Back Custom print Link Text Only Rich Text Print

Entire Section

  • PFN PIN 6.5 PFN PIN 6.5 Form 1: Statement of financial position

    • PFN PIN 6.5 Guidance

      1. The ‘Statement of Financial Position’ provides the DFSA with the necessary information on assets, liabilities and capital to undertake an assessment of an Insurer’s financial position and performance and facilitate in assessing compliance with the minimum Capital Requirements.
      2. PIN section 5.3 deals with the Recognition and measurement of assets and liabilities on this form.
      3. The Rules in this section provide instructions as to the completion of specific lines on the form. Instructions that are provided in respect of a particular Category of current assets or liabilities are normally applicable also (with the appropriate changes) to the corresponding Category of noncurrent assets or liabilities, and vice versa.
      4. The completion of this form requires Insurers to make estimates, for example in assigning assets and liabilities as current or non-current. As an example, the settlement date of outstanding claims, particularly IBNR, is often uncertain. An Insurer may make a reasonable estimate of the amount that is expected to be settled within twelve months, and record that amount as a current liability, with the balance being recorded as non-current. A similar approach would be acceptable for the assets representing reinsurance and other recoveries, that would not normally become due and receivable until the underling claim has been settled.
      5. Insurers are required to disclose the amount included in certain totals that relates to parties Related to the Insurer. These disclosures exclude amounts due to or from the Insurer under Contracts of Insurance.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.1

      This form is required for each reporting unit in respect of which the Insurer must prepare a Return, except for a DIFC Business Return.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.2

      Assets and liabilities must be reported as current or non-current. Current assets and liabilities are those expected to mature or be realised within a twelve-month period from the date as at which the Return is drawn up. Where an asset or a liability includes elements that are current as well as elements that are non-current, the asset or liability must be separated into the current and non-current components, if necessary by means of an estimate.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.3

      Item 1 on the form includes only cash and liquid assets. Insurers must have regard to the following principles:

      (a) Item 1.2 includes only Deposits available within 24 hours that are used by the Insurer for daily purposes of liquidity and operations. Deposits that form part of the Insurer’s Investments are reported at item 3 or item 7; and
      (b) Bank overdrafts must be reported at item 21.3, not netted against item 1 unless there is a legal right of offset.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.4 PFN PIN 6.5.4

      Item 2 on the form includes only receivables. In completing this item, Insurers must have regard to the following principles:

      (a) Receivables must be stated net of any provision for doubtful debt or impairment of asset;
      (b) Item 2.2 includes items such as subrogation or salvage recoveries in respect of claims that have been paid;
      (c) Item 2.3 includes instalment premiums on General Insurance contracts that are not yet due for payment. It also includes premiums on General Insurance contracts that have been entered into but not yet recorded. It does not include premiums on Long-Term Insurance contracts that are not yet due for payment;
      (d) Item 2.4 includes amounts due and receivable under reinsurance contracts, including premiums due from cedants and Deposits retained by cedants, as well as amounts due from reinsurers in respect of recoveries against claims that have been paid. Where there is a legal right of set-off, an Insurer may report the working balance on an account with a cedant or reinsurer as a net receivable or payable amount. However if there is no legal right of set-off, amounts must be recorded gross as receivables and payables;
      (e) Item 2.5 includes amounts in respect of reinsurance and other recoveries in respect of claims that have been incurred but not paid, up to the date to which the Return is drawn up. This includes reinsurance and other recoveries in respect of IBNR. Because of the uncertainty of the outcome of outstanding claims and IBNR, it is necessary to estimate at least a part of this balance. The basis on which the estimate is made must be consistent with the basis of estimation of the Related liability, reported at item 18;
      (f) Reinsurance and other recoveries in respect of claims that have not yet been incurred are reported at item 2.6. It is necessary to estimate this balance. The basis on which the estimate is made must be consistent with the basis of estimation of the Related liability, reported at item 19; and
      (g) Where, in determining the amounts to be reported at item 2.4 or 2.5, an Insurer has made or considered making a provision for doubtful debt in respect of recoveries due or potentially due from a reinsurer, the Insurer must take into account the potential need to make a provision when determining any estimate to be included at item 2.5 or 2.6.

      • PFN PIN 6.5.4 Guidance

        It is common practice for Insurers to account for their exposures on General Insurance contracts in force by means of an unearned premium provision, an asset representing deferred reinsurance expense and (where necessary) a premium deficiency reserve. Insurers are referred to the Guidance to item 19. An Insurer that uses an unearned premium provision and premium deficiency reserve as a proxy for Premium Liabilities may record its deferred reinsurance expense at item 2.6 (for the current portion) and item 7.6 (for the noncurrent portion).


        Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.5 PFN PIN 6.5.5

      An Insurer’s current Investments are reported at item 3. This item does not include Derivatives used to hedge Investments reported here. Hedging Derivatives are included in item 5. Insurers must have regard to the following principles when completing item 3:

      (a) Investments that are strategic in nature must be assumed to be non-current, and must be reported at item 8 or item 9; and
      (b) Deposits that are of the nature of Security Deposits, or retentions under contracts, are not reported at item 3.1 but are reported as receivables.

      • PFN PIN 6.5.5 Guidance

        Investments that take the form of mudaraba or musharaka contracts must be reported in accordance with their nature. A contract that takes the form of a collective Investment, where the Insurer is one of several investors providing capital to a mudarib who then provides the capital to the entrepreneur, should be reported as a collective Investment (where it does not fall to be reported as a Profit Sharing Investment Account). Where however, a contract of mudaraba or musharaka is entered into by an Insurer as an Investment directly with an entrepreneur, or through a mudarib with the Insurer as sole rab ul mal, the Investment should be reported as a contract of mudaraba or musharaka as appropriate.


        Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.6

      Deferred tax assets that are current assets are reported at item 4. Insurers must have regard to the following principles when completing item 4:

      (a) Netting off of deferred tax assets and liabilities is permitted only where both the asset and the liability relate to the same tax to which the Insurer is subject, and are expected to crystallise in the same taxation period; and
      (b) Amounts that represent refunds due from taxation authorities, that are not contingent on earning future taxable income, are not deferred tax assets but are receivables.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.7

      Item 5 includes current assets that do not fall to be reported under other items. In completing this item, Insurers must have regard to the following principles:

      (a) Acquisition costs in respect of General Insurance Business must not be deferred, as the basis on which the Premium Liability is determined requires immediate expensing of acquisition costs; and
      (b) Item 5.2 does not include deferred reinsurance expense, as item 2.6 stands in place of this asset.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.8

      Item 6.1 reports the total of amounts due from, balances with or Investments in Related parties that form a part of the total of current assets. This amount excludes amounts due under insurance contracts.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.9

      In completing items 7 (non-current receivables) and 8 (non-current investments) Insurers should have regard to the principles set out in this section for the equivalent Categories of current assets.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.10

      In item 9, Investments in Related parties must be recognised and measured in accordance with the principles of chapter 5. Section 5.7 requires an Insurer to make allowance for any minimum Capital Requirement or equivalent to which a Subsidiary or Associate is subject in the jurisdiction in which it is incorporated.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.11

      In item 10, an Insurer must exclude any properties of the Insurer, whether or not occupied. Properties must be reported at item 3.6 or 8.6 as appropriate.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.12

      In item 11, an Insurer must report intangible assets after deducting any amortisation or impairment Charge in respect of those assets.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.13

      In completing items 12 (non-current deferred tax assets) and 13 (other non-current assets) Insurers should have regard to the principles set out in this section for the equivalent Categories of current assets.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.14

      Item 14.1 reports the total of amounts due from, balances with or Investments in Related parties that form a part of the total of current assets. This amount excludes amounts due under insurance contracts.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.15

      Amounts due under reinsurance contracts at item 17 must include premiums payable but not yet due for payment under the terms of reinsurance contracts, and Deposits withheld from reinsurers. Other items attributable to reinsurance contracts such as the reinsurer's portion of recoveries and salvage and commissions due to reinsurers must also be included under this item.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.16

      Item 18 reports the current portion of the Insurer’s provision for outstanding claims. This item must be completed having regard to the following principles:

      (a) The liability must represent the estimated cost to the Insurer of settling claims which it has incurred at the reporting date but which have not been finalised. The liability is in respect of both direct business and inward reinsurance business and must take into account unpaid claims, unreported claims, adjustments for claims development and the direct and indirect claims settlement costs that the Insurer expects to incur in settling its outstanding claims;
      (b) In the case of Long-Term Insurance Business, this item must include all claims liabilities in respect of Contracts of Insurance that are no longer included in the calculation of the net policy benefits at item 20;
      (c) The liability must be stated without deducting reinsurance and other recoveries (these are disclosed as an asset as reinsurance receivables);
      (d) The requirements for Recognition and measurement of this liability are set out in PIN sections 5.4 and 5.6; and
      (e) The liability does not include any amounts for catastrophe reserve, equalisation reserve or similar provisions that an Insurer may be required to maintain to satisfy regulatory requirements in a jurisdiction other than the DIFC.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.17 PFN PIN 6.5.17

      Item 19, Premium Liability, represents the current portion of the cost of providing insurance service over the unexpired period of General Insurance contracts in force at the balance date. This item must be completed having regard to the following principles:

      (a) The Premium Liability reported is required to cover the value of future claims payments and associated direct and indirect settlement costs arising during the unexpired portion of the contracts in question.
      (b) Item 19 must be recorded without deducting reinsurance and other recoveries (these are disclosed as an asset as reinsurance receivables); and
      (c) The requirements for Recognition and measurement of this liability are set out in section 5.4.
      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

      • PFN PIN 6.5.17 Guidance

        As stated in the Guidance to PIN rule 5.4.7, it is common practice for Insurers to account for their exposures on General Insurance contracts in force by means of an unearned premium provision and (where necessary) a premium deficiency reserve. Where the aggregate of the unearned premium provision and the premium deficiency reserve (both gross of reinsurance) can be shown to be not less than the amount of Premium Liability determined in accordance with section 5.4, an Insurer may use that aggregate as a proxy for Premium Liability for the purposes of recording items 19 and 29 on this form.


        Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.18

      Item 20 represents the net value of future Policy Benefits under Long-Term Insurance contracts that are in force as at the date to which the Return is made up. The amount reported here must be determined in accordance with PIN section 5.6.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.19

      Item 23, provisions, must be completed having regard to the following principles:

      (a) A provision must be made at item 23.1 in respect of dividends payable out of past and current year profit, to the extent that profit has been recognised;
      (b) Employee entitlements at item 23.2 include annual leave, gratuity, accrued allowances, staff housing and loan benefits, healthcare, pension and other Employee entitlements; and
      (c) A provision must be made at item 23.3 in respect of any costs that the Insurer expects to incur as a result of restructuring, including severance, termination and redundancy payments, and integration costs.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.20

      Item 25.1 reports the amount of current liabilities representing amounts due to Related parties, other than amounts due under insurance contracts.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.21

      In completing items 26 to 34, Insurers should have regard to the principles set out in this section for the equivalent Categories of current liabilities.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.22

      Item 35 includes all loan capital and hybrid Securities that have been issued by the Insurer and have a residual term to maturity of more than one year. Any loan capital or hybrid Securities that have a residual term to maturity of less than one year should be reported as borrowings, at item 21.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.23

      Item 36.1 reports the amount of non-current liabilities representing amounts due to Related parties, other than amounts due under insurance contracts and amounts reported at line 35.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.24

      Item 36.2 reports the amount reported at item 35 representing interests of Related parties in loan capital or hybrid Securities issued by the Insurer.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.25

      In completing item 39, Equity, Insurers must have regard to the following principles:

      (a) Item 39.6 must be equal to item 38;
      (b) Hybrid Securities and loan capital are reported at item 35, not item 39;
      (c) Item 39.1 is not used in a Fund Return;
      (d) Item 39.3 is used only in a Fund Return, to record amounts of capital transferred into the Long-Term Insurance Fund; and
      (e) Where an Insurer makes use of item 39.6, the Insurer must State in a Supplementary Note the nature of the amount recorded at this item.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.26

      Insurers must record at item 39.8 the amount included at item 39.1 meeting the following descriptions:

      (a) in the case of a Global Return of an Insurer that is not a Protected Cell Company, the amount of ordinary share capital meeting the description at PIN rule A3.5.1(d);
      (b) in the case of a Global Return of an Insurer that is a Protected Cell Company, the amount of ordinary share capital meeting the description at PIN rule A5.5.1(e); and
      (c) in the case of a Cell Return, the amount of ordinary share capital meeting the description at PIN rule A5.10.1(d).

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.27

      No amount must be recorded at item 39.8 in the case of a Fund Return.


      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]

    • PFN PIN 6.5.28

      An Insurer must provide the following information in a Supplementary Note to this form:

      (a) any amount included in item 39.7 that is not available to meet the Insurance Liabilities of the Insurer;
      (b) the amount and details of any guarantees (apart from guarantees arising under Contracts of Insurance) given by the Insurer;
      (c) the amount and details of any contingent liabilities existing as at the date to which the Return is made up; and
      (d) where the amount of item 39.4 is not equal to the sum of items 39.4 and 39.5 for the comparative reporting period, a reconciliation of the differences. This applies only when the form forms a part of the Annual Regulatory Return.

      Derived from DFSA RM11/2004 (Made 16th September 2004). [VER1/09-04]