• CIB 6.9 CIB 6.9 Recognition and measurement of Insurance Liabilities and establishment of technical provisions

    • CIB 6.9.1

      A Captive Insurer must establish technical provisions in respect of all of its insurance and reinsurance obligations to policyholders and beneficiaries of insurance and contracts of reinsurance.

    • CIB 6.9.2

      The value of technical provisions established by a Captive Insurer must:

      (a) correspond to the current amount the Captive Insurer would have to pay if it were to transfer its insurance and reinsurance obligations immediately to another entity; and
      (b) except where the alternative approach is permitted in accordance with Rule 6.9.10, be equal to the sum of a best estimate and a risk margin.

    • CIB 6.9.3

      A Captive Insurer must calculate its technical provisions:

      (a) making use of, and consistent with, information provided by the financial markets and generally available data on underwriting risks;
      (b) in a prudent, reliable and objective manner;
      (c) taking account of all expenses that will be incurred in servicing the obligations arising under the Captive Insurer's insurance and contracts of reinsurance;
      (d) taking account of inflation, including expenses and claims inflation in respect of the obligations arising under the Captive Insurer's insurance and contracts of reinsurance;
      (e) taking account of all payments to policyholders and beneficiaries, including future discretionary bonuses (if any), which the Captive Insurer expects to make, whether or not those payments are contractually guaranteed;
      (f) taking account of the value of financial guarantees and any contractual options included in the Captive Insurer's insurance and reinsurance policies; and
      (g) applying assumptions relating to the likelihood that policyholders will exercise contractual options, including lapses and surrenders, that are realistic and based on current and credible information and which take account, either explicitly or implicitly, of the impact that future changes in financial and non-financial conditions may have on the exercise of those options.

    • CIB 6.9.4

      The best estimate calculated by a Captive Insurer must correspond to the probability- weighted average of future cash-flows under the Captive Insurer's insurance and contracts of reinsurance, taking account of the time value of money using the relevant discount rate applying pursuant to Rule 6.12.

    • CIB 6.9.5

      A Captive Insurer must calculate the best estimate:

      (a) based upon up-to-date and credible information and realistic assumptions and using adequate, applicable and relevant actuarial and statistical methods;
      (b) taking account of all the cash in- and out-flows required to settle the obligations arising under the Insurer's insurance and contracts of reinsurance; and
      (c) gross, without deduction of the amounts recoverable from contracts of reinsurance entered into by the Captive Insurer as Cedant.

    • CIB 6.9.6

      A Captive Insurer must calculate the risk margin so as to ensure that the value of the technical provisions is equivalent to the amount that another entity would be expected to require in order to take over and meet the obligations arising under the Captive Insurer's insurance and contracts of reinsurance.

    • CIB 6.9.7

      A Captive Insurer must calculate the best estimate and the risk margin separately.

    • CIB 6.9.8

      A Captive Insurer must calculate the risk margin by determining the cost of providing an amount of Adjusted Capital Resources equal to the minimum capital requirement provided for in Rule 2.2 in respect of the obligations under the Captive Insurer's insurance and contracts of reinsurance over the lifetime thereof.

    • CIB 6.9.9

      The Regulator may specify the cost of capital that applies under Rule 6.9.8.

    • CIB 6.9.10

      Notwithstanding Rule 6.9.7 and Rule 6.9.2(b) where future cash flows associated with obligations under a Captive Insurer's insurance and contracts of reinsurance can be replicated reliably using Financial Instruments for which a reliable market value is observable, a Captive Insurer must determine the value of technical provisions associated with those future cash flows on the basis of the market value of those Financial Instruments. In this case, separate calculations of the best estimate and the risk margin are not required.

    • CIB 6.9.11

      The Regulator may specify actuarial principles to be used by a Captive Insurer in relation to the recognition and measurement of Insurance Liabilities and the establishment of technical provisions.