• CAPI Chapter 10 CAPI Chapter 10 Captive insurers in run-off

    • CAPI Part 10.1 CAPI Part 10.1 General provisions

      • CAPI 10.1.1 Terms and concepts relating to run-offs

        (1) A firm that is a QFC captive insurer, a cell or a long term insurance fund is in run-off if the firm, cell or fund has ceased to effect contracts of insurance for the whole of its captive insurance business or for a category of contracts of insurance previously effected by it.

        Note However, a firm, cell or long term insurance fund that is in run-off continues to carry out the contracts of insurance included in the run-off by paying out any future claims arising from them and permitting premiums and losses to run to their normal expiration.
        (2) The reasons why a firm, cell or long term insurance fund may go into run-off or be placed into run-off (and thereby cease to effect contracts of insurance as described in subrule (1)) include—
        (a) a decision of the governing body of the firm to cease to conduct captive insurance business; and
        (b) a business or strategic decision to cease to effect contracts of insurance for a category of contracts of insurance; and
        (c) the winding up or liquidation of the business; and
        (d) a decision of the Regulatory Authority to withdraw the firm's authorisation; and
        (e) a direction of the Regulatory Authority; and
        (f) a court order or decision to wind up or liquidate the group to which the firm belongs.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 10.1.2 Obligation of firm in run-off under FSR

        Unless the Regulatory Authority directs otherwise, a firm must comply with this chapter if the firm is in run-off because of a decision or written notice of the authority, under the Financial Services Regulations, to the effect that the firm is to cease to effect contracts of insurance.

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

      • CAPI 10.1.3 CAPI 10.1.3 Contracts effected under existing term

        (1) In determining whether a firm is effecting contracts of insurance (or whether a firm has ceased to effect contracts of insurance), contracts of insurance that are effected under a term of an existing contract must be ignored unless the Regulatory Authority decides otherwise in respect of a particular contract.
        (2) This rule applies whether the contracts of insurance are effected through a cell or long term insurance fund.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 10.1.3 Guidance

          The effect of this rule is to disregard, for the purpose of determining whether this chapter applies, contracts of insurance that are effected by a firm because of a term of an existing contract of insurance. A contract will normally only be regarded as being effected under a term of an existing contract if—

          (a) the firm does not have discretion to decline to effect the new contract; or
          (b) it would be unreasonable for the firm, having regard to the interests of the policyholder, to decline to effect the new contract.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI Part 10.2 CAPI Part 10.2 Notices and run-off plans

      • CAPI Division 10.2.A CAPI Division 10.2.A Ceasing to effect contracts in a category

        • CAPI 10.2.1 Firms must notify Regulatory Authority—ceasing to effect contracts in a category

          (1) This rule applies to a firm that is a QFC captive insurer if the firm ceases, or decides to cease, to effect new contracts of insurance or to renew contracts of insurance—
          (a) in a category in which the firm has previously effected contracts of insurance; or
          (b) for a cell or long term insurance fund-in a category in which the firm has previously effected contracts of insurance through the cell or long term insurance fund.

          Note Category is defined in the glossary.
          (2) A firm to which this rule applies is taken to have undergone a material change for purposes of rule 2.3.6 (Strategy and risk document — review by firm) and must—
          (a) by written notice, tell the Regulatory Authority about ceasing, or deciding to cease, to effect contracts of insurance in the category; and
          (b) if the firm's strategy and risk document is amended following a review under rule 2.3.6 — 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 Any material amendment to a firm's strategy and risk document must be approved by its governing body (see rule 2.3.5 (1)).
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI Division 10.2.B CAPI Division 10.2.B Ceasing to effect contracts for entire captive insurance business

        • CAPI 10.2.2 Application of div 10.2.B

          This division applies to a firm that is a QFC captive insurer if the firm—

          (a) goes into, or is in, run-off or maintains a cell or long term insurance fund that is in run-off; or
          (b) makes a decision to go into run-off or to place a cell or long term insurance fund into run-off; or
          (c) has its authorisation to effect contracts of insurance for its entire captive insurance business, or for the entire captive insurance business of a cell or long term insurance fund, withdrawn by the Regulatory Authority.

          Note 1 An event or decision mentioned in this rule is a material change for purposes of rule 2.3.6 (Strategy and risk document — review by firm) and the firm must review and amend its strategy and risk document.

          Note 2 Any material amendment to a firm's strategy and risk document must be approved by its governing body (see rule 2.3.5 (1)).

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

        • CAPI 10.2.3 Firms must notify Regulatory Authority — events and decisions

          (1) A firm to which this division applies must, by written notice, tell the Regulatory Authority about an event or decision in rule 10.2.2 (a) or (b).
          (2) The notice must be given within 28 days after—
          (a) the firm, or cell or long term insurance fund that it maintains, goes into run-off; or
          (b) the firm makes the decision to go into run-off or place the cell or long term insurance fund into run-off.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 10.2.4 Run-off plan — firm decides to go into run-off

          (1) If a firm decides to go into run-off, or to place a cell or a long term insurance fund into run-off, the firm must give the Regulatory Authority a written run-off plan for the captive insurance business, cell or long term insurance fund being placed into run-off.
          (2) The run-off plan must be given at the same time the notice in rule 10.2.3 is given.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 10.2.5 Run-off plan — Regulatory Authority withdraws firm's authorisation

          (1) This rule applies if the Regulatory Authority withdraws a firm's authorisation to effect contracts of insurance for—
          (a) its entire captive insurance business; or
          (b) the entire captive insurance business of a cell or long term insurance fund.
          (2) A firm must give the Regulatory Authority a written run-off plan for the captive insurance business of the firm, cell or long term insurance fund.
          (3) The run-off plan must be given within 28 days after the firm receives the notice of withdrawal of the authorisation unless the notice specifies a longer period.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 10.2.6 Period of run-off plan

          (1) A firm must ensure that a run-off plan given to the Regulatory Authority covers the period until all liabilities to policyholders relating to the captive insurance business in run-off are met.
          (2) The run-off plan must include—
          (a) an explanation of how, and the extent to which, liabilities to policyholders will be met in full as they fall due; and
          (b) an explanation of how, and the extent to which, the firm will maintain its compliance with the requirements of these rules until all liabilities to policyholders are met; and
          (c) a description, appropriate to the scale and complexity of the firm's business, of its business strategy; and
          (d) financial projections showing, in a form appropriate to the scale and complexity of the firm's operations, the forecast financial position of the firm as at the end of each reporting period during the period covered by the run-off plan; and
          (e) an assessment of the sensitivity of the financial position of the firm to stress arising from realistic scenarios relevant to the circumstances of the firm; and
          (f) details of planned run-off reinsurance protections and the extent to which the protections match the scenarios mentioned in paragraph (e); and
          (g) details of the claims handling and reserving strategy; and
          (h) details of the cost of the management of the run-off.
          (3) For a cell or long term insurance fund in run-off, the run-off plan must deal with the matters in subrule (2) so far as they relate to the cell or long term insurance fund.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

        • CAPI 10.2.7 Firms to monitor run-off plan etc

          (1) A firm that has given a run-off plan to the Regulatory Authority must monitor the matters in the plan.
          (2) If there is a significant departure from the run-off plan, the firm must, in writing, immediately tell the Regulatory Authority, but by no later than the second business day after the day the departure happens or starts.

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

        • CAPI 10.2.8 Amended run-off plan

          (1) If a firm gives notice of a significant departure from a run-off plan, the Regulatory Authority may, by written notice, require the firm to give to the authority an amended run-off plan.
          (2) The amended run-off plan must be given within 28 days after the firm receives the notice requiring the amended plan unless the notice specifies a longer period.
          Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI Part 10.3 CAPI Part 10.3 Provisions for contracts relating to captive insurance business in run-off

      • CAPI 10.3.1 Application of part 10.3

        This part applies to a firm that―

        (a) is in run-off in relation to its entire captive insurance business or the entire captive insurance business of a cell or long term insurance fund; or
        (b) has given notice to the Regulatory Authority under rule 10.2.3 for its entire captive insurance business or the entire captive insurance business of a cell or long term insurance fund; or
        (c) has received a written notice from the Regulatory Authority withdrawing the firm's authorisation to effect contracts of insurance for its entire captive insurance business, or for the entire captive insurance business of a cell or long term insurance fund.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 10.3.2 Firms in run-off must notify Regulatory Authority of certain contracts

        (1) A firm to which this part applies must—
        (a) within 10 business days after the day its captive insurance business goes, or is placed, into run-off, notify the Regulatory Authority in writing about the existence and principal features of any notifiable contract that existed at the time the business entered into run-off; and
        (b) within 10 business days after the day it enters into a notifiable contract in relation to its captive insurance business in runoff, notify the Regulatory Authority in writing about the existence and principal features of the contract.

        Note Business day and writing are defined in the glossary.
        (2) To remove any doubt, subrule (1) (b) applies whether or not the captive insurance business is conducted through a cell or long term insurance fund that is in run-off.
        (3) In this rule:

        notifiable contract means—
        (a) a contract with a person related to the firm, other than a contract of insurance effected by the firm before going into run-off; or
        (b) a contract relating to the management of all or any of the captive insurance business in run-off; or
        (c) a contract for reinsurance of all or any of the captive insurance business in run-off; or
        (d) any other contract with a person with whom a contract of the kind mentioned in paragraph (b) or (c) was entered into or a person related to such a person.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

      • CAPI 10.3.3 Regulatory Authority may request additional information

        (1) The Regulatory Authority may, by written notice given to a firm that has notified the authority about a notifiable contract under rule 10.3.2, require the firm to give the authority, within a stated reasonable period, additional information about the contract.
        (2) The firm must comply with the requirement.
        (3) The power given by subrule (1) is additional to the Regulatory Authority's other powers.

        Note See for example Financial Services Regulations, article 48 (Power to obtain documents and information).
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI Part 10.4 CAPI Part 10.4 Limitations on distributions by captive insurers in run-off

      • CAPI 10.4.1 Firms not to make distribution

        (1) A firm that is a QFC captive insurer in run-off must not make, without the written consent of the Regulatory Authority—
        (a) any distribution to shareholders or members of the firm, whether by way of dividends or otherwise; or
        (b) any payment of management fees.
        (2) A distribution or payment of management fees must be made within the period, if any, stated in the written consent given by the Regulatory Authority.
        (3) Subrule (1) (b) does not apply to management fees payable under a notifiable contract under rule 10.3.2.
        Derived from QFCRA RM/2011-1 (as from 1st July 2011)