CI-3.1.1

Principle 9 requires insurance licensees to hold adequate financial resources for the needs of the business. Module CA (Capital Adequacy) sets out in detail the minimum financial resources requirements for insurance licensees. In addition, it is the responsibility of Boards of insurance licensees to make their own assessment of the financial resources needed to meet their liabilities.

CI-3.1.2

The base requirement is for firms to maintain at all times capital available in excess of the higher of its required solvency margin and minimum fund.

CI-3.1.3

The minimum fund, that captive insurance firms must maintain (at all times) is:

Category C1 firm: — BD 75,000; and

Category C2 firm: — BD 300,000.

These minimum requirements for C1 firms are lower than the corresponding amounts for conventional insurance firms, in recognition of captives' risk exposure being to its owning group rather than third parties.

CI-3.1.4

For general insurance, the required solvency margin is calculated on the basis of the premiums written and claims incurred by the firm. A risk factor is applied, to reflect the differing risk profiles of different classes of insurance. For long-term insurance, the required solvency margin is calculated on the basis of the aggregate of the mathematical reserves calculation and the capital sum at risk calculation. Refer to Chapter CA-2 for the detailed rules governing the calculation of the required solvency margin.

CI-3.1.5

Captive insurers must maintain a capital available at all times in accordance with the rules in Chapter CA-1.

CI-3.1.6

The Valuation and Admissibility of Assets Regulations are contained in Chapter CA-4. Assets of an insurance firm may only be given value for regulatory purposes in accordance with the Valuation of Assets Regulations. Surplus (inadmissible) assets are valued at zero for the purposes of calculating the firm's capital available. Assets considered inadmissible include those that exceed permitted categories and counterparty limits and intangible assets (e.g. brand value).

CI-3.1.7

The Valuation of Liabilities Regulations are contained in Chapter CA-5. Liabilities must be valued in accordance with International Accounting Standards (to the extent available) or, until such standards come into effect, with Section CA-5.1.

CI-3.1.8

There are also Rules concerning the matching of assets and liabilities, to minimise the risk of maturity and/or currency mismatch in the portfolio.

CI-3.1.9

Captive insurers are exempted from the requirements to report on their group solvency position.