Rule 9.4.2 must be made available in one of the following two manners or in a combination of those two manners:
(a) assets of a type described in PIN Rule 4.7.3 may be deposited with a custodian nominated or approved in writing by theDFSA ; or(b) a financial institution nominated or approved in writing by theDFSA may issue a confirmed letter of credit in favour of theDFSA , for the amount of the assets required to be made available.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.7 PIN 9.4.7
The terms and conditions of a custody arrangement referred to in PIN Rule 9.4.6(a) or a letter of credit referred to in PIN Rule 9.4.6(b) and any change to those terms and conditions, must be notified to the
DFSA , which may within two months of such notification require theInsurer to make any change to the terms and conditions of the arrangement or letter of credit.Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.7 Guidance
The terms and conditions of an arrangement or letter of credit will normally be expected to include provisions having the following effect:
a. the arrangement or letter of credit is not revocable or cancellable at the option of theInsurer , and contains no provision for automatic cancellation on the insolvency of theInsurer ;b. theDFSA has the right to apply assets deposited, or to draw upon the letter of credit, for the purpose of meetingInsurance Liabilities of theInsurer and any expenses incidental to that activity;c. in the case of a custody arrangement, theInsurer is prohibited from applying, directly or indirectly, the assets deposited, except in the following manners:i. in settlement ofInsurance Liabilities of theInsurer that are in respect of theInsurance Business that is in run-off;ii. in exchange for fair value, for other assets of a type described in PIN Rule 4.7.3 and deposited with the same custodian under the same conditions;iii. in consideration for the transfer to anotherInsurer ofInsurance Liabilities of theInsurer that are in respect of theInsurance Business that is, or has been placed into, run-off;iv. withdrawal from the custody of the custodian for deposit with a different custodian approved by theDFSA ;v. withdrawal from the custody of the custodian in accordance with PIN Rule 9.4.12; orvi. withdrawal from the custody of the custodian in accordance with a written notice issued by theDFSA revoking or varying the collateral notice; andd. in the case of a letter of credit, the amount of the letter of credit may be reduced only:i. in order to achieve, in accordance with PIN Rule 9.4.12 a reduction in the amount of assets made available by theInsurer ; orii. in accordance with a written notice issued by theDFSA revoking or varying the collateral notice.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.8
The
DFSA may, by written notice to anInsurer , require theInsurer to charge in favour of theDFSA part or all of any assets deposited with a custodian in accordance with PIN Rule 9.4.6(a).
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.9
The
Insurer must reassess, as at the end of March, June, September and December in each year, the amount of the assets that theInsurer is required by a collateral notice to make available, and the amount of assets made available by theInsurer .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.10
The
Insurer must report to theDFSA , within two months of the date as at which the reassessment referred to in PIN Rule 9.4.9 is performed, the results of that reassessment and details of any action taken or proposed to be taken as a result of that assessment.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.11
If the reassessment referred to in PIN Rule 9.4.9 shows that the amount of assets made available is less than the amount that the
Insurer is required to make available, theInsurer must, within two months of the effective date of the reassessment, make additional assets available so that theInsurer complies with the requirements of the collateral notice.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.4.12
If the reassessment shows that the amount of assets made available is more than the amount that the
Insurer is required to make available, theInsurer may, with the written consent of theDFSA , remove assets from those made available provided that theInsurer complies with the requirements of the collateral notice after the assets have been removed.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.5 PIN 9.5 Provisions in respect of contracts relating to insurance business in run-off
PIN 9.5.1
This section applies to any
Insurer referred to in PIN Rule 9.4.1.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.5.2
An
Insurer to which this section applies must inform theDFSA in writing of the existence and principal features of any contract which it enters into in respect of itsInsurance Business in run-off, includingInsurance Business carried on through aCell or aLong-Term Insurance Fund that is in run-off, or that is in existence at the time theInsurer places thatInsurance Business into run-off, and that is of any of the following types:(a) contracts, other thanContracts of Insurance effected by theInsurer prior to going into run-off, with parties that areRelated to theInsurer ;(b) contracts relating to the management of theInsurance Business in run-off, and any other contracts with the same counterparty or partiesRelated to that counterparty; or(c) contracts for reinsurance of theInsurance Business that is in run-off, and any other contracts with the same counterparty or partiesRelated to that counterparty.
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.5.3
The
DFSA may by written notice require anInsurer to provide additional information as specified in that notice in respect of any contract notified to theDFSA in accordance with PIN Rule 9.5.2
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]PIN 9.6 PIN 9.6 Limitations on distributions by DIFC incorporated insurers in run-off
PIN 9.6.1
No
DIFC Incorporated Insurer that is in run-off may make any distribution of profits or surplus however called or described, or return of capital, or any payment of management fees (other than fees payable under a contract notified to theDFSA in accordance with PIN Rule 9.5.2), without the written consent of theDFSA . Any such distribution or return of capital or payment of management fees must be made within the period, if any, specified in the written notice of consent given by theDFSA .
Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]