Instructional Guidelines

1. This form is required only for a DIFC Business Return.
2. The Summary statement of operations provides the DFSA with quarterly information on the operations of a DIFC Branch of an Insurer that is not incorporated in the DIFC.
3. The instructional guidelines in this section provide instructions as to the completion of specific lines on the form. The instructions are similar to those applicable to corresponding items on forms 1 and 3, which are not applicable to DIFC Business Returns.
4. On this form, reinsurance premiums and reinsurance recoveries refer to amounts ceded and recovered in respect of insurance contracts entered into as part of the Insurer's DIFC Insurance Business, regardless of where the reinsurance premiums and reinsurance recoveries are payable or receivable.
Item No. Item Instructional Guidelines
1. Gross Written Premiums An Insurer must present at item 1 the amount of its Gross Written Premium in respect of its business conducted in the DIFC.
2. Reinsurance Premiums Ceded An Insurer must present at item 2 the amount of reinsurance premium ceded in respect of insurance contracts whose Gross Written Premium is recorded at item 1.
3. Net written premiums  
4. Claims paid An Insurer must present at item 4 the amount of claims paid in respect of its business conducted in the DIFC.
5. Reinsurance and other recoveries received An Insurer must present at item 5 the amount of reinsurance and other recoveries receivable in respect of claims recorded at item 4.
6. Net claims paid  
7. Movements in Insurance Liabilities (gross) An Insurer must present at item 7 the amount of the movement in the period reported on in the balance of Insurance Liabilities.
8. Movements in recoveries against Insurance Liabilities An Insurer must present at item 8 the amount of the movement in the period reported on in the balance of reinsurance and other recoveries in respect of Insurance Liabilities.

Insurance Liabilities are reported gross of reinsurance and other recoveries. Reinsurance and other recoveries that are recorded in respect of Insurance Liabilities are reported as assets. An increase in Insurance Liabilities is reported on form 10 as an expense. In the same manner, an increase in the reinsurance and other recoveries in respect of Insurance Liabilities is recorded as revenue.
9. Net movement in provisions  
10. Expenses  
11. Other operating revenue Where an Insurer reports any amount at item 11.2, the Insurer must present in a Supplementary Note the amount of any such income receivable from Related parties, and a description of the nature of that income.
12. Operating income  
13. Outstanding Claims Provision (including IBNR) Item 13 reports 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 17;
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 Rule 5.4 and PIN Rule 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.
14. Expected reinsurance and other recoveries in respect of item 13 Item 14 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 13.

Where, in determining the amount to be reported at item 14, 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 14 or 16.

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 instructional guidelines to item 15. 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 16.
15. Premium liabilities under General Insurance contracts Item 15, 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 15 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 PIN Rule 5.4.

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 PIN section 5.4, an Insurer may use that aggregate as a proxy for Premium Liability for the purposes of recording item 15 on this form.
16. Expected reinsurance and other recoveries in respect of item 15 Reinsurance and other recoveries in respect of claims that have not yet been incurred are reported at item 16. 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 15.
17. Net policy benefits under Long-Term insurance contracts in force Item 17 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 RM44/2007 (Made 1st June 2007). [VER2/06-07]
[Amended] DFSA GM2/2007 (Made 5th July 2007). [VER3/08-07]