• PIN 9 PIN 9 INSURERS IN RUN-OFF

    • PIN 9.1 PIN 9.1 Introduction

      • PIN 9.1.1

        Subject to Rule 9.1.2, this Chapter applies to all Insurers.

      • PIN 9.1.2 PIN 9.1.2

        In the case of an Insurer that is not an ADGM Incorporated Insurer, this Chapter applies only in respect of an Insurance Business carried on by the Insurer through an establishment in ADGM.

        • Guidance

          1. This Chapter sets out prudential provisions applying to Insurers that cease to carry on Insurance Business, either wholly or in respect of a particular Class of Business. The provisions are also applicable to Cells and Long-Term Insurance Funds of Insurers, but do not (because of the effect of Rule 9.1.2) apply to non-ADGM Insurance Business of Insurers that are not ADGM Incorporated Insurers.
          2. Rules 9.2 and 9.3 set out actions that an Insurer is required to take when it decides to cease to effect or carry out Contracts of Insurance. Rules 9.4, 9.5 and 9.6 give the Regulator specific powers relating to the supervision of such Insurers.

      • PIN 9.1.3 PIN 9.1.3

        For the purposes of this Chapter, in determining whether an Insurer is effecting Contracts of Insurance, or has ceased effecting Contracts of Insurance, including Contracts of Insurance effected through a Cell or a Long-Term Insurance Fund, Contracts of Insurance effected under a term of an existing Contract of Insurance must be ignored.

        • Guidance

          The effect of Rule 9.1.3 is to disregard, for the purposes of determining whether the Chapter applies, Contracts of Insurance that are effected by the Insurer, as a consequence of a term of an existing Contract of Insurance. A contract will normally only be regarded as being effected under a term of an existing contract if the Insurer does not have discretion to decline to effect the new contract, or if it would be unreasonable for the Insurer, having regard to the interests of the policyholder, to decline to effect it.

      • PIN 9.1.4

        In this Chapter:

        (a) an Insurer in run-off means an Insurer that has ceased to effect Contracts of Insurance in respect of the whole of its Insurance Business (or, in the case of an Insurer that is not an ADGM Incorporated Insurer, the whole of its Insurance Business carried on through an establishment in ADGM), and a Cell in run-off and a Long-Term Insurance Fund in run-off are construed accordingly; and
        (b) going into run-off or placing Insurance Business into run-off means ceasing to effect Contracts of Insurance, and placing a Cell or a Long-Term Insurance Fund into run-off are construed accordingly.

    • PIN 9.2 PIN 9.2 Insurers ceasing to effect Contracts of Insurance in a Class of Business

      • PIN 9.2.1

        This section applies to an Insurer that ceases or decides to cease to effect new Contracts of Insurance:

        (a) in a Class of Business in which the Insurer has previously carried on Insurance Business; or
        (b) in respect of a Cell or a Long-Term Insurance Fund, in a Class of Business in which the Insurer has previously carried on Insurance Business through that Cell or Long-Term Insurance Fund.

      • PIN 9.2.2

        An Insurer to which this section applies must, within twenty-eight days of a decision to cease to effect new Contracts of Insurance in a Class of Business, notify the Regulator of its decision, in a written notice specifying the following details:

        (a) the effective date of the decision to cease effecting Contracts of Insurance;
        (b) the Class of Business to which the decision relates; and
        (c) where relevant, the Cell or Long-Term Insurance Fund to which the decision relates.

      • PIN 9.2.3

        An Insurer which has provided a notice to the Regulator in accordance with Rule 9.2.2 must not effect any Contracts of Insurance in that Class of Business without the written permission of the Regulator. Where the notice referred to in Rule 9.2.2 relates to a Cell or Long-Term Insurance Fund of the Insurer, the restriction set out in this Rule applies only to that Cell or Long-Term Insurance Fund.

    • PIN 9.3 PIN 9.3 Run-off plans

      • PIN 9.3.1

        This section applies to:

        (a) Insurers that are in run-off or that maintain Cells or Long-Term Insurance Funds that are in run-off;
        (b) Insurers that go into run-off or that place Cells or Long-Term Insurance Funds into run-off;
        (c) Insurers that make a decision to go into run-off or to place a Cell or Long-Term Insurance Fund into run-off; and
        (d) Insurers whose permission to effect Contracts of Insurance in respect of their entire Insurance Business or in respect of the entire business of a Cell or Long-Term Insurance Fund is withdrawn by the Regulator.

      • PIN 9.3.2

        If an Insurer takes a decision to go into run-off or to place a Cell or a Long-Term Insurance Fund into run-off, the Insurer must, at the same time as the notice referred to in Rule 9.2.2, provide the Regulator with a written run-off plan in respect of the Insurance Business being placed into run-off.

      • PIN 9.3.3

        If the Regulator withdraws an Insurer's permission to effect Contracts of Insurance in respect of the Insurer's entire Insurance Business or the entire Insurance Business of a Cell or Long-Term Insurance Fund, the Insurer must, within twenty-eight days of the written notice of withdrawal of permission (or, if later, the period specified in that notice), provide the Regulator with a written run-off plan in respect of that Insurance Business.

      • PIN 9.3.4

        A run-off plan provided to the Regulator in accordance with this section must cover the period until all liabilities to policyholders relating to the Insurance Business in run-off are met and must include:

        (a) an explanation of how, or to what extent, all liabilities to policyholders will be met in full as they fall due;
        (b) an explanation of how, or to what extent, the Insurer will maintain its compliance with the requirements of Chapter 4 until such time as all liabilities to policyholders are met;
        (c) a description, appropriate to the scale and complexity of the Insurer's business, of the Insurer's business strategy;
        (d) financial projections showing, in a form appropriate to the scale and complexity of the Insurer's operations, the forecast financial position of the Insurer as at the end of each financial year during the period to which the run-off plan relates; and
        (e) an assessment of the sensitivity of the financial position of the Insurer to stress arising from realistic scenarios relevant to the circumstances of the Insurer.

      • PIN 9.3.5

        Where an Insurer's Insurance Business in run-off relates to a Cell or a Long-Term Insurance Fund of that Insurer, the run-off plan must deal with the matters set out in Rule 9.3.4 so far as they relate to that Cell or Long-Term Insurance Fund.

      • PIN 9.3.6 PIN 9.3.6

        An Insurer that has provided a written run-off plan to the Regulator must monitor the matters contained in the run-off plan and must notify the Regulator promptly and in writing of any significant departure from the run-off plan.

        • Guidance

          An Insurer should decide whether a matter constitutes a significant departure from a run-off plan, having regard to the nature and size of the matter and its materiality relative to the size and complexity of the Insurer and, where relevant, the size and complexity of the Cell or Long-Term Insurance Fund concerned. The following matters will normally be considered as representing a significant departure from a run-off plan:

          a. significant revision of the Insurer's strategy for managing risks, and in particular its strategy for the use of reinsurance;
          b. a significant deterioration in the Insurer's claims experience, financial position or solvency position (the amount by which the Insurer's capital resources, determined in accordance with the provisions of Chapter 4 relevant to that Insurer, exceed the applicable minimum capital requirements set out in that Chapter); or
          c. any other transaction or circumstance that is likely to have a material effect upon the Insurer's solvency position.

      • PIN 9.3.7

        Where an Insurer has notified a matter to the Regulator in accordance with Rule 9.3.6, the Regulator may by notice in writing require the Insurer to provide an amended run-off plan. The Insurer must provide an amended run-off plan within twenty-eight days of receipt of the notice, unless the notice specifies a longer period.

    • PIN 9.4 PIN 9.4 Requirements for collateral for Insurers in run-off

      • Guidance

        This section contains provisions that require an Insurer that is in run-off or going into run-off to post collateral assets or make equivalent arrangements by letter of credit, to support the Insurance Liabilities and Minimum Capital Requirements applicable to the Insurer. In considering whether to exercise the powers in this section, the Regulator will have regard to the circumstances of the Insurer and the interests of policyholders.

      • PIN 9.4.1

        This section applies only to an Insurer that:

        (a) is in run-off as regards its entire Insurance Business or the entire Insurance Business of a Cell or Long-Term Insurance Fund;
        (b) has provided a notice to the Regulator in accordance with Rule 9.2.2 in respect of its entire Insurance Business or the entire Insurance Business of a Cell or Long-Term Insurance Fund; or
        (c) has received a written notice from the Regulator withdrawing the Insurer's permission to effect Contracts of Insurance in respect of its entire Insurance Business or the entire Insurance Business of a Cell or Long-Term Insurance Fund.

      • PIN 9.4.2

        The Regulator may, by written notice (referred to in this Chapter as a 'collateral notice') require an Insurer to make available assets:

        (a) of a type and in a manner described in Rule 9.4.6; and
        (b) having a value, determined in accordance with the provisions of Chapter 5, of the lower of:
        (i) the amount, if any, specified in the notice; and
        (ii) the amount determined in accordance with Rule 9.4.5.

      • PIN 9.4.3

        An Insurer must comply with the requirements of a collateral notice within the period (if any) specified in the notice, or within two months of the date of the notice, whichever is the longer.

      • PIN 9.4.4

        The Regulator may at any time, by written notice to the Insurer, vary or revoke a collateral notice issued under Rule 9.4.2.

      • PIN 9.4.5 PIN 9.4.5

        The amount referred to in Rule 9.4.2(b)(ii) is calculated as follows:

        (a) in the case of an Insurer that is not an ADGM Incorporated Insurer, the amount of the assets that the Insurer is required by Rule 4.6.2 to make available;
        (b) in the case of a Cell of an Insurer, the sum of the following two amounts:
        (i) the Insurance Liabilities attributable to that Cell; and
        (ii) the Minimum Cellular Capital Requirement applicable to that Cell.
        (c) in the case of a Long-Term Insurance Fund, subject to (e) and (f), the sum of the following two amounts:
        (i) the Insurance Liabilities attributable to that Long-Term Insurance Fund; and
        (ii) the Minimum Fund Capital Requirement applicable to that Long-Term Insurance Fund;
        (d) in the case of an Insurer that is an ADGM Incorporated Insurer and that is not a Cell Company, the sum of the following two amounts:
        (i) the Insurer's Insurance Liabilities; and
        (ii) the Insurer's Minimum Capital Requirement.
        (e) in the case of an Insurer to which (a) and (c) both apply, the amount set out in (a); and
        (f) in the case of an Insurer to which (c) and (d) both apply, the amount set out in (d).

        • Guidance

          Rule 9.4.5 describes the maximum amount of assets that the Regulator may require to be made available as collateral. The Rule includes provisions to avoid imposing multiple collateral requirements on the same Insurer in respect of the same Insurance Business in run-off.

      • PIN 9.4.6

        The assets referred to in Rule 9.4.2 must be made available in one of the following two manners or in a combination of those two manners:

        (a) assets of a type described in Rule 4.6.3 may be deposited with a custodian nominated or approved in writing by the Regulator; or
        (b) a Financial Institution nominated or approved in writing by the Regulator may issue a confirmed letter of credit in favour of the Regulator, for the amount of the assets required to be made available.

      • PIN 9.4.7 PIN 9.4.7

        The terms and conditions of a custody arrangement referred to in Rule 9.4.6(a) or a letter of credit referred to in Rule 9.4.6(b) and any change to those terms and conditions, must be notified to the Regulator, which may within two months of such notification require the Insurer to make any change to the terms and conditions of the arrangement or letter of credit.

        • Guidance

          The terms and conditions of an arrangement or letter of credit will normally be expected to include provisions having the following effect:

          a. the arrangement or letter of credit is not revocable or cancellable at the option of the Insurer, and contains no provision for automatic cancellation on the insolvency of the Insurer;
          b. the Regulator has the right to apply assets deposited, or to draw upon the letter of credit, for the purpose of meeting Insurance Liabilities of the Insurer and any expenses incidental to that activity;
          c. in the case of a custody arrangement, the Insurer is prohibited from applying, directly or indirectly, the assets deposited, except in the following manners:
          i. in settlement of Insurance Liabilities of the Insurer that are in respect of the Insurance Business that is in run-off;
          ii. in exchange for fair value, for other assets of a type described in Rule 4.6.3 and deposited with the same custodian under the same conditions;
          iii. in consideration for the transfer to another Insurer of Insurance Liabilities of the Insurer that are in respect of the Insurance Business that is, or has been placed into, run-off;
          iv. withdrawal from the custody of the custodian for deposit with a different custodian approved by the Regulator;
          v. withdrawal from the custody of the custodian in accordance with Rule 9.4.12; or
          vi. withdrawal from the custody of the custodian in accordance with a written notice issued by the Regulator revoking or varying the collateral notice; and
          d. in the case of a letter of credit, the amount of the letter of credit may be reduced only:
          i. in order to achieve, in accordance with Rule 9.4.12 a reduction in the amount of assets made available by the Insurer; or
          ii. in accordance with a written notice issued by the Regulator revoking or varying the collateral notice.

      • PIN 9.4.8

        The Regulator may, by written notice to an Insurer, require the Insurer to charge in favour of the Regulator part or all of any assets deposited with a custodian in accordance with Rule 9.4.6(a).

      • PIN 9.4.9

        The Insurer must reassess, as at the end of each quarter in each calendar year, the amount of the assets that the Insurer is required by a collateral notice to make available, and the amount of assets made available by the Insurer.

      • PIN 9.4.10

        The Insurer must report to the Regulator, within two months of the date as at which the reassessment referred to in Rule 9.4.9 is performed, the results of that reassessment and details of any action taken or proposed to be taken as a result of that assessment.

      • PIN 9.4.11

        If the reassessment referred to in Rule 9.4.9 shows that the amount of assets made available is less than the amount that the insurer is required to make available, the insurer must, within two months of the effective date of the reassessment, make additional assets available so that the Insurer complies with the requirements of the collateral notice.

      • PIN 9.4.12

        If the reassessment shows that the amount of assets made available is more than the amount that the insurer is required to make available, the Insurer may, with the written consent of the Regulator, remove assets from those made available provided that the Insurer complies with the requirements of the collateral notice after the assets have been removed.

    • PIN 9.5 PIN 9.5 Provisions in respect of contracts relating to Insurance Business in run-off

      • PIN 9.5.1

        This section applies to any Insurer referred to in Rule 9.4.1.

      • PIN 9.5.2

        An Insurer to which this section applies must inform the Regulator in writing of the existence and principal features of any contract which it enters into in respect of its Insurance Business in run-off, including Insurance Business carried on through a Cell or a Long-Term Insurance Fund that is in run-off, or that is in existence at the time the Insurer places that Insurance Business into run-off, and that is of any of the following types:

        (a) contracts, other than Contracts of Insurance effected by the Insurer prior to going into run-off, with parties that are Related to the Insurer;
        (b) contracts relating to the management of the Insurance Business in run-off, and any other contracts with the same counterparty or parties Related to that counterparty; or
        (c) contracts for reinsurance of the Insurance Business that is in run-off, and any other contracts with the same counterparty or parties Related to that counterparty.

      • PIN 9.5.3

        The Regulator may by written notice require an Insurer to provide additional information as specified in that notice in respect of any contract notified to the Regulator in accordance with Rule 9.5.2.

    • PIN 9.6 PIN 9.6 Limitations on distributions by ADGM Incorporated Insurers in run-off

      • PIN 9.6.1

        No ADGM Incorporated Insurer that is in run-off may make any distribution of profits or surplus however called or described, or return of capital, or any payment of management fees (other than fees payable under a contract notified to the Regulator in accordance with Rule 9.5.2), without the written consent of the Regulator. 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 Regulator.