Part 4.8 Reduction of eligible capital 4.8.1 Tier 1 capital not to be reduced without approval An insurer must not reduce the tier 1 capital component of its eligible capital without the prior approval of the Regulatory Authority. Guidance A reduction of an eligible capital includes, but is not limited to: insurer’s a. buybacks; share b. the redemption, repurchase or early repayment of any eligible capital instruments issued by the insurer or a trading in its own special purpose vehicle or shares; c. where aggregate interest and dividend payments on tier 1 capital exceed the after-tax earnings in the year to which they relate (i.e. dividend and insurer’s interest payments on tier 1 capital wholly or partly funded from retained earnings). 4.8.2 Capital plan to be provided An insurer must provide to the Regulatory Authority when seeking approval for a reduction under rule 4.8.1 a capital plan that has incorporated the effects of the proposed reduction and: (a) demonstrates that the insurer will remain in excess of its minimum capital requirement for 2 years without relying on new capital issues; (b) is consistent with the business plan; and insurer’s (c) takes account of any possible acquisitions, locked-in capital in and the possibility of exceptional losses. subsidiaries 4.8.3 Notice to be given of proposed reduction of tier 2 capital An insurer must notify the Regulatory Authority of its intention to reduce its tier 2 capital at least 6 before the actual date of the months proposed reduction, providing details of how it will meet its minimum capital requirement after the proposed reduction.
Part 4.8 Reduction of eligible capital 4.8.1 Tier 1 capital not to be reduced without approval An insurer must not reduce the tier 1 capital component of its eligible capital without the prior approval of the Regulatory Authority. Guidance A reduction of an insurer’s eligible capital includes, but is not limited to: a. share buybacks; b. the redemption, repurchase or early repayment of any eligible capital instruments issued by the insurer or a special purpose vehicle trading in its own shares; or c. where aggregate interest and dividend payments on tier 1 capital exceed the insurer’s after-tax earnings in the year to which they relate (i.e. dividend and interest payments on tier 1 capital wholly or partly funded from retained earnings). 4.8.2 Capital plan to be provided An insurer must provide to the Regulatory Authority when seeking approval for a reduction under rule 4.8.1 a capital plan that has incorporated the effects of the proposed reduction and: (a) demonstrates that the insurer will remain in excess of its minimum capital requirement for 2 years without relying on new capital issues; (b) is consistent with the insurer’s business plan; and (c) takes account of any possible acquisitions, locked-in capital in subsidiaries and the possibility of exceptional losses. 4.8.3 Notice to be given of proposed reduction of tier 2 capital An insurer must notify the Regulatory Authority of its intention to reduce its tier 2 capital at least 6 months before the actual date of the proposed reduction, providing details of how it will meet its minimum capital requirement after the proposed reduction.
QFCRA_4538_VER15.docx