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).