• CAPI Chapter 2 CAPI Chapter 2 Prudential requirements

    • CAPI Part 2.1 CAPI Part 2.1 Prudential requirements—general

      • CAPI 2.1.1 CAPI 2.1.1 Financial resources—general requirement

        (1) A firm that is a QFC captive insurer must have, at all times, financial resources of the kinds and amounts required by, and calculated in accordance with, this chapter.
        (2) A firm must also have, at all times, additional financial resources that are adequate for the nature, size and complexity of its business to ensure that there is no significant risk that liabilities cannot be met as they fall due.
        (3) A firm must have systems and controls to enable it—
        (a) to monitor its minimum capital and solvency requirements; and
        (b) to show, at all times, whether it complies with this part.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 2.1.1 Guidance

          For rule 2.1.1(2), the firm's governing body should assess whether the minimum financial resources required by these rules are adequate for the firm's business. Additional financial resources should be maintained by the firm if its governing body considers that the required minimum financial resources do not adequately reflect the risks of the firm's business.

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

      • CAPI 2.1.2 References to particular currencies

        In these rules, the specification of an amount of money in a particular currency is also taken to specify the equivalent sum in any other currency at the relevant time.

        Inserted by QFCRA RM/2015-1 (as from 1st July 2015).

    • CAPI Part 2.2 CAPI Part 2.2 Minimum capital requirements

      • CAPI 2.2.1 Firms must have minimum capital

        (1) A firm that is a QFC captive insurer must have, at all times, the minimum capital required under this part.
        (2) The minimum capital requirement for a firm is the highest of the following:
        (a) the base capital requirement for the firm under rule 2.2.2;
        (b) the premium risk component under rule 2.2.3;
        (c) the outstanding claims risk component under rule 2.2.4 or rule 2.2.5.
        Note The minimum capital requirement of a firm is made up of eligible capital of the firm under chapter 3.
        Amended by QFCRA RM/2015-1 (as from 1st July 2015).

      • CAPI 2.2.2 What is a firm's base capital requirement?

        The base capital requirement for a firm is—

        (a) for a class 1 captive insurer—QR540,000;
        (b) for a class 2 captive insurer—QR1.4 million unless the Regulatory Authority determines another amount for the firm;
        (c) for a class 3 captive insurer—QR900,000; or
        (d) for a class 4 captive insurer—QR3.6 million unless the Regulatory Authority determines another amount for the firm.
        Amended by QFCRA RM/2015-1 (as from 1st July 2015).

      • CAPI 2.2.3 What is a firm's premium risk component?

        The premium risk component for a class 1, class 2, class 3 or class 4 captive insurer is the amount calculated in accordance with the following formula:

        [20% × firm's net written premium up to QR18 million]

        +

        [15% × firm's net written premium in excess of QR18 million]

        Amended by QFCRA RM/2015-1 (as from 1st July 2015).

      • CAPI 2.2.4 Outstanding claims risk component — firms conducting general insurance business

        (1) The outstanding claims risk component for a class 1, class 2, class 3 or class 4 captive insurer that conducts general insurance business is the amount calculated in accordance with the following formula:

        [5% × firm's net claims reserve on property insurance]
        +
        [15% × firm's net claims reserve on liability insurance]

        where:

        net claims reserve on property insurance is the amount of the firm's net claims reserve on property insurance under general insurance contracts in categories 3 to 9 in the Financial Services Regulations, schedule 3, part 3, paragraph 10.3.

        net claims reserve on liability insurance is the amount of the firm's net claims reserve on liability insurance under general insurance contracts in categories 1, 2 and 10 to 18 in the Financial Services Regulations, schedule 3, part 3, paragraph 10.3.

        net claims reserve, as at a date, is the amount of the firm's provisions for—
        (a) claims incurred but not yet paid as at the date, including claims incurred but not yet reported; and
        (b) direct and indirect claims settlement expenses for those claims;
        less the amount of reinsurance and other recoveries expected to be received in respect of those claims.
        (2) Despite subrule (1), the Regulatory Authority may, by written notice, direct a firm (whether on application of the firm or on the authority's own initiative) to include a particular contract of insurance or category of contracts of insurance in the firm's net claims reserve on property insurance or net claims reserve on liability insurance.

        Note In deciding whether a particular contract of insurance or category of contracts of insurance is to be included in the firm's net claims reserve on property insurance (at 5%) or net claims reserve on liability insurance (at 15%), the Regulatory Authority may consider, among other factors—
        (a) who would potentially be affected by the failure of the firm; and
        (b) whether the technical provisions for the contract have a lot of volatility or have the potential for adverse deviation.
        For example, contracts of insurance where the failure of the firm affects third parties will usually be treated at the higher percentage. Thus, the failure of a firm that has group health insurance for its owner's business could significantly affect individual employees and will be treated at the higher percentage. In contrast contracts of insurance (such as those that insure against pure property risks) where the failure of the firm would only financially affect the owner, will usually be treated at the lower percentage.
        Amended by QFCRA RM/2015-1 (as from 1st July 2015).

      • CAPI 2.2.5 Outstanding claims risk component—firms conducting life insurance business

        The outstanding claims risk component for a class 1, class 2, class 3 or class 4 captive insurer that conducts life insurance business is 2.5% of the policyholder liabilities calculated using actuarial methods for life insurance.

        Note The following tables summarise the percentages for the premium risk and outstanding claims risk component for captive insurers.

        Premium risk component for captive insurers conducting general insurance business or life insurance business (see rule 2.2.3) Percentage
        First QR18 million of net written premium 20%
        PLUS  
        Net written premium in excess of QR18 million 15%
        Outstanding claims risk component for captive insurers conducting general insurance business (see rule 2.2.4) Percentage
        Net claims reserve on property insurance 5%
        PLUS  
        Net claims reserve on liability insurance 15%
        Outstanding claims risk component for captive insurers conducting life insurance business( see rule 2.2.5) Percentage
        Policyholder liabilities calculated using actuarial methods for life insurance 2.5%


        Amended by QFCRA RM/2015-1 (as from 1st July 2015).

      • CAPI 2.2.6 Regulatory authority to have regard to certain matters

        (1) In determining an amount for a class 2 or class 4 captive insurer under this part, the Regulatory Authority must have regard to the nature, scale and complexity of the firm's business.
        (2) Without limiting subrule (1), the Regulatory Authority may, in determining an amount for a class 2 captive insurer, take into account the following:
        (a) the third party risks the captive insurer expects to insure;
        (b) how closely linked the business or operations giving rise to the third party risks are to the business or operations of the group to which the captive insurer belongs;
        (c) the percentage of gross written premium (up to 20%) that captive insurer intends to obtain from third party risks;
        (d) any burden or undue risks to the cedent or other policyholders.
        (3) Without limiting subrule (1), the Regulatory Authority may take into account the matters in rule 1.2.6 (2) (Regulatory Authority may authorise entity as class 4 captive insurer) in determining an amount for a class 4 captive insurer.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 2.2.7 CAPI 2.2.7 Obligation to tell regulatory authority about breach of part 2.2

        If a firm that is a QFC captive insurer becomes aware, or has reasonable grounds to believe, that it is or may be (or may be about to be) in breach of any provision of this part, it must—

        (a) tell the Regulatory Authority orally about the matter immediately, but within 1 business day; and
        (b) by written notice given to the authority by no later than the next business day—
        (i) confirm the oral notification; and
        (ii) explain the nature of the breach or why the firm considers it may be (or may be about to be) in breach of the provision; and
        (iii) set out the action that the firm proposes to take about the breach or to avoid the breach; and
        (c) not make any distribution to its shareholders or members, whether by way of dividends or otherwise, without the authority's written permission.

        Examples—meaning of 'within 1 business day'

        1 If, on a business day, the firm becomes aware that it may be in breach of this part, the firm must tell the Regulatory Authority immediately, but on that day.
        2 If, on a day that is not a business day, the firm becomes aware that it may be in breach of this part, the firm must tell the Regulatory Authority immediately, but by no later than the next business day.

        Note Business day is defined in the glossary.

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

        • CAPI 2.2.7 Guidance

          In dealing with a breach, or possible breach, of this part, the Regulatory Authority's primary concern will be the interests of existing and prospective policyholders and clients. The authority recognises that there will be circumstances in which a problem may be resolved quickly, for example by support from a parent entity, without jeopardising the interests of policyholders and clients. In such circumstances, it will be in the interests of all parties for there to be minimum disruption to the firm's business. The authority's normal approach will be to seek to work cooperatively with firms to deal with any problems. There will, however, be circumstances in which it is necessary to take regulatory action to avoid exposing further policyholders and clients to the risk of the firm's failure, and the authority will not hesitate to take appropriate action if it considers this necessary.

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

    • CAPI Part 2.3 CAPI Part 2.3 Prudential requirements—other provisions

      • CAPI Division 2.3.A CAPI Division 2.3.A Prudential returns

        • CAPI 2.3.1 Preparation of prudential returns

          (1) A firm that is a QFC captive insurer must prepare the annual prudential returns that it is required to prepare by the Regulatory Authority by written notice published on an approved website.
          (2) The Regulatory Authority may, by written notice given to a firm—
          (a) require the firm to prepare additional prudential returns; or
          (b) exempt the firm from the requirement to prepare annual returns or a particular annual return.
          (3) An exemption under subrule (2) (b) may be subject to conditions, restrictions or requirements.
          (4) A firm given an exemption under subrule (2) (b) must comply with all conditions, restrictions and requirements to which the exemption is subject.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 2.3.2 Time limit for annual prudential returns

          A firm must give an annual prudential return to the Regulatory Authority within 3 months after the day the relevant financial year of the firm ends.

          Example

          If a financial year of an insurer ends on 31 December in a year, the annual prudential return for the year must be given to the Regulatory Authority before 1 April of the next year.

          Amended by QFCRA RM 2019-1 (as from 28th March 2019).

      • CAPI Division 2.3.B CAPI Division 2.3.B Strategy and risk document

        • CAPI 2.3.3 CAPI 2.3.3 What is a strategy and risk document?

          (1) A firm that is a QFC captive insurer must prepare, at the beginning of each financial year, a high level document (the strategy and risk document) that describes the key elements of a firm's risk management policy.
          (2) A firm's strategy and risk document must be appropriate to the nature, scale and complexity of the firm's business and must include—
          (a) the purpose of the firm as captive insurer; and
          (b) its risk appetite and risk management strategy (or revised strategy); and
          (c) a description of the risk assessment conducted by the firm and the results of that assessment; and
          (d) an explanation about how the risks identified by the risk assessment are to be reported, monitored and managed; and
          (e) the role and responsibilities of management in relation to risks; and
          (f) systems and controls for managing risks; and
          (g) the firm's forward budget; and
          (h) an outline of the approval and review processes for the document.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

          • CAPI 2.3.3 Guidance

            Although a strategy and risk document would not normally contain the policies or procedures that underpin the firm's risk management policy, it may refer to them for illustrative purposes.

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

        • CAPI 2.3.4 Strategy and risk document—risk assessment

          A risk assessment for a firm must have regard to the nature, scale and complexity of the firm's business and must include assessments in relation to the following risks:

          (a) insurance and reinsurance risk;
          (b) investment and liquidity risk;
          (c) market risk;
          (d) credit risk;
          (e) operational risk.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 2.3.5 Strategy and risk document—approval by governing body

          (1) A firm must ensure that its strategy and risk document and any amendment to it are approved by its governing body.
          (2) The governing body of a firm must not approve the firm's strategy and risk document (or any amendment to it) unless it is satisfied that—
          (a) the document, including any amendment, describes the key elements of the firm's risk management policy; and
          (b) the risk management policy of the firm is appropriate; and
          (c) the risk management strategy set out in the document gives reasonable assurance that all material risks facing the firm, specially those mentioned in rule 2.3.4, are being prudently and soundly managed.
          (3) The governing body must approve the strategy and risk document and any amendment to it with sufficient promptness to enable the firm to comply with its obligation under rule 2.3.7 (Strategy and risk document—copy must be given to Regulatory Authority).
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 2.3.6 Strategy and risk document—review by firm

          A firm must review, and amend if necessary, its strategy and risk document if there is a material change to its risk management policy.

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

        • CAPI 2.3.7 Strategy and risk document—copy must be given to Regulatory Authority

          (1) A firm must give the Regulatory Authority a copy of its strategy and risk document for a financial year within 2 months after the start of the financial year.
          (2) If a strategy and risk document of a firm is amended, the firm must give the Regulatory Authority a copy of the amendment, together with a copy of its strategy and risk document as amended, within 10 business days after the day the amendment is approved by the firm's governing body.

          Note Governing body, month and business day are defined in the glossary.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 2.3.8 Strategy and risk document—deviation

          A firm must not intentionally deviate in a material way from its strategy and risk document unless—

          (a) the deviation has been approved by the governing body; and
          (b) the Regulatory Authority has been notified in writing about the deviation.

          Note Writing is defined in the glossary.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI Division 2.3.C CAPI Division 2.3.C Restrictions on captive insurance business

        • CAPI 2.3.9 Restrictions on captive insurance business—activities that may be conducted

          (1) A QFC captive insurer must not conduct any activity other than captive insurance business unless the activity is directly connected with, or conducted for the purposes of, captive insurance business.
          (2) For this rule, managing investments is not an activity directly connected with, or conducted for the purposes of, captive insurance business.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 2.3.10 Restrictions on captive insurance business—long term and general insurance

          A QFC captive insurer must not conduct, in or from the QFC, both long term insurance business and general insurance business unless the general insurance business is restricted to categories 1 (accident) and 2 (sickness).

          Note Long term insurance business, category and general insurance business are defined in the glossary.

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