The solvency template developed by the Authority shall be based on following principles:
a) The Solvency Capital Requirement shall be calculated on the presumption that the Company will pursue its business as a going concern.
b) The Solvency Capital Requirement shall be calibrated so as to ensure that all quantifiable risks to which each Company is exposed are taken into account. It shall cover existing business, as well as the new business expected to be written over the following twelve (12) months. It shall correspond to the Value-at-Risk of the Basic Own Funds of a Company subject to a confidence level of 99.5 % over a one year period.
c) The Solvency Capital Requirement should cover the following risks:
1) Underwriting risk;
2) Market and Liquidity (Investment) risk;
3) Credit risk; and
4) Operational risk.
d) The Solvency Capital Requirement for the Company are the solvency level of all its Participants’ Risk Funds and Shareholders Funds. The solvency level for all Participants’ Risk Funds (PRF) shall be consistent with the overall risk profiles mentioned in subparagraph (c).
e) The Solvency Capital Requirement for a Company is determined in accordance with the guidelines set above for Participants’ Risk Funds and Shareholders Funds, in addition to:
1) A reserve for Participants’ Risk Funds shall have adequate solvency resources to provide assurance that it could meet claims from the Takaful participants.
2) Adequate capital resources are maintained for shareholders to meet their financial and legal obligations. This is in addition to funds kept aside for meeting the requirements of deficiencies in PRFs.
3) The entire Shareholders’ Funds shall be made available to provide Qard Hasan in case of a deficit in the Participants’ Risk Funds.
4) The expected impact of fluctuations in the value of assets and liabilities must be carried out taking into account by the shareholders of the funds to cover the deficit in solvency calculations required for the risk involved.
5) The collected funds set aside by the shareholders to provide for the deficiency in solvency for the Participants’ Risk Funds shall take into consideration the foreseeable fluctuations in asset and liability valuations. The assets earmarked for Qard Hasan needs to be accounted for separately and be valued for solvency as per the guidelines on asset valuation detailed in Asset Valuation Instructions.
6) The right to receive repayment toward Qard Hasan provided to the Participants’ Risks Funds shall not be considered an asset toward calculating the shareholders solvency.
f) If the Participants’ Investment Fund is relating to a Family linked investment fund, this fund shall not be taken into consideration in assessing the Solvency Capital Requirement of various Participants’ Risk Funds in a Company.
The Company is required to calculate their Solvency Margin based on the solvency template developed, and amended from time to time, by the Authority.
The Solvency Capital Requirement shall be calculated as follows:
a) At the UAE level only for branches of foreign Takaful and Re-Takaful operators;
b) At the group level for local Takaful and Re-Takaful operators having branches or subsidiaries outside the UAE; and
c) At the UAE level only for all other Takaful and Re-Takaful operators.
For the purpose of solvency reporting, the Authority may:
a) Determine the nature, scope and format of the information required for solvency, based on certain frequencies as follows:
1) On an annual basis;
2) On a quarterly basis;
3) Upon occurrence of predefined events; and
4) During enquiries regarding the situation of the Company.
b) Obtain any information regarding contracts which are held by intermediaries or regarding contracts which are entered into with third parties; and