Entire Section

  • PIN A6.6 PIN A6.6 Off-balance sheet asset risk component

    • PIN A6.6 Guidance

      The purpose of the off-balance sheet asset risk component is to require an Insurer to set aside capital to cover the risk of default and deterioration in value in respect of exposures that the Insurer has because it is a party to a derivative contract. The provisions in this section apply the basic provisions of PIN section A4.6 to the segments of a Protected Cell Company.


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

    • PIN A6.6.1

      An Insurer is required to calculate an off-balance sheet asset risk component, if the Insurer is, as at the Solvency Reference Date, a party to a derivative contract, including a forward, future, swap, option or other similar contract, but not including:

      (a) a put option serving as a guarantee;
      (b) a foreign exchange contract having an original maturity of 14 days or less; or
      (c) an instrument traded on a futures or options exchange, which is subject to daily mark-to-market and margin payments.

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

    • PIN A6.6.2

      An Insurer must calculate the off-balance sheet asset risk component in respect of a segment as the sum of the amounts obtained by applying the calculations set out in PIN Rule A6.6.3 in respect of each derivative contract entered into by the Insurer in respect of that segment that meets the description in PIN Rule A6.6.1.


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

    • PIN A6.6.3

      The amount in respect of a derivative contract is obtained by calculating, for an asset equivalent amount as determined in PIN Rule A6.6.4, a default risk component as set out in PIN section A6.4 and an investment volatility risk component as set out in PIN section A6.5, as though the asset equivalent amount were a debt obligation due from the derivative counterparty.


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

    • PIN A6.6.4

      The asset equivalent amount in respect of a derivative is calculated as the sum of the current mark-to-market exposure of the derivative (where this is positive) and the amount obtained by multiplying the notional principal amount of the derivative by the factors specified in the table set out in PIN Rule A4.6.4, according to the nature and residual maturity of the derivative.


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