Instructions No. 4 of 2002 on Reinsurance Standards and Amending Instructions

Official Gazette of the Hashemite Kingdom of Jordan

Amman: Thursday, 13 Dhu al-Qi'dah 1423 AH, corresponding to January 16, 2003 AD.
Issue No.: 4581
Issued by the Prime Minister's Office - Official Gazette Directorate

Instructions No. (4) of 2002
Reinsurance Standards Instructions
Issued by the Board of Directors of the Insurance Commission pursuant to the provisions of paragraph (c) of Article (23) of the Insurance Activities Regulation Law No. (33) of 1999

Article (1):
These Instructions shall be known as the "Reinsurance Standards Instructions for the Year 2002" and shall come into effect as of January 1, 2003, and be published in the Official Gazette.

Article (2):
The words and phrases contained in these Instructions shall have the meanings assigned to them in Article (2) of the Insurance Activities Regulation Law No. (33) of 1999, unless the context indicates otherwise.

Article (3):
A. The Board of Directors of the Company shall adopt a reinsurance policy as an integral part of the Company's underwriting policy in its authorized insurance branches, enabling it to meet its obligations. This policy must comply with the provisions of the Law, regulations, and instructions issued thereunder, and must include the following:

Types of reinsurance needed by the Company to protect its authorized business, whether treaty or facultative, placed locally or externally.
Methods for selecting reinsurers, whether by treaty and/or facultatively, including means of evaluating the financial capacity of reinsurers to meet their contractual obligations and the nature of guarantees required from each.
Methods for direct placement with reinsurers and/or placement through reinsurance brokers, and methods for selecting them.

Limits of reinsurance programs related to net retention per risk and maximum expected amounts for reinsurer coverages.
Procedures, bases, and standards used to estimate the maximum possible loss for each risk.
Procedures for monitoring the implementation of reinsurance programs within the Company.
Determination of administrative and financial authorities and responsibilities within the Company to implement reinsurance programs.
Liquidity management plans in the event of a mismatch between claim payments and the collection of the reinsurers' share of these claims.
B. The Board of Directors of the Company shall review this policy annually or as necessary during the year.
C. The Company shall provide the Director General with a copy of the reinsurance policy annually and with any changes or amendments made to it during the year.

Article (4):
In implementation of the reinsurance policy, the Company shall determine the following:
A. Underwriting bases according to the insurance branches authorized for the Company, which include the terms and conditions of the insurance policies issued by it and the total risk limits it wishes to underwrite for each branch of insurance. B. Reinsurer coverage limits for each branch of insurance authorized for the Company and subject to treaty reinsurance programs.
C. Bases for facultative reinsurance arrangements.
D. Net retention limits of the Company for a single risk or a single event, or both, based on the underwritten insurance branch and/or based on the entire underwritten business.

E. The Company's liability limits based on the assessment of underwritten risks and the cost of their reinsurance, proportionate to the available capital.

Article (5):
The sum of shares placed with treaty and/or facultative reinsurers, according to the credit classification set forth in the Solvency Instructions in effect and decisions issued thereunder, from all or any of the insurance companies for each insurance contract, shall be as follows:
A. (70%) for the First and Second Groups as a minimum.
B. (20%) for the Third Group as a maximum.
C. (10%) for the Fourth Group as a maximum.

Article (6):
A. The Company shall ensure that reinsurers from the Third and Fourth Groups with whom it wishes to transact business meet the solvency margin ratio according to the Solvency Margin Instructions in effect in the Kingdom, and the Company shall obtain the following information from these reinsurers:

A copy of the license to conduct insurance and/or reinsurance business in the home country, duly authenticated by the government regulatory and supervisory authority and any amendments or changes to this license.
A copy of the report defining the reinsurer, its organization, activities, and the markets in which it operates.
A copy of the latest annual report of the reinsurer, including audited financial statements.
B. The Director General may request the Company to cease dealing with a reinsurer if it becomes apparent that the provisions of paragraph (a) of this Article have not been complied with.

Article (7):
The Company shall provide the Commission annually with the following regarding treaty reinsurance programs:
A. Copies of the letters of intent issued by the reinsurers with whom the Company deals, no later than fifteen days from the end of the financial year. The Company shall not issue any insurance policies falling under the type and branch of insurance covered by the letter of intent from the beginning of the next financial year until the Commission has been provided with this letter of intent. B. Copies of cover notes within a period not exceeding thirty days from the beginning of the financial year.
C. Copies of reinsurance contracts when available.

Article (8):
The Board of Directors of the Company shall adopt an effective internal control system to ensure the implementation of reinsurance programs as follows:
A. Providing the Board of Directors of the Company with periodic reports clarifying the effectiveness of the coverage and compensation systems provided by the reinsurance programs adopted by the Company, including information related to underwriting and reinsurance. B. That reinsurance programs in the Company are implemented in accordance with the reinsurance policy approved by its Board of Directors and that these programs meet the Company's underwriting requirements.
C. Documenting the underwritten insurance policies and the associated reinsurers and the percentage of placement to each.
D. Determining the due dates for reinsurance premiums.
E. Informing the relevant reinsurers of their share of claims and ensuring their receipt from reinsurers in a timely manner.

Article (9):
The Auditor shall provide the Commission with a certificate, attached to the Company's final financial statements, indicating the extent to which the reinsurance programs carried out by the Company comply with the provisions of these Instructions and the provisions of the Insurance Activities Regulation Law and the regulations and instructions issued thereunder.

Article (10):
A. The Company submitting bids to sell authorized insurance services or wishing to enter into any tenders to purchase insurance services shall comply with the following:

Completing all reinsurance programs in accordance with the provisions of these Instructions and obtaining the prior written consent of the reinsurers for the sale of insurance services or for the terms of any tenders.
Specifying the details of the reinsurance programs referred to in item (1) of paragraph (a) of this Article and any other conditions imposed by the reinsurers participating in these reinsurance programs that may affect the decision to award the purchase of insurance services to the Company, whether through sale bids or tenders, except as provided in paragraph (b) of this Article.
B. If the Company decides to place more than (30%) of an insurance contract on facultative reinsurance arrangements, the Company shall complete at least (60%) of that placement with a reinsurer classified in the First Group according to the Solvency Margin Instructions in effect and decisions issued thereunder.

Article (11):
The terms and conditions of the reinsurance programs approved between the Company and its reinsurers must be consistent with the terms and conditions of the underwritten risks to ensure that there are no uncovered risks.

Article (12):
Treaty reinsurance programs begin on January 1 and end on December 31 of the year.

Article (13):
The Company shall regularize its status in accordance with the provisions of these Instructions as follows:
A. Within a period not exceeding three months from the date of entry into force of these Instructions for the purpose of facultative reinsurance arrangements.
B. 1. From the date of entry into force of these Instructions for the purpose of treaty reinsurance programs organized during 2003 and ending during 2004.
2. From the beginning of the financial year 2004 for the purpose of treaty reinsurance programs, except as provided in item (1) of paragraph (b) of this Article.

Article (14):
The Director General shall issue the necessary decisions to implement the provisions of these Instructions.

Board of Directors of the Insurance Commission

Official Gazette of the Hashemite Kingdom of Jordan

Amman: Sunday, 22 Ramadan 1424 AH, corresponding to November 16, 2003 AD.
Issue No.: 4632
Issued by the Prime Minister's Office - Official Gazette Directorate

Instructions No. (4) of 2003
Amending Instructions for Reinsurance Standards Instructions No. (4) of 2002 Issued by the Board of Directors of the Insurance Commission

Article (1):
These Instructions shall be known as the "Amending Instructions for Reinsurance Standards Instructions for the Year 2003" and shall be read together with the Instructions No. (4) of 2002 referred to hereinafter as the "Original Instructions" as a single set of instructions and shall come into effect from the date of their publication in the Official Gazette.

Article (2):
Article (2) of the Original Instructions is amended by considering what was stated in paragraph (a) thereof and by adding the following paragraph (b) to it:
B. For the purposes of these Instructions, the term "treaty and/or facultative reinsurer" means an insurance company and/or a reinsurance company that conducts reinsurance business placed with it by an insurance company.

Article (3):
The text of Article (5) of the Original Instructions is repealed and replaced with the following:
A. The sum of shares placed with treaty and/or facultative reinsurers, according to the credit classification set forth in the Solvency Instructions in effect and decisions issued thereunder, from all or any of the insurance companies for each insurance contract during the first three years from the date of entry into force of these Instructions shall be as follows:

(75%) for the First and Second Groups as a minimum.
(25%) for the Third and Fourth Groups as a maximum.
B. After three years have passed from the date of entry into force of these Instructions, the Company shall comply with the following:

The sum of shares placed with treaty and/or facultative reinsurers, according to the credit classification set forth in the Solvency Instructions in effect and decisions issued thereunder, for each insurance contract shall be (100%) for the First and Second Groups.
The Director General may approve dealing with treaty and/or facultative reinsurers classified in the Third and Fourth Groups according to the bases and conditions to be determined for this purpose, including the allowed placement ratios.
C. In all cases, the Company shall retain the following:
An amount equivalent to (30%) of the reinsurance premiums for the treaty reinsurer.
An amount equivalent to (30%) of the reinsurance premiums for the facultative reinsurer classified in the Third or Fourth Group.
Such amount shall be released after one year from the date of retention.

Article (4):
Article (6) of the Original Instructions is amended as follows:
First: By canceling the numbering in paragraph (a) thereof and renumbering items (1), (2), and (3) thereof to become paragraphs (a), (b), and (c).
Second: By repealing the text of paragraph (b) thereof.

Article (5):
The Original Instructions are amended as follows:
First: By adding the following two Articles after Article (6) contained therein.

Article (7):
A. The Company may deal with any fund and/or insurance pool in accordance with the provisions of Articles (5) and (6) of these Instructions, as appropriate.
B. The Company may deal with a fund and/or insurance pool classified in the Third and Fourth Groups exceeding the ratios specified in Article (5) of these Instructions according to controls and conditions determined for this purpose, provided that the Director General is provided with the following for the purpose of obtaining prior approval for this dealing:

The nature of the work of the fund and/or insurance pool.
The agreements signed between the fund and/or insurance pool and the companies participating in it.
Reinsurance agreements specific to the fund and/or insurance pool.
The financial status of the fund and/or insurance pool, as appropriate.

Article (8):
A. Despite what was stated in Article (5) of these Instructions, the Company accepting a reinsurance share from another company shall comply with the following provisions:

It shall retain a percentage of that share, which shall not exceed the retention level accepted by the Company in its policy for similar risks.
It shall reinsure the share it does not retain with a treaty reinsurer, and that share or part of it may be reinsured facultatively with the prior consent of the insurance company that placed that share with it.
It shall not reinsure for another company.

B. Reinsurance premiums received from within and outside the Kingdom by the Company shall not exceed (25%) of the Company's total insurance premiums as stated in the latest published annual financial statements, in all cases. Second: By renumbering Articles (7-12) contained therein to become (9-14) respectively.

Article (6):
The text of Article (7) of the Original Instructions is repealed and replaced with the following:
The Company shall provide the Commission annually with the following regarding treaty reinsurance programs:
A. A letter of intent issued by the reinsurers indicating the reinsurers' willingness to deal with the Company and the conditions of such dealing, no later than fifteen days from the end of the financial year. The Company shall not issue any insurance policies falling under the type and branch of insurance covered by the letter of intent from the beginning of the next financial year until the Commission has been provided with this letter of intent. B. Copies of cover notes within a period not exceeding thirty days from the beginning of the financial year.
C. Evidence that the Company has received reinsurance contracts from the reinsurers when available.

Article (7):
Article (10) of the Original Instructions is amended by canceling the word "First" contained in paragraph (b) thereof and replacing it with the phrase "Second as a minimum."

Article (8):
The Original Instructions are amended as follows:

First: By adding the following two Articles after Article (12) contained therein.

Article (15):
The Director General may request the Company to cease dealing with a reinsurer, fund, or pool in any of the following cases:
A. If it becomes apparent to him that the Company has not complied with the provisions of these Instructions.
B. If he has information indicating financial difficulties of the reinsurer, fund, or pool.
C. If the reinsurer, fund, or pool has not fulfilled its obligations or is likely to fail to do so or is unable to continue its business.
D. If any of the data or documents required pursuant to the provisions of these Instructions and decisions issued thereunder have not been provided to him.

Article (16):
The reinsurer, fund, or pool shall be required to provide any data or information requested by the Director General or his delegates from the Commission's staff within the period specified for this purpose. Second: By renumbering Articles (13) and (14) contained therein to become (17) and (18) respectively.

Board of Directors of the Insurance Commission

Official Gazette of the Hashemite Kingdom of Jordan

Amman: Thursday, 14 Muharram 1431 AH, corresponding to December 31, 2009 AD.
Issue No.: 5006
Issued by the Prime Minister's Office - Official Gazette Directorate Website: www.Pm.gov.jo

Instructions No. (10) of 2009
Amending Instructions for Reinsurance Standards Instructions for 2009 Issued by the Board of Directors of the Insurance Commission

Article (1):
These Instructions shall be known as the "Amending Instructions for Reinsurance Standards Instructions for 2009" and shall be read together with the Instructions No. (4) of 2002 referred to hereinafter as the "Original Instructions" and any amending instructions thereto as a single set of instructions and shall come into effect thirty days after the date of their publication in the Official Gazette.

Article (2):
Article (3) of the Original Instructions is amended as follows:
First: By adding item (3) to paragraph (a) thereof with the following text, and renumbering items (3-8) of this paragraph to become items (4-9) respectively:
3. Priority of dealing with a reinsurer licensed by the Commission to conduct reinsurance business in accordance with the provisions of the Law, regulations, instructions, and decisions issued thereunder.
Second: By adding the phrase "with giving priority to dealing with a reinsurance broker licensed by the Commission in accordance with the instructions on licensing reinsurance brokers, regulating their business, and their responsibilities in effect" to the end of item (3) of paragraph (a) thereof. Third: By adding items (10) and (11) to it with the following text:
10. The mechanism for the Company's dealing with accumulated risks for each insurance license.
11. Policy for determining the maximum allowed concentration for a reinsurer in reinsurance programs.

Article (3):
The Original Instructions are amended by repealing the text of Article (5) thereof and replacing it with the following text:

A. The Company shall reinsure each of its insurance contracts with reinsurers classified in the First and Second Groups, according to the credit classification set forth in the decision on guidelines for the Solvency Margin Instructions in effect, and the Company shall provide proof that the reinsurer has obtained an interactive credit classification and not a classification based on published data. B. The Company shall retain the amount stated below, which shall be released after one year from the date of retention:

An amount equivalent to (30%) of the treaty reinsurer's share of reinsurance premiums.
An amount equivalent to (15%) of the local treaty reinsurer's share of reinsurance premiums.
C. Despite what was stated in paragraph (a) of this Article, the Director General may, in specific cases, approve dealing with treaty and/or facultative reinsurers classified in the Third and Fourth Groups.
D. For the purposes of applying the provisions of paragraph (a) of this Article, the local insurance company and local reinsurance company shall be treated as companies classified in the First Group in the decision on guidelines for the Solvency Margin Instructions in effect.

Article (4):
The Original Instructions are amended by repealing the text of Article (6) thereof and renumbering Articles (7-16) to become (6-15) respectively.

Article (5):
Article (7) of the Original Instructions is amended as follows:
First: By canceling the phrase "Articles (5) and (6)" contained in paragraph (a) thereof and replacing it with the phrase "Article (5)", and canceling the phrase "as appropriate" contained in this paragraph. Second: By canceling the beginning of paragraph (b) thereof and replacing it with the following:

(The Company may deal with a fund and/or insurance pool classified in the Third and Fourth Groups according to the credit classification set forth in the decision on guidelines for the Solvency Margin Instructions in effect, provided that prior approval is obtained from the Director General for this dealing and the Commission is provided with the following for the purpose of obtaining this approval:) Third: By canceling the text of item (4) of paragraph (b) thereof and replacing it with the following text:
4. A copy of the latest annual report of the fund or insurance pool, including audited financial statements.

Article (6):
Article (8) of the Original Instructions is amended as follows:
First: By canceling the beginning of paragraph (a) thereof and replacing it with the following:
A. In implementation of the provisions of the Law, the Company may reinsure insurance contracts for any branch of insurance it conducts with another company authorized to conduct that branch, provided it complies with the following provisions:
Second: By canceling the phrase "treaty reinsurer" contained in item (2) of paragraph (a) thereof and replacing it with the phrase "reinsurance company conducting treaty reinsurance business." Third: By adding the phrase "from insurance companies" after the phrase "by re-reinsuring" contained in item (3) of paragraph (a) thereof.

Fourth: By adding paragraph (c) to it with the following text:
C. The provisions of paragraph (b) of this Article shall not apply to reinsurance premiums received by the Company's branches outside the Kingdom.
D. The percentage of placement to insurance companies outside the Kingdom shall not exceed the percentage determined by the Director General by a decision issued for this purpose.

Article (7):
Article (10) of the Original Instructions is amended by adding item (w) to it with the following text:
w. Determining the cases in which the Company incurred a loss resulting from insurance policies that could have been reduced through reinsurance arrangements, due to the Company retaining the entire or a large part of the risk exceeding its capacity to bear it, or due to the reinsurer not paying its share of claims for any reason.

Article (8):
The Original Instructions are amended by adding item (c) to Article (12) thereof with the following text:
c. The Company shall, in all cases, complete reinsurance arrangements before the effective date of the insurance policy.

Article (9):
Article (15) of the Original Instructions is amended by canceling the phrase "with the reinsurer or fund or pool" contained in its beginning and replacing it with the phrase "or determining the nature of dealing with a reinsurer, fund, or insurance pool."

Article (10):
The Original Instructions are amended by adding the following Articles (16) and (17) to it:
Article (16):
The Company shall provide the Commission with proof that it has taken the necessary measures to grant priority to dealing with a reinsurer licensed by the Commission to conduct reinsurance business and a reinsurance broker licensed by the Commission, in accordance with the provisions of items (3) and (4) of paragraph (a) of Article (3) of these Instructions.
Article (17):
The Company shall ensure that its branches and affiliated companies conducting insurance business outside the Kingdom apply the provisions of these Instructions and decisions issued thereunder as a minimum of the provisions to be complied with regarding reinsurance standards.

Article (11):
The Original Instructions are amended by repealing the text of Article (17) thereof.

Board of Directors of the Insurance Commission

Instructions No. 4 of 2002 on Reinsurance Standards and Amending Instructions

Lineage: In force

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