• CAPI Chapter 5 CAPI Chapter 5 Additional requirements for protected cell companies

    • Guidance

      1 The Regulatory Authority will examine each application for authorisation to conduct insurance business from a protected cell company on a case by case basis. The Regulatory Authority is of a general view that captive insurers with significant assets or premiums should be formed on a standalone basis rather then be run through a cell.
      2 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.
      3 This chapter sets out the capital requirements for an insurer that is a protected cell company.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 5.1.1 Definitions for chapter 5

      For this chapter—

      non-cellular assets—see the Companies Regulations, article 157.

      non-cellular eligible capital of a QFC captive insurer that is a protected cell company means the insurer's eligible capital calculated in accordance with chapter 3, but excluding—

      (a) cell shares (within the meaning given in the Companies Regulations, article 157); and
      (b) any capital instruments or equity reserves that are attributable to a cell.

      recourse agreement means an agreement under which a cell is entitled to have recourse to non-cellular assets.

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

    • CAPI 5.1.2 General requirement

      A QFC captive insurer that is a protected cell company must at all times hold non-cellular eligible capital of at least—

      (a) QR180,000; or
      (b) if the cells have recourse to non-cellular assets under 1 or more recourse agreements—a higher amount determined by the Regulatory Authority.
      Amended by QFCRA RM/2015-1 (as from 1st July 2015).

    • CAPI 5.1.3 Captive insurers that are PCCs not to create cells without consent

      A QFC captive insurer that is a protected cell company must not create a cell before it has obtained the written consent of the Regulatory Authority.

      Note If a form is approved for the purpose of seeking the Regulatory Authority's consent under this rule, the approved form must be used (see GENE, rule 5.3.2).

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

    • CAPI 5.1.4 Captive insurers that are PCCs to conduct insurance business only through cells

      A QFC captive insurer that is a protected cell company must ensure that, when it conducts captive insurance business, each contract of insurance is attributable to a particular cell of the QFC captive insurer.

      Note For the obligations of a QFC captive insurer that is a protected cell company and that effects long term insurance contracts, see rule 8.2.2.

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

    • CAPI 5.1.5 Captive insurers that are PCCs not to conduct general and life insurance business through same cell

      A QFC captive insurer that is a protected cell company must not conduct both general insurance business and long term insurance business through the same cell.

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

    • CAPI 5.1.6 Minimum solvency criterion

      (1) A cell that is conducting captive insurance business (an active cell) must meet the minimum solvency criterion.
      (2) An active cell must comply with subrule (1) by—
      (a) relying upon non-cellular assets under a recourse agreement; or
      (b) satisfying the risk-based minimum solvency requirement in rule rule 5.1.7.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 5.1.7 Risk-based minimum solvency requirement

      (1) The risk-based minimum solvency requirement for a cell is that the amount of the cell's net cellular assets must be greater than the liabilities attributable to the cell by at least the greater of—
      (a) the cell's premium risk component; and
      (b) its outstanding claims risk component.
      (2) In this rule:

      net cellular assets, of a cell, are the assets attributable to the cell (other than any deductible assets) less the liabilities attributable to the cell.

      deductible assets of a cell means—
      (a) investments in subsidiaries and associates; and
      (b) intangible assets; and
      (c) inadmissible assets; and
      (d) any other asset that the Regulatory Authority has directed the firm to include under rule 3.1.2 (2) (b).
      Amended by QFCRA RM/2015-1 (as from 1st July 2015).

    • CAPI 5.1.8 What is a cell's premium risk component?

      The premium risk component for a cell carrying out contracts of insurance as a class 1, class 2, class 3 or class 4 captive insurer is the amount calculated in accordance with the following formula:

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

      +

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

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

    • CAPI 5.1.9 Outstanding claims risk component — cells conducting general insurance business

      (1) The outstanding claims risk component for a cell carrying out contracts of insurance as 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% × cell's net claims reserve on property insurance]
      +
      [15% × cell's net claims reserve on liability insurance]

      where:

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

      net claims reserve, as at a date, is the amount of the cell's provision 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 net claims reserve on property insurance or net claims reserve on liability insurance for a cell of the firm.

      Example

      Suppose PCC Limited is a protected cell company that is authorised as a class 4 captive insurer. Cell 1 of PCC Limited conducts captive insurance business as a class 3 captive insurer. Cell 1 has no recourse to non-cellular assets. Under rule 5.1.6 (2), therefore, Cell 1 must satisfy the risk-based minimum solvency requirement as follows.

      Supposing its net written premium to be QR30 million, its premium risk component (see rule 5.1.8) is:

      (20% × QR18m) + (15% × QR12m) = QR3.6m × QR1.8m = QR5.4m

      Supposing its net claims reserve on property insurance under general insurance contracts in categories 3 to 9 is QR8 million and its net claims reserve on liability insurance under the other categories of general insurance contracts is QR20 million. Then its outstanding claims risk component (see rule 5.1.9) is:

      (5% × QR8m) + (15% × QR20m) = QR400,000 + QR3m = QR3.4m

      Because its premium risk component (QR5.4m) is higher than its outstanding claims risk component (QR3.4m), its risk-based minimum solvency requirement for Cell 1 (see rule 5.1.7) is that the total amount of its cellular assets must be higher than its cellular liabilities by:

      at least US QR5.4m
      Amended by QFCRA RM/2015-1 (as from 1st July 2015).

    • CAPI 5.1.10 Outstanding claims risk component — cells conducting life insurance business

      The outstanding claims risk component for a cell carrying out contracts of insurance as 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.

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

    • CAPI 5.1.11 Regulatory Authority to make available certain details of PCCs

      In the record kept and made available by the Regulatory Authority under the FSR, article 18(1) (F), the Regulatory Authority must include, for any QFC captive insurer that is a protected cell company, details of each cell created by the insurer.

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