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  • CA-8.4 CA-8.4 Capital Adequacy and Solvency

    • CA-8.4.1

      All Takaful firms are subject to capital available and solvency requirements.

      Amended: April 2014
      Amended: October 2008
      Amended: January 2007

    • Determination of Available Capital

      • CA-8.4.2

        The determination of available capital eligible to meet the solvency requirements is the total of:

        (a) The participants' fund(s) net admissible assets as defined under Paragraph CA-8.4.3 in all funds; and
        (b) The capital available of the shareholder fund as determined under Section CA-1.2, excluding any assets of the participants' fund(s).
        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.3

        Every participants' fund must calculate its net admissible assets to meet the solvency requirements of the Takaful firm. The admissible assets are calculated in accordance with Chapter CA-4 and are reduced by any of the participants' fund(s) liabilities (including any Qard Hassan payable to the shareholder fund) and excluding 55% of any unrealised gains to arrive at the net admissible assets.

        Amended: April 2014
        Amended: October 2008

      • CA-8.4.4

        For the purpose of calculating the admissible assets of the participants' fund(s) referred to under Paragraph CA-8.4.3, the insurance business amount referred to in Paragraph CA-4.2.34 means:

        (a) In the case of general Takaful business, the general Takaful insurance business amount is the value of the general participants' fund(s)'s assets (other than family participants' fund(s) assets) and allocated earmarked assets to the insurance business amount (see Paragraphs AA-4.3A.6 to AA-4.3A.11 for actuarial requirements) from the shareholder fund and excluding any reinsurance/retakaful recoveries as determined in accordance with Chapter CA-4; and
        (b) In the case of family Takaful business, the family Takafulinsurance business amount is the value of the family participants' fund(s)'s assets (other than general participants' fund(s) assets) and allocated earmarked assets to the insurance business amount from the shareholder fund and excluding reinsurance/retakaful recoveries and assets required to match property-linked liabilities in accordance with Chapter CA-4.
        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.5

        Any earmarked assets used under Paragraph CA-8.4.4 must be adjusted to account for any Qard Hassan that may be granted as outlined under Paragraph CA-8.4A.2

        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.6

        For purposes of Paragraph CA-8.4.4, earmarked assets must meet the following criteria:

        (a) Availability: the asset is available and can be called on demand to meet any liquidity requirement where a Qard Hassan may be extended (see Section CA-8.4A);
        (b) Permanency: the asset is not callable and cannot be withdrawn;
        (c) Free of encumbrances: the asset is free of any encumbrances or mandatory payments; and
        (d) Highly liquid: the asset must be readily convertible to cash equivalent to a minimum of 90% of its reported value on the shareholder's fund statement of financial condition.
        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.7

        Earmarked assets must comply with the criteria outlined in Paragraph CA-8.4.6 and refer to the following allocated assets from the shareholder fund to the each of the participants' fund:

        (a) Cash and unencumbered current accounts with financial institutions;
        (b) Placements with financial institutions which can be liquidated within one month;
        (c) Readily marketable securities;
        (d) GCC government securities;
        (e) Other sovereign securities, other than in Paragraph CA-8.4.7(c) and Paragraph CA-8.4.7(d) above, up to one year maturity, carrying an S&P minimum rating of A (or equivalent); and
        (f) Accounts receivable due within one month, excluding any past due accounts.
        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.8

        Earmarked assets from the shareholder fund must be allocated for each participants' fund in the calculation of the insurance business amount of each participants fund and as determined by the actuary under Paragraph AA-4.3A.7.

        Added: April 2014

    • CA-8.4.6A

      In cases where Paragraph CA-8.4.5 applies, any income generated from the assets forming part of the free loan, will be solely for the benefit of the Takaful fund, and should be recorded as investment income of the Takaful fund. The total investment income being generated by the Takaful fund will however be subject to a mudaraba fee as approved by the Shari'a Board.

      Inserted: October 2008

    • Solvency Requirements

      • CA-8.4.9

        The solvency requirements only apply to the insurance activities of the participants' fund(s) and are calculated in accordance with Chapter CA-2 for each of the participants' fund(s). The solvency required is the total of the solvency requirements for all participants' funds.

        Amended: April 2014
        Amended: April 2009
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.10

        Where the capital available as defined under Paragraph CA-8.4.2 does not meet the solvency requirements of Paragraph CA-8.4.9, a capital injection must be made by the shareholders to meet the solvency required.

        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.11

        Should the Takaful firm fail to meet its required solvency margin, it will be restricted from writing any new Takaful business until such time as the Takaful firm is in compliance with the solvency margin requirements.

        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

    • Other Requirements

      • CA-8.4.12

        In cases where a Qard Hassan has been granted to the participants' fund(s), any income generated from the assets forming part of the Qard Hassan (free loan), will be solely for the benefit of the participants' fund, and should be recorded as investment income of the participants' fund. The total investment income being generated by the participants' fund will however be subject to a Mudaraba fee as approved by the Shari'a Board (see Paragraph CA-8.2.4).

        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.13

        A participants' fund is prohibited from providing any form of credit by way of loan, guarantee or other instrument to another participants' fund or to any other party, including but not limited to:

        (a) The Takaful operator (i.e. the shareholder fund);
        (b) A person in a controlled function;
        (c) A participant (policyholder) except as provided under Paragraph CA-8.4.14; and
        (d) A controller or close link of the Takaful firm.
        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.14

        In the case of Family Takaful, a participant credit facility (policyholder loan) may be granted should the contract of insurance allow for such event to take place and the contract outlines the various conditions attached to such credit.

        Amended: April 2014
        Amended: October 2008
        Amended: January 2007

      • CA-8.4.15

        The Rule under Paragraph CA-8.4.13 does not restrict the participants' funds from providing any form of commitment associated with investment projects/funds.

        Added: April 2014

    • CA-8.4.13A

      Following the Takaful fund's first year of operation, the fund will be expected to meet the solvency margin requirements, but the calculation of its capital available (participants' equity) will still be subject to valuation rules but will not be subject to deductions resulting from inadmissible assets (by category or counterparty) as outlined in Section CA-4.2:

      (a) For a period not exceeding 5 years from the start of the Takaful fund; or
      (b) When the asset base of the fund reaches a minimum asset level of BD 5 million,

      whichever of (a) or (b) occurs first.

      Inserted: October 2008

    • CA-8.4.13B

      Once a Takaful fund has reached conditions (a) or (b) stated in Paragraph CA-8.4.13A, it will be expected to calculate its capital available as per Paragraph CA-1.2.21, including all deductions related to inadmissible assets due to category or counterparty limits.

      Inserted: October 2008

    • CA-8.4.13C

      During the transition phase outlined in Paragraph CA-8.4.13A, while category and counterparty limits do not apply, proper diversification of the assets of the Takaful funds should be followed, focusing on low risk and income producing assets.

      Inserted: October 2008

    • Qard Hassan Transition Rules

      • CA-8.4.16

        Where a Qard Hassan has been granted for solvency purposes under the Rules in place at that time, the amount of Qard Hassan will be written off and/or repaid over a period not exceeding 5 years and disclosed as an off-balance sheet item (see Paragraph PD-1.1.13A) and not included as part of available capital for solvency purposes.

        Added: April 2014

      • CA-8.4.17

        Where Paragraph CA-8.4.16 applies, should the participants' fund for which the Qard Hassan was originally granted generate a surplus during the course of the write-off period, such surplus may be used to repay any part of the portion of the Qard Hassan that has not been written off, subject to the CBB's prior written approval.

        Added: April 2014