14.1.1. Definition of Captive Insurer

A Captive Insurer is an Authorised Firm with a Licence to carry on Insurance Business as a Class 1, Class 2 or Class 3 Captive Insurer

14.1.1-1. Classification of Captive Insurer

(1)  A class 1 Captive Insurer is an AIFC Captive Insurer that is permitted under the conditions of its authorisation to effect or carry out Contracts of Insurance only for risks related to or arising out of the business or operations of the group to which the Insurer belongs.

(2)  A class 2 Captive Insurer is an AIFC Captive Insurer that is permitted under the conditions of its authorisation to obtain no more than 20% of its gross written premium from third-party risks arising from business or operations that are closely linked to the business or operations of the group to which the Insurer belongs.

(3)  A class 3 Captive Insurer is an AIFC Captive Insurer that:

(a)is permitted under the conditions of its authorisation to effect or carry out Contracts of Insurance only for risks related to or arising out of the business or operations of persons who engage in similar, related or common:

i.businesses; or

ii.activities; or

iii.trade; or

iv.services; or

v.operations; and

(b)is owned by the persons mentioned in paragraph (i) or by a body corporate of which all such persons are members such as group captives.

14.1.2. Definition of Captive Insurance Business

(1)  Captive Insurance Business is the business of Effecting or Carrying out Contracts of Insurance as a Class 1, Class 2 or Class 3 Captive Insurer.

(2)  General Captive Insurance Business is Captive Insurance Business in relation to General Insurance Contracts.

(3)  Long-Term Captive Insurance Business is Captive Insurance Business in relation to Long-Term Insurance Contracts.

14.1.3. Captive Insurer to be incorporated in the AIFC

(1) Only an Authorised Firm which is incorporated under the laws of the AIFC may apply to the AFSA for a Licence to conduct Captive Insurance Business.

(2) A Captive Insurer may either be self-managed or managed by an Insurance Manager authorised by AFSA.

14.2.1. Captive Insurer may be a Protected Cell Company

(1) An Authorised Firm which is a Protected Cell Company (PCC) incorporated under the Companies Regulations may apply to the AFSA for a Licence to conduct Captive Insurance Business.

(2) A Protected Cell Company may not otherwise carry on Insurance Business.

14.2.2. Captive insurers that are PCCs not to create cells without consent

A Captive Insurer that is a Protected Cell Company must not create a Cell without the written consent of the AFSA.

14.2.3. Captive insurers that are PCCs to conduct Captive Insurance Business only through cells

A 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 Captive Insurer.

14.2.4. Captive insurers that are PCCs not to conduct General and Long-Term Captive Insurance Business through same Cell

A Captive Insurer that is a Protected Cell Company must not conduct both General Captive Insurance Business and Long-Term Captive Insurance Business through the same Cell.

14.3.1. Application of PINS 2 (Systems and Controls)

(1) A Captive Insurer must comply with the requirements of PINS 2 (Systems and Controls) in full subject to (2).

(2)  A Captive Insurer may appoint an Insurance Manager authorised by AFSA to perform the Controlled Function of Senior Executive Officer provided that such Employee is an Approved Individual and the Designated Function of Money Laundering Reporting Officer.

14.3.2. Application of PINS 3 (Risk Management Strategy).

A Captive Insurer must comply with PIN 3 (Risk Management Strategy) in full.

14.3.3. Application of PINS 4 (Own Risk and Solvency Assessment (ORSA)).

A Captive Insurer must comply with PINS 4 (Own Risk and Solvency Assessment (ORSA)) in full.

14.3.4. Application of PINS 5 (Capital adequacy requirements)

A Captive Insurer must comply with the requirements of PINS 5 (Capital adequacy requirements) in full, subject to the rules in PINS 14.4 (Capital adequacy requirements for Captive Insurers).

14.3.5. Application of PINS 6 (Investment)

A Captive Insurer must comply with PINS 6 (Investment) in full.

14.3.6. Application of PINS 7 (Segregation of Long-Term Insurance assets and liabilities)

A Captive Insurer carrying on Long-Term Captive Insurance Business must comply with PINS 7 (Segregation of Long-Term Insurance assets and liabilities) in full.

14.3.7 Application of PINS 8 (Valuation)

A Captive Insurer must comply with PINS 8 (Valuation) in full.

14.3.8 Application of PINS 9 (Actuarial Reporting)

A Captive Insurer must comply with PINS 9 (Actuarial reporting) in full.

14.3.9 Application of PINS 10 (Insurers that are members of Groups)

A Captive Insurer must comply with PINS 10 (Insurers that are members of Groups) in full.

14.3.10 Application of PINS 11 (Transfers of Business)

A Captive Insurer must comply with PINS 11 (Transfer of insurance business) in full.

14.3.11. Application of PINS 12 (Insurers in run-off)

A Captive Insurer must comply with PINS 12 (Insurers in run-off) in full.

14.3.12. Application of PINS 13 (Prudential Returns)

(1) A Captive Insurer must comply with PINS 13 (Prudential returns) in full.

(2) Unless required otherwise by AFSA in writing, Class 1 Captive Insurer may submit Prudential Returns semi-annually instead of quarterly as stated in Schedule 6.

14.4.1. Minimum Capital Requirement (MCR) for a Captive Insurer

(1)  For the purposes of Schedule 4 of PINS, the Capital Floor for a Captive Insurer is the highest of the following:

(a) the Base Capital Requirement;

(b) the Premium Risk Component;

(c) the Technical Provision Risk Component.

(2)  Base Capital Requirement (BCR) for a Captive Insurer is

(a) US$100,000 for a Class 1 Captive Insurer;

(b) US$200,000 for a Class 2 Captive Insurer;

(c)  US$300,000 for a Class 3 Captive Insurer.

(3)  Premium Risk Component for a Captive Insurer

(a) The Premium Risk Component for Class 1, Class 2 or Class 3 Captive Insurers conducting general insurance business or life insurance business is the amount calculated in accordance with the following formula:

[18% ´ firm’s net written premium up to US$ 5 million]

+

[16% ´ firm’s net written premium in excess of US$ 5 million]

(4)  Technical Provision Risk Component for a Captive Insurer

(a) The Technical Provision Risk Component for Class 1, Class 2 or Class 3 Captive Insurers conducting general insurance business is the amount calculated in accordance with the following formula:

[5% ´ firm’s net claims reserve under general Contracts of Insurance]

-

[15% ´ the amount of firm’s reinsurance and other recoveries expected

to be received in respect of those claims]

(b) The technical provision risk component for Class 1, Class 2 or Class 3 Captive Insurers conducting long-term insurance business is the amount calculated in accordance with the following formula:

[2.5% ´ Policyholder liabilities calculated using actuarial methods for long-term insurance]

14.4.2. Minimum Capital Requirement for a Protected Cell Company

(1) Subject to (2), each Cell of a Protected Cell Company must calculate its Minimum Capital Requirement in accordance with PINS 5.2.2 (Obligation to calculate MCR) as if it were a stand-alone Insurer.

(2) For a Captive Insurer that is a Protected Cell Company, the Capital Floor only applies to the overall Protected Cell Company and there is no Capital Floor for each Cell or the Core.

14.4.3. Prescribed Capital Requirement for a Protected Cell Company

(1) Class 1, Class 2 and Class 3 Captive Insurers are not required to calculate Prescribed Capital Requirement;

(2) For a Protected Cell Company each Cell of a Protected Cell Company must calculate its Prescribed Capital Requirement in accordance with PINS 5.2.3 (Obligation to calculate PCR) as if it were a stand-alone Insurer.

14.4.4. Eligible Capital of a Protected Cell Company

(1) Each Cell of a Protected Cell Company must calculate its Eligible Capital in accordance with PINS 5.2.1 (Obligation to calculate Eligible Capital).

(2) The Core of a Protected Cell Company must calculate its Eligible Capital in accordance with PINS 5.2.1 (Obligation to calculate Eligible Capital).

(3) In calculating its Eligible Capital, a Cell may only rely upon Non-Cellular Assets where it has entered into a recourse agreement with the Core pursuant to which it is entitled to rely upon such Non-Cellular Assets.

(4) The Core of a Protected Cell Company must not enter into a recourse agreement with a Cell where the total capital thereby made available to Cells of the Protected Cell Company would exceed the Eligible Capital of the Core.