Entire Section

  • PIN App5 PIN App5 Calculation of Adjusted Non-Cellular Capital Resources and Adjusted Cellular Capital Resources

    • PIN A5.1 PIN A5.1 Purpose and general provisions

      • PIN A5.1.1 PIN A5.1.1

        This appendix applies to all Insurers to which PIN section 4.4 applies.

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

        • PIN A5.1.1 Guidance

          1. This appendix sets out the manner in which an Insurer that is a Protected Cell Company is required to calculate its Adjusted Non-Cellular Capital Resources and the Adjusted Cellular Capital Resources applicable to each Cell. The calculation is in each case analogous to that applicable to Insurers that are not Protected Cell Companies, so that (except where changes are necessary to reflect structural differences) the capital of each Cell, and of the non-cellular portion of the Insurer, is determined as though it was an Insurer subject to PIN App3.
          2. The Adjusted Non-Cellular Capital Resources and Adjusted Cellular Capital Resources are calculated by making adjustments to the non-cellular equity of the Insurer or cellular equity of the Cell, as at the Solvency Reference Date.
          3. Provisions in respect of adjusted non-cellular capital resources are set out in sections PIN A5.2 to PIN A5.5. Provisions in respect of adjusted cellular capital resources are set out in sections PIN A5.6 to PIN A5.10.

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

    • PIN A5.2 PIN A5.2 Adjusted non-cellular capital resources

      • PIN A5.2.1

        An Insurer must calculate its Adjusted Non-Cellular Capital Resources according to the formula:

        ANCR = ANE – HNCA

        where:

        ANCR means the Insurer's Adjusted Non-Cellular Capital Resources;
        ANE means the Insurer's adjusted non-cellular equity; and
        HNCA means the Insurer's hybrid non-cellular capital adjustment.


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

      • PIN A5.2.2

        Adjusted non-cellular equity is calculated as set out in PIN section A5.4. The hybrid non-cellular capital adjustment is set out in PIN section A5.5


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

    • PIN A5.3 PIN A5.3 Base non-cellular capital

      • PIN A5.3 Guidance

        The commencement point for calculating an Insurer's adjusted non-cellular equity is the Insurer's base non-cellular capital.


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

      • PIN A5.3.1

        Subject to Rules PIN A5.3.2 and PIN A5.3.3, an Insurer's base non-cellular capital consists of the following capital instruments and equity reserves of the Insurer:

        (a) paid-up ordinary shares, except for shares referred to in PIN Rule A5.5.1(3);
        (b) general reserves;
        (c) retained earnings;
        (d) current year's earnings after tax; and
        (e) hybrid non-cellular capital (as defined in PIN Rule A5.5.1).

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

      • PIN A5.3.2

        All Cell Share Capital and any capital instruments or equity reserves of the Insurer that are attributable to a Cell must be excluded from base non-cellular capital.


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

      • PIN A5.3.3

        Hybrid non-cellular capital having a term to maturity of less than five years may only be included in base non-cellular capital with the written consent of the DFSA.


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

    • PIN A5.4 PIN A5.4 Adjusted non-cellular equity

      • PIN A5.4.1 PIN A5.4.1

        An Insurer must calculate its adjusted non-cellular equity by adding items to and deducting them from its base non-cellular capital, as set out in this section.

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

        • PIN A5.4.1 Guidance

          1. The purpose of these adjustments is to provide a consistent basis for the determination of the Insurer's Adjusted Non-Cellular Capital Resources and to exclude from those resources assets that may not be readily realisable for the purposes of meeting any Non-Cellular Liabilities of the Insurer.
          2. A Takaful Insurer may not count as non-cellular capital amounts loaned to Insurance Funds that are attributable to Cells, as those amounts will be counted towards base cellular capital of the Cells concerned.

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

      • PIN A5.4.2

        The following items must be added to base non-cellular capital, to the extent that the Insurer has excluded them in determining its base non-cellular capital:

        (a) any minority interests in companies that are Subsidiaries of the Insurer, where the Insurer's interest in those companies constitutes a Non-Cellular Asset of the Insurer; and
        (b) any amount in respect of dividends to be paid by the Insurer in the form of shares other than Cell Shares.

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

      • PIN A5.4.3

        The following items must be deducted from base non-cellular capital, to the extent that the Insurer has not excluded them in determining its base non-cellular capital, or has added them to base non-cellular capital under PIN Rule A5.4.2:

        (a) any amounts in respect of appropriations to be made from profit in respect of the reporting period most recently ended, including dividends, bonuses, pensions and welfare charges that are determined on the basis of the profit of that reporting period, whether or not the amounts have been approved by the Insurer for payment;
        (b) Owners' Equity in a Takaful Insurer that does not, under the constitutional documents of the Insurer or the terms of insurance contracts or both, participate in the surpluses and losses of Takaful business;
        (c) the amount of any investment by the Insurer or by a Subsidiary of the Insurer, in the Insurer's own shares;
        (d) the amount of any tax liability that would be attributable to unrealised gains on investments, if those gains were realised;
        (e) the amount of any deferred tax asset;
        (f) the amount of any goodwill, patents, service rights, brands and any other intangible items;
        (g) in a Takaful Insurer, the amount of any loan made from the Owners' Equity to an Insurance Fund that is attributable to a Cell, that has not been repaid as at the Solvency Reference Date;
        (h) the amount of any Zakah or charity fund of a Takaful Insurer;
        (i) the amount of any operating assets, including inventories, plant and equipment, and vehicles; and
        (j) the amount of any other assets that may not be applied to meet Non-Cellular Liabilities of the Insurer.

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

    • PIN A5.5 PIN A5.5 Hybrid non-cellular capital adjustment

      • PIN A5.5 Guidance

        1. This section acts to limit hybrid non-cellular capital to 15% of an Insurer's adjusted non-cellular equity.
        2. The purpose of the hybrid non-cellular capital adjustment is to limit the extent to which an Insurer may rely for its Adjusted Non-Cellular Capital Resources on instruments that do not or may not constitute permanent capital of the Insurer. Such instruments include share capital contributed by a Holding Company, where the Holding Company's investment is financed by debt rather than by its own capital.

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

      • PIN A5.5.1

        Subject to PIN Rule A5.5.2, hybrid non-cellular capital includes the following items:

        (a) subordinated debt;
        (b) preference shares; and
        (c) ordinary shares issued by an Insurer to a Holding Company whose own paid-up ordinary share capital, taken together with its general reserves, is lower than that of the Insurer.

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

      • PIN A5.5.2

        Hybrid non-cellular capital excludes any instrument that is attributable to a Cell.


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

      • PIN A5.5.3

        Subject to PIN Rule A5.5.4, an Insurer must calculate its hybrid non-cellular capital adjustment as the amount by which the total amount of hybrid non-cellular capital exceeds 15% of adjusted non-cellular equity.


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

      • PIN A5.5.4

        The DFSA may at its discretion and on the application of an Insurer, permit that Insurer to apply PIN Rule A5.5.3 as though the figure of 15% was replaced with a higher figure approved in writing by the DFSA. The approved figure may not be more than the actual percentage which the hybrid non-cellular capital represents of adjusted non-cellular equity, and may not in any case exceed 30%.


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

    • PIN A5.6 PIN A5.6 Adjusted cellular capital resources

      • PIN A5.6.1

        An Insurer must calculate the Adjusted Cellular Capital Resources in respect of a Cell according to the formula:

        ACCR = ACE +CCA – HCCA

        where, in respect of that Cell:

        ACCR means the Adjusted Cellular Capital Resources;

        ACE means the adjusted cellular equity
        CCA means the non-cellular capital adjustment; and
        HCCA means the hybrid cellular capital adjustment.


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

      • PIN A5.6.2

        Adjusted cellular equity is calculated as set out in PIN section A5.8. The non-cellular capital adjustment is determined as set out in PIN section A5.9. The hybrid non-cellular capital adjustment is set out in PIN section A5.10.


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

    • PIN A5.7 PIN A5.7 Base cellular capital

      • PIN A5.7 Guidance

        The commencement point for calculating the adjusted cellular equity in respect of a Cell is the base cellular capital in respect of that Cell.


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

      • PIN A5.7.1

        Subject to Rules PIN A5.7.3 and PIN A5.7.4, the base cellular capital in respect of a Cell consists of the following capital instruments and equity reserves that are attributable to that Cell:

        (a) paid-up Cell Shares, except for shares referred to in PIN Rule A5.10.1(d);
        (b) general reserves;
        (c) in the Insurance Fund of a Takaful Insurer, where the Insurance Fund is attributable to the Cell, amounts provided from the Owners' Equity by loan to the Insurance Fund and not repaid as at the Solvency Reference Date;
        (d) retained earnings;
        (e) current year's earnings after tax; and
        (f) hybrid cellular capital (as defined in PIN Rule A5.10.1).

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

      • PIN A5.7.2

        Owners' Equity in a Takaful Insurer other than amounts referred to in PIN Rule A5.7.1(c) must be classified as hybrid capital for the purposes of this section if:

        (a) under the constitutional documents of the Insurer or the terms of insurance contracts or both, participation in the surpluses and losses of Takaful business is limited to the policyholders of the Insurer; and
        (b) the Owners' Equity is available for loan to the Insurance Fund of the Insurer.

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

      • PIN A5.7.3

        Hybrid cellular capital having a term to maturity of less than five years may only be included in base cellular capital with the consent of the DFSA.


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

    • PIN A5.8 PIN A5.8 Adjusted cellular equity

      • PIN A5.8.1 PIN A5.8.1

        An Insurer must calculate its adjusted cellular equity in respect of each Cell by adding items to and deducting them from the base cellular capital of that Cell, as set out in this section.

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

        • PIN A5.8.1 Guidance

          The purpose of these adjustments is to provide a consistent basis for the determination of the Adjusted Cellular Capital Resources in respect of a Cell and to exclude from those resources assets that may not be readily realisable for the purposes of meeting any Cellular Liabilities of that Cell.


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

      • PIN A5.8.2

        The following items must be added to base cellular capital, to the extent that the Insurer has excluded them in determining base cellular capital:

        (a) any minority interests in companies that are Subsidiaries of the Insurer, where the Insurer's interest in those companies constitutes a Cellular Asset of that Cell; and
        (b) any amount in respect of dividends to be paid by the Insurer in the form of Cell Shares of that Cell.

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

      • PIN A5.8.3

        The following items must be deducted from base cellular capital, to the extent that the Insurer has not excluded them in determining base cellular capital, or has added them to base cellular capital under PIN Rule A5.8.2:

        (a) any amounts in respect of appropriations to be made from profit of the Cell in respect of the reporting period most recently ended, including dividends, bonuses, pensions and welfare charges that are determined on the basis of the profit of that reporting period, whether or not the amounts have been approved by the Insurer for payment;
        (b) Owners' Equity in a Takaful Insurer that does not, under the constitutional documents of the Insurer or the terms of insurance contracts or both, participate in the surpluses and losses of Takaful business;
        (c) the amount of any investment by the Insurer or by a Subsidiary of the Insurer, in the Insurer's own shares, where that investment or the Subsidiary concerned is a Cellular Asset;
        (d) the amount of any tax liability that would be attributable to unrealised gains on investments that are Cellular Assets, if those gains were realised;
        (e) the amount of deferred acquisition costs that are Cellular Assets;
        (f) the amount of any deferred tax asset that is a Cellular Asset;
        (g) the amount of any Cellular Asset representing the value of in-force Long-Term Insurance Business of the Insurer;
        (h) the amount of any goodwill, patents, service rights, brands and any other intangible items that are Cellular Assets;
        (i) the amount of any Zakah or charity fund of a Takaful Insurer;
        . . .
        (j) the amount of any operating assets, including inventories, plant and equipment, and vehicles, that are Cellular Assets; and
        (k) the amount of any other Cellular Assets that may not be applied to meet Cellular Liabilities of that Cell.

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

      • PIN A5.8.4

        PIN Rule A5.8.3(l) does not require an Insurer to exclude Cellular Assets attributable to a Long-Term Insurance Fund maintained by the Insurer.


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

    • PIN A5.9 PIN A5.9 Non-cellular capital adjustment

      • PIN A5.9.1 PIN A5.9.1

        Where an Insurer that is a Protected Cell Company is organised such that Non-Cellular Assets may be used to meet Cellular Liabilities of a Cell, the Insurer may determine a non-cellular capital adjustment in respect of that Cell.

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

        • PIN A5.9.1 Guidance

          The purpose of the non-cellular capital adjustment is to permit an Insurer to allocate all or part of its Adjusted Non-Cellular Capital Resources to support the Adjusted Cellular Capital Resources of its Cells. The adjustment is limited to the amount of Adjusted Non-Cellular Capital Resources that could be made available to meet Cellular Liabilities.


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

      • PIN A5.9.2

        The amount of the non-cellular capital adjustment in respect of a Cell is an amount selected by the Insurer, subject to the following constraints:

        (a) the non-cellular capital adjustment in respect of a Cell must not be negative;
        (b) the non-cellular capital adjustment in respect of a Cell must not exceed the amount that could be made available to meet the liabilities of that Cell in the event of insolvency of the Insurer, after taking into consideration all other potential calls on the Insurer's Adjusted Non-Cellular Capital Resources; and
        (c) the sum of the non-cellular capital adjustments in respect of all Cells must not exceed the amount that could be made available to meet the Cellular Liabilities in the event of insolvency of the Insurer, after taking into consideration all other potential calls on the Insurer's Adjusted Non-Cellular Capital Resources.

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

    • PIN A5.10 PIN A5.10 Hybrid cellular capital adjustment

      • PIN A5.10 Guidance

        1. This section acts to limit hybrid cellular capital to 15% of an Insurer's adjusted cellular equity in respect of a Cell.
        2. The purpose of the hybrid cellular capital adjustment is to limit the extent to which an Insurer may rely for its Adjusted Cellular Capital Resources in respect of a Cell on instruments that do not or may not constitute permanent capital of that Cell. Such instruments include share capital contributed by an investor where the investor's investment in the Cell is financed by debt rather than by the investor's own capital.

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

      • PIN A5.10.1

        Subject to PIN Rule A5.10.2, hybrid cellular capital includes the following items:

        (a) subordinated debt;
        (b) preference shares;
        (c) Owners' Equity in a Takaful Insurer, of the type described in PIN Rule A5.7.2; and
        (d) Cell Shares issued by a Cell to an investor who stands in the position of a Holding Company in relation to the Cell, and whose own paid-up ordinary share capital, taken together with its general reserves, is lower than that of the Cell.

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

      • PIN A5.10.2

        Hybrid cellular capital excludes any instrument that is not attributable to a Cell.


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

      • PIN A5.10.3

        Subject to PIN Rule A5.10.4, an Insurer must calculate the hybrid cellular capital adjustment in respect of a Cell as the amount by which the total amount of hybrid cellular capital exceeds 15% of adjusted non-cellular equity.


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

      • PIN A5.10.4

        The DFSA may at its discretion and on the application of an Insurer, permit that Insurer to apply PIN Rule A5.10.3 as though the figure of 15% was replaced with a higher figure approved in writing by the DFSA. The approved figure may not be more than the actual percentage which the hybrid cellular capital represents of adjusted cellular equity, and may not in any case exceed 30%.


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