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  • PIN A8.8 PIN A8.8 Concentration risk component

    • PIN A8.8 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 each Long-Term Insurance Fund that an Insurer maintains.


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

    • PIN A8.8.1

      An Insurer is required to calculate a concentration risk component in respect of a Long-Term Insurance Fund if that fund 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 Fund Capital Resources.


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

    • PIN A8.8.2

      For the purposes of the calculation referred to in PIN Rule A8.8.1:

      (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 that fund has because the Insurer 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 fund capital in accordance with any of the Rules referred to in PIN Rule A8.4.3(b); and
      (b) 'AAA'-Rated Governments and Government agencies are not counterparties.

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

    • PIN A8.8.3

      An Insurer must calculate its concentration risk component in respect of a Long-Term Insurance Fund as the sum of the amounts obtained by multiplying each investment exposure of that fund 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 Fund Capital Resources, and subject to PIN Rule A8.8.4


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

    • PIN A8.8.4

      If the concentration risk component in respect of an investment exposure of a Long-Term Insurance Fund, aggregated with the sum of the default risk component, investment volatility risk component and off-balance sheet asset risk component (so far as concerns that fund), 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 three 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]