Asset Valuation and Solvency Margin
Article Sixty-Three
Whereby a Company conducts general insurance business and protection and saving insurance business, the assets of each class of insurance must be considered separately.
Article Sixty-Four
The Company shall not consider assets obtained from the issuance of bonds or from obtaining loans in its solvency margin calculations without SAMA’s written approval.
Article Sixty-Five
The Company’s shall value its assets for the purpose of calculating the solvency margin according to Table (2) provided that the following are observed:
1. Market value shall not be exceeded in the valuation process and all assets linked to the Investment part of the Protection and Savings insurance policy shall be excluded.
2. Maximum limit of 20% of the total assets value in any one-asset category.
Article Sixty-Six
1. The Company, in respect to its general and health insurance business, shall maintain a margin of solvency equivalent to the highest of the following three amounts:
a. Minimum Capital Requirement.
b. Premium Solvency Margin.
c. Claims Solvency Margin
As an exception to the preceding, Premium Solvency Margin, method shall be used to calculate the solvency margin for the first three years of the company’s registration.
2. Solvency Margin calculations:
First: Premium Solvency Margin:
a. Dividing gross premiums written into the categories set out in Table (3).
b. Deducting the outwards reinsurance relating to the gross premiums determined in (1) above, provided that in all cases the net premiums written is not less than 50% of gross premiums written.
c. Multiplying the net premiums written for each category by relevant factors set out in Table 3 and aggregating the result for each category to come out with the appropriate solvency margin.
Second: Claims Solvency Margin:
a. Dividing average gross claims incurred over the three most recent financial claims into categories set out in Table 4 of this Article.
b. Deducting the outwards reinsurance relating to the gross claims determined in (1) above, provided that in all cases the net claims amount is not less than 50% of gross claims amount.
c. Multiplying the net claims by (2) above for each category by the relevant factors set out in Table 4 and aggregating the result for each category to come out with the appropriate solvency margin.
Article Sixty Seven
The solvency margin for the Protection and Saving Insurance business shall be determined by taking the aggregate of the results arrived through the calculation described below:
1. Four percent (4%) of the technical provisions for the protection and saving direct insurance.
2. Three per thousand (3/1000) of the Capital at Risk for individual policies after the deduction of reinsurance cessions, provided that the reinsurance amount do not exceed 50% of the total Capital at Risk.
3. One per thousand (1/1000) of the Capital at Risk For group policies after the deduction of reinsurance cessions, provided that the reinsurance amount do not exceed 50% of the total Capital at Risk.
Article Sixty-Eight
1. The Company shall complete all forms related to the actual and required solvency margin calculations.
2. The Company shall maintain a solvency margin according to the standards specified, and implement the following measures when its solvency margin falls below the required margin (s):
a. The Company shall restore, in a period not exceeding the next financial quarter, its solvency margin when it falls between the ranges of 75% to 100% of the required solvency margin.
b. The Company shall restore its solvency margin when it falls between 50% and 75% of the required margin. The company shall apply measures stated in paragraph (a) of this Article. If the required solvency margin is not restored to its appropriate level for two consecutive financial quarters, the company shall formulate and provide SAMA with a corrective action plan to be taken and the period necessary to restore its solvency.
c. The Company shall restore its solvency margin when it falls between 25% and 50% of the required margin. The Company shall apply measures stated in paragraph (b) of this Article. If the required solvency margin is not restored to its appropriate level for two consecutive quarters, the company will be required by SAMA to take all or any of the following measures immediately:
1. Increase the Company’s capital.
2. Adjust insurance premiums
3. Reduce costs;
4. Stop underwriting business.
5. Assets liquidation.
6. Any other measures deemed appropriate by the Company and approved by SAMA.
d. SAMA shall appoint an advisor to provide consultation and advice to the company or issue a cease and desist order to the Company and recommend the withdrawal of it license if the solvency margin falls below 25% and/or the Company fails to act appropriately to rectify its financial situation.