• PINS Part 8.1 PINS Part 8.1 General

    Amended by QFCRA RM/2013-1 and Editorial changes (as from 1st January 2015).

    • PINS 8.1.1 PINS 8.1.1 Application of ch 8

      This Chapter applies to every insurer (other than a QFC captive insurer).

      Amended by QFCRA RM/2013-1 and Editorial changes (as from 1st January 2015).

      • PINS 8.1.1 Guidance [Deleted]

        Deleted by QFCRA RM/2013-1 (as from 1st January 2015).

    • PINS 8.1.2 PINS 8.1.2 Purpose of ch 8

      The purpose of this Chapter is to set out rules for:

      (a) matching an insurer's assets with its liabilities;
      (b) the consistent valuation of those assets and liabilities;
      (c) investment concentration limits of insurers that are limited liability companies incorporated under the Companies Regulations 2005; and
      (d) the use of derivatives.
      Inserted by QFCRA RM/2013-1 and amended by Editorial changes (as from 1st January 2015).

      • PINS 8.1.2 Guidance

        This Chapter is not intended to establish a basis of accounting for general purpose financial statements of insurers. It does not prevent an insurer from adopting a method of valuing assets and liabilities that might be considered excessively prudent if used in the insurer's financial statements.

        Inserted by QFCRA RM/2013-1 and amended by Editorial changes (as from 1st January 2015).

    • PINS 8.1.3 Value of insurer's assets to match its insurance liabilities

      (1) An insurer must hold supporting assets of a value at least equal to the amount of its insurance liabilities.
      (2) The assets:
      (a) must have characteristics of safety, yield and marketability that are appropriate to the nature, scale and complexity of the insurer's business;
      (b) must be diversified;
      (c) must be adequately spread; and
      (d) must be of a sufficient amount, and of an appropriate currency and term, to ensure that the cash inflows from the assets meet the expected cash outflows from the insurer's insurance liabilities as they fall due.
      (3) In determining the expected cash outflows for subrule (2) (d), the insurer must take into account any options that exist in the insurer's contracts of insurance.
      (4) This rule does not apply to assets held to cover index-linked liabilities.
      (5) However, this rule applies to assets held to cover the guaranteed portion of any index-linked long-term insurance contract that includes a guarantee of investment performance or some other guaranteed benefit.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).

    • PINS 8.1.4 PINS 8.1.4 Asset admissibility and investment criteria

      (1) An insurer may invest in assets and instruments only if the insurer:
      (a) can identify, measure, monitor, manage and report on the risks arising from the assets and instruments; and
      (b) can take those risks into account in the assessment of its solvency needs in accordance with these rules.
      (2) Investments must be made by the insurer in such a way:
      (a) as to ensure the security, quality, liquidity and profitability of its portfolio of assets; and
      (b) as to avoid:
      (i) over-reliance or concentration on a particular asset class, region, issuer or group of issuers; and
      (ii) excessive accumulation of risk in the portfolio.
      (3) Assets and securities that are not admitted to trading on a regulated financial market must be kept to prudent levels.
      (4) Assets held by the insurer to cover technical provisions must be invested:
      (a) as appropriate to the nature and duration of its insurance liabilities;
      (b) in the best interest of all policyholders and beneficiaries; and
      (c) taking into account any policy objectives disclosed by the insurer.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).

      • PINS 8.1.4 Guidance

        For investments of assets held by an insurer to cover technical provisions, the Regulatory Authority expects the investments to be made in liquid assets like:

        1 cash and cash-equivalent instruments;
        2 time deposits;
        3 readily tradable securities;
        4 shares in publicly listed companies;
        5 liquid corporate or sovereign bonds.
        Inserted by QFCRA RM/2013-1 (as from 1st January 2015).

    • PINS 8.1.5 Use of derivatives

      (1) An insurer must not use a derivative instrument for speculation or proprietary trading.
      (2) An insurer may use a derivative instrument:
      (a) to mitigate or reduce financial risks;
      (b) for sound hedging; or
      (c) for efficient portfolio management.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).

    • PINS 8.1.6 Investment concentration limits for companies

      (1) For an insurer that is a limited liability company incorporated under the Companies Regulations 2005, investments representing a concentration of exposures to single or related counterparties (whether on or off-balance sheet and including intra-group entities) must not exceed whichever is the lesser of the following amounts:
      (a) 20% of the insurer's applicable assets;
      (b) the insurer's eligible capital.
      Example

      An insurer's deposits in the same bank will be subject to the investment concentration limit because it is an exposure to a single counterparty.
      (2) Applicable assets of an insurer means the insurer's total assets less reinsurance receivables, premiums receivables, deferred acquisition costs, fixed assets, intangible assets and other assets that are not held for investment purposes.

      Example

      In calculating the value of applicable assets, items such as deferred tax assets, prepayments, advances and accrued income should be deducted from the insurer's total assets.
      (3) Assets that are excluded from eligible capital in accordance with paragraph (G) of the table in rule 4.2.2 are not subject to the concentration limit.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).