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).