CIB 3 CIB 3 ELIGIBLE CAPITAL
CIB 3.1.1 Eligible capital
Eligible capital of a Captive Insurer means an instrument or other asset that is included in calculating the Captive Insurer's minimum capital requirement under Rule 2.2.
CIB 3.1.2 Eligible capital amount(1) The total eligible capital of a Captive Insurer is the amount of the Captive Insurer's eligible capital, calculated in accordance with the following formula:
Eligible capital — required deduction
Eligible capital means the sum of the Captive Insurer's —(a) permanent share capital;(b) retained earnings or losses;(c) the following items up to an amount not exceeding 50% of the sum of paragraphs (a) and (b) above:(d) qualifying letters of credit under Rule 3.1.4; and(e) any other instrument permitted by the Regulator under Rule 3.1.2(2)(a).Required deduction, for a Captive Insurer, means the sum of —(i) investments in Subsidiaries and Associates;(ii) intangible assets; and(iii) any other asset that the Regulator directs, under Rule 3.1.2(2)(b), the Captive Insurer to include.(2) For calculating the Captive Insurer's total eligible capital, the Regulator may, by written notice, do any one or more of the following:(a) allow the Captive Insurer to include an instrument as eligible capital;(b) direct the Captive Insurer to include an asset as a required deduction;(c) allow the Captive Insurer to exceed the 50% limit in paragraph (cof the definition of eligible capital in Rule 3.1.2(1).(3) Permission under Rules 3.1.2(2)(a) or 3.1.2(2)(c) may be given on application of the Captive Insurer or on the Regulator's own initiative.
CIB 3.1.3 Permanent Share Capital
Permanent Share Capital means ordinary share capital or an equivalent capital instrument which meets the following conditions:(a) it is fully paid up and subscription to it is not financed directly or indirectly by the issuer;(b) it is directly issued;(c) it is recognised as equity under applicable national accounting standards and insolvency law and gives investors a claim as shareholder or equivalent status;(d) it is simple and the terms upon which it is issued are clearly defined;(e) it is undated and non-redeemable except with the prior written consent of the Regulator;(f) it does not give the holder a right to require redemption and its terms do not create any expectation that it will be redeemed at any point;(g) it is immediately and fully available to the Captive Insurer to absorb losses on a going concern basis;(h) it ranks for repayment upon winding up or insolvency pari passu with all other Permanent Share Capital and after all other debts and liabilities;(i) it is not subject to a guarantee, pledge or other credit enhancement that could legally or economically enhance its seniority in the insolvency or liquidation of the Captive Insurer; and(j) any dividends and other charges in relation to Permanent Share Capital are:(a) payable only out of accumulated realised profits;(b) payable only at the option of the Captive Insurer;(c) non-cumulative;(d) not fixed, capped or otherwise ascertainable in advance of being declared;(e) not calculated by reference to the amount paid in at issuance; and(f) not such as to trigger the insolvency of the Captive Insurer in the event of non-payment.
CIB 3.1.4 Qualifying letters of credit(1) A letter of credit is a qualifying letter of credit if:(a) it meets the requirements in Rule 3.1.4(2); and(b) the Regulator allows, under Rule 2(2)(a), that it be included as eligible capital.(2) A letter of credit meets the requirements of this Rule 3.1.4(2) if:(a) it is unconditional and irrevocable;(b) it does not contain a subordination clause;(c) it is legally enforceable in ADGM or any other jurisdiction approved for this purpose by the Regulator;(d) it cannot be cancelled or amended without the consent of all parties;(e) it is for a fixed amount;(f) it is renewable annually;(g) the terms of the agreement between the bank and the Captive Insurer do not require the Captive Insurer to give collateral to the bank for issuing the letter of credit; and(h) the bank that provides the letter of credit is, at the time of issue, and afterwards:(i) rated at least BBB+ by Standard & Poor's or the equivalent by another Approved Rating Agency; and(ii) regulated in ADGM or any other jurisdiction approved for this purpose by the Regulator.(3) A letter of credit is, or is taken to be, legally enforceable in ADGM or any other jurisdiction approved for this purpose by the Regulator if:(a) it is issued by a bank regulated in ADGM; or(b) it is issued by a bank regulated in any jurisdiction approved for this purpose by the Regulator and the Captive Insurer has an appropriate legal opinion that the letter of credit is enforceable in ADGM or that jurisdiction.(4) If a letter of credit ceases to be a qualifying letter of credit, the Captive Insurer must:(a) immediately tell the Regulator in writing; and(b) take the necessary steps to ensure that the Captive Insurer continues to meet its minimum capital requirement under Rule 2.2 (for example, by obtaining replacement qualifying letters of credit).
CIB 3.1.5 Intangible assets(1) Intangible assets of a Captive Insurer include:(a) goodwill;(b) capitalised development costs;(c) brand names;(d) trademarks, patents and similar intellectual property rights; and(e) licences.(2) The amount of deduction for intangible assets must be based on the full balance sheet value of the assets.
CIB 3.1.6 Asset Requirements(1) A Captive Insurer must invest its assets in such a manner as to ensure the security, quality, liquidity and profitability of the portfolio as a whole and shall only invest in assets whose risks it can properly identify, measure, monitor, manage, control and report, and appropriately take into account in accordance with Chapter 6.(2) A Captive Insurer must invest its assets held to cover the technical provisions in a manner appropriate to the nature and duration of the insurance and/or reinsurance liabilities.(3) A Captive Insurer must not invest its assets in a manner that places excessive reliance on any particular asset issuer or group of issuers or geographical area or which results in an excessive accumulation of risk in the portfolio as a whole.