• CAPI Part 1.2 CAPI Part 1.2 Key terms and basic concepts

    • CAPI 1.2.1 QFC captive insurers and their classes

      (1) A QFC captive insurer is an authorised firm (or firm) with an authorisation for captive insurance business as a class 1, class 2, class 3 or class 4 captive insurer.

      Note Authorised firm (or firm), authorisation and the classes of QFC captive insurers are defined in the glossary.
      (2) An insurer that is not incorporated in the QFC cannot be a QFC captive insurer.

      Note Unlike some other regulated entities, QFC captive insurers are not allowed to operate as a branch.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.2 What is captive insurance business?

      (1) Captive insurance business is the business of effecting or carrying out contracts of insurance as a class 1, class 2, class 3 or class 4 captive insurer.
      (2) For this purpose, a class 1, class 2, class 3 or class 4 captive insurer may effect or carry out contracts that are limited to contracts of reinsurance for risks insured by the cedent.

      Note Contract of insurance, contract of reinsurance and cedent are defined in the glossary.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.3 Who is a class 1 captive insurer?

      A class 1 captive insurer is a QFC captive insurer that is permitted under the conditions of its authorisation to effect or carry out contracts of insurance only for risks related to or arising out of the business or operations of the group to which the insurer belongs.

      Note Group is defined in the glossary.

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.4 CAPI 1.2.4 Who is a class 2 captive insurer?

      A class 2 captive insurer is a QFC captive insurer that is permitted under the conditions of its authorisation to obtain no more than 20% of its gross written premium from third party risks arising from business or operations that are closely linked to the business or operations of the group to which the insurer belongs.

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 1.2.4 Guidance

        A firm applying to become a class 2 captive insurer will need to include in its application to the Regulatory Authority details of—

        (a) the third party risks it expects to insure; and
        (b) the close links between the businesses or operations mentioned in the rule.

        In addition to the 20% cap in this rule, other limitations will most likely be imposed by the Regulatory Authority to ensure that the firm, for its closely-linked business, is restricted to only effecting and carrying out contracts of insurance for the closely-linked business described in its application.

        Example of close links

        A construction company that offers health insurance to its employees through a captive insurer may also want to extend that coverage to self-employed contractors working for the company. Although the self-employed contractors are considered unrelated to the construction company, a class 2 captive insurer for the company may be allowed to provide health insurance cover (up to 20% of its business) because of the self-employed contractors' close association to the construction company that owns the captive insurer.

        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.5 Who is a class 3 captive insurer?

      A class 3 captive insurer is a QFC captive insurer that—

      (a) is permitted under the conditions of its authorisation to effect or carry out contracts of insurance only for risks related to or arising out of the business or operations of persons who engage in similar, related or common—
      (i) businesses; or
      (ii) activities; or
      (iii) trade; or
      (iv) services; or
      (v) operations; and
      (b) is owned by the persons mentioned in paragraph (a) or by a body corporate of which all such persons are members.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.6 CAPI 1.2.6 Regulatory Authority may authorise entity as class 4 captive insurer

      (1) The Regulatory Authority may decide that an entity that does not meet the requirements for class 1 captive insurer, class 2 captive insurer or class 3 captive insurer is a class 4 captive insurer.

      Note Entity is defined in the glossary.
      (2) Without limiting subrule (1), the Regulatory Authority may take into account the following matters in deciding whether an entity is a class 4 captive insurer:
      (a) the business rationale for making the entity a captive insurer;
      (b) the use or non-use of the entity as a risk management tool;
      (c) the nature of the interests of the shareholders or members of the entity and whether they are aligned, or have some commonality with, the policyholder;
      (d) any unique or expert knowledge of the shareholders or members of the entity about the risks to be insured;
      (e) the appropriateness of the structure for the proposed activities or whether the business is more akin to a commercial insurer.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 1.2.6 Guidance

        A protected cell company that is to conduct captive insurance business is usually set up to insure risks that are not those of the owner of the protected cell company, so would normally be authorised as a class 4 captive insurer.

        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.7 Who is a captive insurance manager?

      A captive insurance manager is an authorised firm (or firm) with an authorisation for captive insurance management.

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 1.2.8 What is captive insurance management?

      Captive insurance management is the administration of, and exercise of managerial functions for, a QFC captive insurer, and includes the administration of contracts of insurance for the insurer.

      Note 1 Exercise and functions are defined in the glossary.

      Note 2 Captive insurance management is a regulated activity (see Insurance Mediation Business Rules 2011, rule 1.2.6).

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)