Entire Section

  • PIN A8.4 PIN A8.4 Default risk component

    • PIN A8.4 Guidance

      The purpose of the default risk component is to require an Insurer to set aside capital to cover the risk that amounts receivable from counterparties will not be received. The basic calculation model for this component, as it applies to Insurers that are not Protected Cell Companies, is set out in PIN section A4.4. The provisions in this section apply the relevant provisions of PIN section A4.4 to each Long-Term Insurance Fund that an Insurer maintains.


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

    • PIN A8.4.1

      An Insurer must calculate the default risk component in respect of a Long-Term Insurance Fund as the sum of the amounts obtained by multiplying the value of each asset attributed to the fund with the relevant percentage, in accordance with the following tables and subject to the provisions of Rules PIN A8.4.2 and PIN A8.4.3:

      (a) assets that are Invested Assets: the table set out in PIN Rule A4.4.1(a); and
      (b) assets that are not Invested Assets: the table set out in PIN Rule A4.4.1(b).

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

    • PIN A8.4.2

      The provisions of Rules PIN A4.4.2, PIN A4.4.3, PIN A.4.4.4, PIN A4.4.5 and PIN A4.4.6 must be applied, mutatis mutandis, to assets attributed to a Long-Term Insurance Fund as though references in those Rules to an Insurer were instead references to a Long-Term Insurance Fund.


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

    • PIN A8.4.3

      Notwithstanding anything else in this section:

      (a) the default risk component in respect of any asset that is subject to a fixed or floating charge, mortgage or other encumbrance must be 100% of the value of the asset to the extent of that charge, mortgage or encumbrance. In the case of such assets, the percentages set out in the tables referred to above must be applied only to the amount, if any, by which the value of the asset exceeds the amount of the charge, mortgage or encumbrance; and
      (b) no default risk component must be calculated in respect of assets excluded from Adjusted Fund Capital Resources in accordance with Rules PIN A7.4.2(d), PIN A7.4.2(e), PIN A7.4.2(f), PIN A7.4.2(h), or PIN A7.4.2(i).

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