• PINS S8 PINS S8 Group risk

    • PINS S8.1 What is group risk?

      (1) Group risk is the risk of loss to an insurer as a result of its membership of a group or linkages within a group.
      (2) Group membership can be a source of both strength and weakness for an insurer.
      (3) The purpose of requiring an insurer that is a member of a group to include group risk in its risk management policy is to ensure that the insurer takes proper account of the risks arising from its membership.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).

    • PINS S8.2 Risk management policy — group risk

      (1) If an insurer is a branch, or part of a group, the insurer's risk management policy for group risk should:
      (a) include a summary of the group policy objectives and strategies;
      (b) state whether the local risk management strategy is derived wholly or partly from the group-wide risk management strategy;

      Note The governing body of an insurer must know the implications for the insurer of any group-wide risk management strategy (see CTRL, rule 7.1.7 (5)).
      (c) summarise the linkages and significant differences between the local risk management strategy and the group-wide risk management strategy, including differences arising from local business and other conditions;
      (d) outline the procedures and timing for monitoring by, or reporting to, the parent entity or head office;
      (e) describe the approach to reviews of the procedures in paragraph (d);
      (f) include, if applicable, a summary of the group policy objectives and strategies relating to reinsurance;
      (g) summarise the linkages between local and group reinsurance; and
      (h) detail any arrangements relating to the existence of, and accessibility to, intra-group reinsurance.
      (2) If a part of an insurer's risk management policy is controlled by another entity in the group, or by the head office, the risk management policy must describe the arrangement and how it works.
      (3) If the insurer is a branch or is part of an insurance group and the head office or ultimate holding company is outside the QFC, the risk management policy should include a summary of the supervisory arrangements regarding risk management in the jurisdiction where the head office or holding company is located.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).
      Amended by QFCRA RM/2021-1 (as from 1st July 2021)

    • PINS S8.3 Specific obligations of group members

      (1) If an insurer is a member of a group, the insurer's senior management should monitor any functions performed for the insurer at the group level.

      Examples

      •    group risk management
      •    capital planning
      •    liquidity
      •    compliance.
      (2) The insurer's senior management should establish and maintain procedures and controls to identify and monitor the effect on the insurer of its relationship with the other members of the group and the activities of those other members.
      (3) The procedures and controls should include procedures to monitor:
      (a) changes in relationships between group members;
      (b) changes in the activities of group members;
      (c) conflicts of interest arising within the group;
      (d) events in the group, particularly those that might affect the insurer's own regulatory compliance (for example, any failure of control or compliance in another group member);
      (e) the effect on it of:
      (i) its relationship with the other members of the group;
      (ii) its membership in the group; and
      (iii) the activities of the other members of the group; and
      (f) the group's compliance with:
      (i) the supervision requirements applicable to it, including systems for the production of relevant data; and
      (ii) group reporting requirements.
      (4) The insurer should have procedures to insulate it, so far as practicable, from the adverse effects of other group activities (for example, transfer pricing or fronting) or group events that might expose the insurer to risk.

      Examples

      Such procedures could include:
      •    a requirement for transactions within the group to be at arm's length
      •    maintenance of “Chinese walls
      •    development of contingency plans.
      (5) The insurer's senior management should take reasonable steps to ensure that:
      (a) other group members are aware of the insurer's management and reporting obligations in relation to group risk;
      (b) group capital and group risk reporting requirements are complied with; and
      (c) information about the group provided to the Regulatory Authority is accurate, and is provided in a timely manner.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).