2.1. Risk-Based Capital Requirement

(1) For an AIFC-Incorporated Takaful Operator that has been approved to use its own internal model to calculate its Risk-Based Capital Requirement under TRR 5.3.1, the amount calculated using that model is the Risk-Based Capital Requirement.

(2) The Risk-Based Capital Requirement for an AIFC-Incorporated Takaful Operator that, under TRR 5.3.1 (Approval by AFSA), has been approved to use its own internal model to replace 1 or more components of its Investment, Takaful and Operational Risk Requirements is the amount calculated using those components as replaced and the other components of the AIFC-Incorporated Takaful Operator’s Investment, Takaful and Operational Risk Requirements.

(3) The Risk-Based Capital Requirement (RBC) for any other AIFC-Incorporated Takaful Operator is the aggregate of the Risk-Based Capital Requirements for each of the Takaful Funds operated by it and the Risk-Based Capital Requirements for its own operational and financial risk exposures. RBC for the Takaful Operator = ∑i ( RBC for Takaful Fundi ) + RBC for the Takaful Operator’s own risk exposures

(4) RBC for the Takaful Fund or for the Takaful Operator as the case may be, is calculated as the sum of the following component requirements:

• (a) Investment Risk Requirement;
• (b) Takaful Risk Requirement; and
• (c) Operational Risk Requirement.

Guidance

Among the three components of RBC detailed in 2.1 (4) above, only the Investment Risk Requirement is applicable for the Takaful Operator. Therefore, the Takaful Risk and Operational Risk Requirements need not be calculated for the Takaful Operator. For each of the Takaful Funds operated by the Takaful Operator, all the three requirements must be calculated using the methodologies detailed below.

2.2. Investment Risk Requirement

The Investment Risk Requirement referred in 2.1 (a) above is defined as the sum of:

• (a) Asset Risk Component;
• (b) Off-Balance Sheet Asset Risk Component; and
• (c) Off-Balance Sheet Liability Risk Component.

2.3. Takaful Risk Requirement

The Takaful Risk Requirement referred in 2.1 (b) above is defined as the sum of:

• (a) Premium Risk Component;
• (b) Outstanding Claims Risk Component;
• (c) Family Takaful Risk Component; and
• (d) Takaful Concentration Risk Component.

2.4. Operational Risk Requirement

(1) The Operational Risk Requirement referred in 2.1 (c) above is defined as 2% of whichever is the higher of:

(a) the gross contributions of the Takaful Fund in the 12 months ending on the Solvency Reference Date; and

(b) the technical provisions for the Takaful Fund (without deduction for Retakaful / reinsurance) as at the Solvency Reference Date.

(2) However, if the amount calculated under sub-rule (1) is more than a ceiling, calculated as:

then the Operational Risk Requirement is the amount of the ceiling.