12.1.1. Application

TRR 12 applies to:

• (a) every AIFC-Incorporated Takaful Operator; and
• (b) every Branch in respect of its AIFC Takaful Business operations.

12.1.2 Meanings of terms relating to run-off

In this Chapter:

• (a) a Takaful Operator in Run-off means a Takaful Operator that has ceased to effect Takaful Contracts in respect of the whole or a category of its Takaful Business (or, in the case of a Branch, the whole or a category of its AIFC Takaful Business), and a Family Takaful Fund in run-off is construed accordingly; and
• (b) going into run-off or placing Takaful Business into run-off means ceasing to effect Takaful Contracts, and placing a Family Takaful Fund into run-off is construed accordingly.

12.1.3. Compliance with TRR 12 by Takaful Operator directed to go into run-off

A Takaful Operator in Run-off by virtue of a decision or notice of the AFSA to the effect that the Takaful Operator is to cease to effect Takaful Contracts shall comply with TRR 12 except to the extent the AFSA acting under its powers in the FSFR directs otherwise.

12.1.4. Certain contracts to be disregarded

For the purposes of this Chapter, in determining whether a Takaful Operator is effecting Takaful Contracts or has ceased to effect Takaful Contracts, including Takaful Contracts effected through a Family Takaful Fund, Takaful Contracts effected under a term of an existing Takaful Contract will be ignored unless the AFSA decides otherwise in respect of any particular contract.

12.2.1. Application

TRR 12.2.2 (Takaful Operators to give notice of decision to cease business) and TRR 12.2.3 (Takaful Operators in run-off not to effect certain contracts) apply to a Takaful Operator that ceases or decides to cease to effect new Takaful Contracts or to renew Takaful Contracts:

(a) in a category in which the Takaful Operator has previously effected Takaful Business; or

(b) in respect of a Family Takaful Fund, in a category in which the Takaful Operator has previously effected Takaful Business through that Family Takaful Fund.

12.2.2 Takaful Operators to give notice of decision to cease business

A Takaful Operator to which this Rule applies must, within 28 days of a decision to cease to effect new Takaful Contracts in a category, notify the AFSA of its decision, in a notice specifying the following details:

• (a) the effective date of the decision to cease effecting Takaful Contracts;
• (b) the category to which the decision relates; and
• (c) where relevant, the Family Takaful Fund to which the decision relates.

12.2.3. Takaful Operators in run-off not to effect certain contracts

(1) A Takaful Operator who has provided a notice to the AFSA in accordance with TRR 12.2.2 must not effect any Takaful Contracts in that category without the written permission of the AFSA.

(2) Where the notice referred to in TRR 12.2.2 relates to a Family Takaful Fund of the Takaful Operator, the restriction set out in this rule applies only to that Family Takaful Fund.

12.3.1 Application

TRR 12.3.2 to 12.3.7 apply to:

• (a) Takaful Operators that go into, or are in, run-off, or that maintain Family Takaful Funds that are in run-off;
• (b) Takaful Operators that make a decision to go into run-off or to place a Family Takaful Fund into run-off; and
• (c) Takaful Operators whose Licence to effect Takaful Contracts in respect of their entire Takaful Business or in respect of the entire business of a Family Takaful Fund is withdrawn by the AFSA.

12.3.2. Takaful Operator voluntarily in run-off to provide run-off plan

If a Takaful Operator decides to go into run-off or to place a Family Takaful Fund into run-off, the Takaful Operator must, at the same time as the notice referred to in TRR 12.2.2, provide the AFSA with a written run-off plan in respect of the Takaful Business being placed into run-off.

12.3.3. Takaful Operator directed to go into run-off to provide run-off plan

If the AFSA withdraws a Takaful Operator’s Licence to effect Takaful Contracts in respect of the Takaful Operator’s whole, or a category of, Takaful Business or the whole, or a category of, Takaful Business of a Family Takaful Fund, the Takaful Operator must, within 28 days after the day the Takaful Operator is given the written notice of withdrawal of its Licence (or, if later, the period specified in that notice), provide the AFSA with a written run-off plan in respect of that Takaful Business.

12.3.4. What run-off plans must cover

A Takaful Operator must ensure a run-off plan provided to the AFSA in accordance with this Part covers the period until all liabilities to policyholders relating to the Takaful Business in run-off are met and includes:

(a) an explanation of how, or the extent to which, all liabilities to policyholders will be met in full as they fall due;

(b) an explanation of how, or the extent to which, the Takaful Operator will maintain its compliance with the requirements of these Rules until such time as all liabilities to policyholders are met;

(c) a description, appropriate to the scale and complexity of the Takaful Operator’s business, of the Takaful Operator’s business strategy;

(d) financial projections showing, in a form appropriate to the scale and complexity of the Takaful Operator’s operations, the forecast financial position of the Takaful Operator as at the end of each reporting period during the period to which the run-off plan relates;

(e) an assessment of the sensitivity of the financial position of the Takaful Operator to stress arising from realistic scenarios relevant to the circumstances of the Takaful Operator;

(f) details of the planned run-off reinsurance protections and the extent to which the planned reinsurance protections match the run-off realistic scenarios;

(g) details of the claims handling and reserving strategy; and

(h) details of the cost of the management of the run-off.

12.3.5. Application of run-off plan to fund

Where a Takaful Operator’s Takaful Business in run-off relates to a Family Takaful Fund of that Takaful Operator, the run-off plan must deal with the matters set out in TRR 12.3.4 so far as they relate to that Family Takaful Fund.

12.3.6. Takaful Operator to monitor run-off plan etc

(1) This rule applies to a Takaful Operator that has given a run-off plan to the AFSA.

(2) The Takaful Operator must monitor the matters provided in the run-off plan.

(3) If there is a significant departure from the run-off plan, the Takaful Operator must tell the AFSA immediately, but by no later than the second business day after the day the departure happens or starts.

12.3.7. AFSA may direct Takaful Operator to amend run-off plan

(1) Where a Takaful Operator has notified a matter to the AFSA in accordance with TRR 12.3.6, the AFSA may by notice in writing require the Takaful Operator to provide an amended runoff plan.

(2) The Takaful Operator must provide an amended run-off plan within 28 days of receipt of the notice, unless the notice specifies a longer period.

12.4.1 Application

TRR 12.4.2 (Takaful Operator with business in run-off to notify AFSA of certain contracts) applies only to a Takaful Operator that:

• (a) is in run-off as regards its entire Takaful Business or the entire Takaful Business of a Family Takaful Fund;
• (b) has provided a notice to the AFSA in accordance with TRR 12.2.2 (Takaful Operators to give notice of decision to cease business) in respect of its entire Takaful Business or the entire Takaful Business of a Family Takaful Fund; or
• (c) has received a written notice from the AFSA withdrawing the Takaful Operator’s Licence to effect Takaful Contracts in respect of its entire Takaful Business or the entire Takaful Business of a Family Takaful Fund.

12.4.2. Takaful Operator with business in run-off to notify AFSA of certain contracts

(1) A Takaful Operator to which this Rule applies must:

(a) within 10 business days after the day its Takaful Business enters into run-off, tell the AFSA 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 Takaful Business in runoff, tell the AFSA about the existence and principal features of the contract.

(2) To remove any doubt, subrule (1) (b) applies whether or not the Takaful Business is conducted through a Family Takaful Fund that is in run-off.

(3) In this rule: notifiable contract means:

(a) a contract with a person related to the Takaful Operator, other than a Takaful Contracts effected by the Takaful Operator before going into run-off;

(b) a contract with any person relating to the management of all or any of the Takaful Business in run-off;

(c) a contract with any person for reinsurance of all or any of the Takaful Business in runoff; or

(d) any other contract with a person mentioned in paragraph (b) or (c) or a person related to such a person.

12.5.1 Takaful Operator in run-off not to make distributions

(1) An AIFC-Incorporated Takaful Operator in run-off must not make any distribution to shareholders or members of the Takaful Operator, whether by way of dividends or otherwise, or any payment of management fees (other than fees payable under a contract notified to the AFSA in accordance with TRR 12.4.2), without the written consent of the AFSA.

(2) Any such distribution or return of capital or payment of management fees must be made within the period, if any, specified in the written notice of consent given by the AFSA.