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).