Entire Section

  • PIN A4.11 PIN A4.11 Reserving risk component

    • PIN A4.11 Guidance

      The purpose of the reserving risk component of the Minimum Capital Requirement is to require an Insurer to set aside capital to address the risk that the cost of claims in respect of General Insurance Business will vary from the amounts recorded as liabilities in the Insurer's balance sheet. This calculation applies only to liabilities in respect of outstanding claims (the risk of deterioration in Premium Liability is addressed in the underwriting risk component in PIN section A4.10). The principles of the calculation are similar to those in PIN section A4.10.


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

    • PIN A4.11.1

      Subject to the other provisions of this section, an Insurer must calculate its reserving risk component as the sum of the amounts obtained by multiplying the Insurer's base claims reserve under Contracts of Insurance and reinsurance effected by it, for each Class of Business, by the percentage factors set out in the following table.

      Class of Business Percentage factor
        Direct insurance Proportional reinsurance Non-proportional and facultative reinsurance
      (a) Classes 1 and 2 28 28 28
      (b) Class 3 12 12 12
      (c) Class 4 16 16 16
      (d) Class 5 22 22 22
      (e) Class 6 10 10 10
      (f) Classes 7(a) and 7(b) 31.25 31.25 31.25
      (g) Class 8 28 28 28
      Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
      [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

    • PIN A4.11.2

      Where an Insurer underwrites Contracts of Insurance in Class 1 or Class 2, and those contracts constitute Long-Term Insurance contracts, the Insurer must not calculate a reserving risk component in respect of those contracts but must instead calculate a Long-Term Insurance risk component as set out in PIN section A4.12.


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

    • PIN A4.11.3

      The DFSA may, on written application by an Insurer undertaking Insurance Business in Class 2, give consent in writing to the use of percentages other than those stated in PIN Rule A4.11.1(a), if the DFSA is satisfied that adequate mortality and morbidity information exists in respect of that business, to provide a reasonable basis for reliance on actuarial principles. The percentages that may be used must be those stated in the notice giving consent, but may not be lower than 5%.


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

    • PIN A4.11.4

      For the purposes of PIN Rule A4.11.1, the Insurer's base claims reserve means the following amounts:

      (a) for an Insurer, other than a Captive Insurer, the higher of:
      (i) the Insurer’s provision for Gross Outstanding Claims, less the amount of reinsurance and other recoveries expected to be received in respect of that liability; and
      (ii) 50% of the amount of the Insurer’s provision for Gross Outstanding Claims; and
      (b) for a Captive Insurer, the amount of the Insurer’s provision for Gross Outstanding Claims, less the amount of reinsurance and other recoveries expected to be received in respect of that liability.
      Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
      [Amended] DFSA RMI296/2021 (Made 24th February 2021). [VER17/04-21]

    • PIN A4.11.5 PIN A4.11.5

      Where an Insurer has entered as reinsurer into a finite risk reinsurance contract, the reserving risk component in respect of that contract, regardless of the class of business it relates to, must be 6% of the base claims reserve on the contract.

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

      • PIN A4.11.5 Guidance

        Provisions in respect of Class 7 are contained in PIN section 4.5.

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