Entire Section

  • PIN A6.8 PIN A6.8 Concentration risk component

    • PIN A6.8 Guidance

      The purpose of the concentration risk component is to require an Insurer to set aside capital to cover the sensitivity that it has to default or volatility in respect of assets and exposures to single counterparties or groupings of connected counterparties, or single properties. The provisions in this section apply the relevant provisions of PIN section A4.8 to the segments of a Protected Cell Company.


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

    • PIN A6.8.1

      An Insurer is required to calculate a concentration risk component in respect of a segment if the segment has, as at the Solvency Reference Date, an investment exposure to a single counterparty or group of Related counterparties, or to a single property, that exceeds 10% of the adjusted segmental capital resources.


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

    • PIN A6.8.2

      For the purposes of the calculation referred to in PIN Rule A6.8.1:

      (a) 'investment exposure' means the aggregate value of all equity, bond or other investments in or in respect of the counterparty or group of Related parties or property in question, together with off-balance sheet exposures to the same counterparty or group of Related counterparties or property that the Insurer has because it has issued guarantees, letters of credit or other credit substitutes (other than insurance contracts), or because it has entered into derivative contracts, but excluding any assets excluded from base cellular capital or base non-cellular capital by reason of any of the Rules referred to in PIN Rule A6.4.3(b);
      (b) 'adjusted segmental capital resources' in respect of a segment means Adjusted Cellular Capital Resources in respect of that segment (where the segment is a Cell) or the Insurer's Adjusted Non-Cellular Capital Resources (where the segment is not a Cell); and
      (c) 'AAA'-Rated Governments and Government agencies are not counterparties.

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

    • PIN A6.8.3

      An Insurer must calculate its concentration risk component in respect of a segment as the sum of the amounts obtained by multiplying each investment exposure of that segment that exceeds 10% of the adjusted segmental capital resources, by the relevant factor percentage set out in the table set out in PIN Rule A4.8.3, reading that table as though all references to Adjusted Capital Resources were references to adjusted segmental capital resources, and subject to PIN Rule A6.8.4.


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

    • PIN A6.8.4

      If the concentration risk component in respect of an investment exposure of a segment, aggregated with the sum of the default risk, investment volatility risk and off-balance sheet asset risk components (so far as concerns that segment), in respect of the assets and off-balance sheet exposures comprising that investment exposure, exceeds 100% of that investment exposure, the concentration risk component in respect of that investment exposure must be reduced so that the total of the four components in respect of that investment exposure is equal to 100% of that investment exposure.


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