PIN 9 PIN 9 Insurers in Run-off
PIN 9.1 PIN 9.1 Introduction
Subject to PIN Rule 9.1.2, chapter applies to all
PIN 9.1.2 PIN 9.1.2
In the case of an
Insurerthat is not a DIFC Incorporated Insurer, this chapter applies only in respect of Insurance Businesscarried on by the Insurerthrough an establishment in the DIFC.
PIN 9.1.2 Guidance1. This chapter sets out prudential provisions applying to
Insurersthat cease to carry on Insurance Business, either wholly or in respect of a particular Class of Business. The provisions are also applicable to Cellsand Long-Term Insurance Fundsof Insurers, but do not (because of the effect of PIN Rule 9.1.2) apply to non- DIFC Insurance Businessof Insurersthat are not DIFC Incorporated Insurers.2. Sections PIN 9.2 and PIN 9.3 set out actions that an Insureris required to take when it decides to cease to effect or carry out Contracts of Insurance. Sections PIN 9.4, PIN 9.5 and PIN 9.6 give the DFSAspecific powers relating to the supervision of such Insurers.
PIN 9.1.3 PIN 9.1.3
For the purposes of this chapter, in determining whether an
Insureris effecting Contracts of Insurance, or has ceased effecting Contracts of Insurance, including Contracts of Insuranceeffected through a Cellor a Long-Term Insurance Fund, Contracts of Insuranceeffected under a term of an existing Contract of Insurancemust be ignored.
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 Insurancethat are effected by the Insurer, as a consequence of a term of an existing Contract of Insurance. A contract will normally only be regarded as being effected under a term of an existing contract if the Insurerdoes not have discretion to decline to effect the new contract, or if it would be unreasonable for the Insurer, having regard to the interests of the policyholder, to decline to effect it.
In this chapter:(a) an
Insurerin run-off means an Insurerthat has ceased to effect Contracts of Insurancein respect of the whole of its Insurance Business(or, in the case of an Insurerthat is not a DIFC Incorporated Insurer, the whole of its Insurance Businesscarried on through an establishment in the DIFC), and a Cellin run-off and a Long-Term Insurance Fundin run-off are construed accordingly; and(b) going into run-off or placing Insurance Businessinto run-off means ceasing to effect Contracts of Insurance, and placing a Cellor a Long-Term Insurance Fundinto run-off are construed accordingly.
PIN 9.2 PIN 9.2 Insurers ceasing to effect contracts of insurance in a class of business
This section applies to an
Insurerthat ceases or decides to cease to effect new Contracts of Insurance:(a) in a Class of Businessin which the Insurerhas previously carried on Insurance Business; or(b) in respect of a Cellor a Long-Term Insurance Fund, in a Class of Businessin which the Insurerhas previously carried on Insurance Businessthrough that Cellor Long-Term Insurance Fund.
Insurerto which this section applies must, within 28 days of a decision to cease to effect new Contracts of Insurancein a Class of Business, notify the DFSAof its decision, in a written notice specifying the following details:(a) the effective date of the decision to cease effecting Contracts of Insurance;(b) the Class of Businessto which the decision relates; and(c) where relevant, the Cellor Long-Term Insurance Fundto which the decision relates.
Insurerwhich has provided a notice to the DFSAin accordance with PIN Rule 9.2.2 must not effect any Contracts of Insurancein that Class of Businesswithout the written permission of the DFSA. Where the notice referred to in PIN Rule 9.2.2 relates to a Cellor Long-Term Insurance Fundof the Insurer, the restriction set out in this rule applies only to that Cellor Long-Term Insurance Fund.
PIN 9.3 PIN 9.3 Run-off plans
This section applies to:(a)
Insurersthat are in run-off or that maintain Cellsor Long-Term Insurance Fundsthat are in run-off;(b) Insurersthat go into run-off or that place Cellsor Long-Term Insurance Fundsinto run-off;(c) Insurersthat make a decision to go into run-off or to place a Cellor Long-Term Insurance Fundinto run-off; and(d) Insurerswhose permission to effect Contracts of Insurancein respect of their entire Insurance Businessor in respect of the entire business of a Cellor Long-Term Insurance Fundis withdrawn by the DFSA.
Insurertakes a decision to go into run-off or to place a Cellor a Long-Term Insurance Fundinto run-off, the Insurermust, at the same time as the notice referred to in PIN Rule 9.2.2, provide the DFSAwith a written run-off plan in respect of the Insurance Businessbeing placed into run-off.
DFSAwithdraws an Insurer'spermission to effect Contracts of Insurancein respect of the Insurer'sentire Insurance Businessor the entire Insurance Businessof a Cellor Long-Term Insurance Fund, the Insurermust, within 28 days of the written notice of withdrawal of permission (or, if later, the period specified in that notice), provide the DFSAwith a written run-off plan in respect of that Insurance Business.
A run-off plan provided to the
DFSAin accordance with this section must cover the period until all liabilities to policyholders relating to the Insurance Businessin 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, the Insurerwill 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 the Insurer'sbusiness, of the Insurer'sbusiness strategy;(d) financial projections showing, in a form appropriate to the scale and complexity of the Insurer'soperations, the forecast financial position of the Insureras 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 the Insurerto stress arising from realistic scenarios relevant to the circumstances of the Insurer.
Insurer's Insurance Businessin run-off relates to a Cellor a Long-Term Insurance Fundof that Insurer, the run-off plan must deal with the matters set out in PIN Rule 9.3.4 so far as they relate to that Cellor Long-Term Insurance Fund.
PIN 9.3.6 PIN 9.3.6
Insurerthat has provided a written run-off plan to the DFSAmust monitor the matters contained in the run-off plan and must notify the DFSApromptly and in writing of any significant departure from the run-off plan.
PIN 9.3.6 Guidance
Insurershould 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 the Insurerand, where relevant, the size and complexity of the Cellor Long-Term Insurance Fundconcerned. The following matters will normally be considered as representing a significant departure from a run-off plan:a. significant revision of the Insurer'sstrategy for managing risks, and in particular its strategy for the use of reinsurance;b. a significant deterioration in the Insurer'sclaims experience, financial position or solvency position (the amount by which the Insurer'scapital resources, determined in accordance with the provisions of PIN chapter 4 relevant to that Insurer, 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 the Insurer'ssolvency position.
Insurerhas notified a matter to the DFSAin accordance with PIN Rule 9.3.6, the DFSAmay by notice in writing require the Insurerto provide an amended run-off plan. The Insurermust provide an amended run-off plan within 28 days of receipt of the notice, unless the notice specifies a longer period.
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
DFSAto require an Insurerthat is in run-off or going into run-off to post collateral assets or make equivalent arrangements by letter of credit, to support the Insurance Liabilitiesand Minimum Capital Requirementsapplicable to the Insurer. In considering whether to exercise the powers in this section, the DFSAwill have regard to the circumstances of the Insurerand the interests of policyholders.
This section applies only to an
Insurerthat:(a) is in run-off as regards its entire Insurance Businessor the entire Insurance Businessof a Cellor Long-Term Insurance Fund;(b) has provided a notice to the DFSAin accordance with PIN Rule 9.2.2 in respect of its entire Insurance Businessor the entire Insurance Businessof a Cellor Long-Term Insurance Fund; or(c) has received a written notice from the DFSAwithdrawing the Insurer'spermission to effect Contracts of Insurancein respect of its entire Insurance Businessor the entire Insurance Businessof a Cellor Long-Term Insurance Fund.
DFSAmay, by written notice (referred to in this chapter as a 'collateral notice') require an Insurerto 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.
Insurermust 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.
DFSAmay at any time, by written notice to the Insurer, vary or revoke a collateral notice issued under PIN Rule 9.4.2.
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 an
Insurerthat is not a DIFC Incorporated Insurer, the amount of the assets that the Insureris required by PIN Rule 4.7.2 to make available;(b) in the case of a Cellof an Insurer, the sum of the following two amounts:(i) the Insurance Liabilitiesattributable to that Cell; and(ii) the Minimum Cellular Capital Requirementapplicable to that Cell.(c) in the case of a Long-Term Insurance Fund, subject to (e) and (f), the sum of the following two amounts:(i) the Insurance Liabilitiesattributable to that Long-Term Insurance Fund; and(ii) the Minimum Fund Capital Requirementapplicable to that Long-Term Insurance Fund;(d) in the case of an Insurerthat is a DIFC Incorporated Insurerand that is not a Protected Cell Company, the sum of the following two amounts:(i) the Insurer's Insurance Liabilities; and(ii) the Insurer's Minimum Capital Requirement.(e) in the case of an Insurerto which (a) and (c) both apply, the amount set out in (a); and(f) in the case of an Insurerto which (c) and (d) both apply, the amount set out in (d).
PIN 9.4.5 Guidance
PIN Rule 9.4.5 describes the maximum amount of assets that the
DFSAmay require to be made available as collateral. The Ruleincludes provisions to avoid imposing multiple collateral requirements on the same Insurerin respect of the same Insurance Businessin run-off.
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 the
DFSA; or(b) a financial institution nominated or approved in writing by the DFSAmay issue a confirmed letter of credit in favour of the DFSA, for the amount of the assets required to be made available.
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 the Insurerto make any change to the terms and conditions of the arrangement or letter of credit.
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 the
Insurer, and contains no provision for automatic cancellation on the insolvency of the Insurer;b. the DFSAhas the right to apply assets deposited, or to draw upon the letter of credit, for the purpose of meeting Insurance Liabilitiesof the Insurerand any expenses incidental to that activity;c. in the case of a custody arrangement, the Insureris prohibited from applying, directly or indirectly, the assets deposited, except in the following manners:i. in settlement of Insurance Liabilitiesof the Insurerthat are in respect of the Insurance Businessthat 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 another Insurerof Insurance Liabilitiesof the Insurerthat are in respect of the Insurance Businessthat is, or has been placed into, run-off;iv. withdrawal from the custody of the custodian for deposit with a different custodian approved by the DFSA;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 the DFSArevoking 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 the Insurer; orii. in accordance with a written notice issued by the DFSArevoking or varying the collateral notice.
DFSAmay, by written notice to an Insurer, require the Insurerto charge in favour of the DFSApart or all of any assets deposited with a custodian in accordance with PIN Rule 9.4.6(a).
Insurermust reassess, as at the end of March, June, September and December in each year, the amount of the assets that the Insureris required by a collateral notice to make available, and the amount of assets made available by the Insurer.
Insurermust report to the DFSA, 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.
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
Insureris required to make available, the Insurermust, within two months of the effective date of the reassessment, make additional assets available so that the Insurercomplies with the requirements of the collateral notice.
If the reassessment shows that the amount of assets made available is more than the amount that the
Insureris required to make available, the Insurermay, with the written consent of the DFSA, remove assets from those made available provided that the Insurercomplies with the requirements of the collateral notice after the assets have been removed.
PIN 9.5 PIN 9.5 Provisions in respect of contracts relating to insurance business in run-off
This section applies to any
Insurerreferred to in PIN Rule 9.4.1.
Insurerto which this section applies must inform the DFSAin writing of the existence and principal features of any contract which it enters into in respect of its Insurance Businessin run-off, including Insurance Businesscarried on through a Cellor a Long-Term Insurance Fundthat is in run-off, or that is in existence at the time the Insurerplaces that Insurance Businessinto run-off, and that is of any of the following types:(a) contracts, other than Contracts of Insuranceeffected by the Insurerprior to going into run-off, with parties that are Relatedto the Insurer;(b) contracts relating to the management of the Insurance Businessin run-off, and any other contracts with the same counterparty or parties Relatedto that counterparty; or(c) contracts for reinsurance of the Insurance Businessthat is in run-off, and any other contracts with the same counterparty or parties Relatedto that counterparty.
DFSAmay by written notice require an Insurerto provide additional information as specified in that notice in respect of any contract notified to the DFSAin accordance with PIN Rule 9.5.2
PIN 9.6 PIN 9.6 Limitations on distributions by DIFC incorporated insurers in run-off
DIFC Incorporated Insurerthat 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 the DFSAin accordance with PIN Rule 9.5.2), without the written consent of the DFSA. 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 the DFSA.