• 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)