Insurance and Reinsurance Laws and Regulations – UAE
Welcome to our blog on insurance and reinsurance in the United Arab Emirates (UAE), including the Dubai International Financial Centre (DIFC). This blog provides a high-level overview of Insurance & Reinsurance Regulations Laws, agreements of insurance, reinsurance, and ownership Restrictions in the UAE. We will also delve into the regulation of insurance and reinsurance contracts, the forms of corporate organization an insurer can take, and the law of insurers and reinsurers, including the rule of the transfer of risk.
Regulation and Legislation
The regulatory framework for the insurance and reinsurance industry in the United Arab Emirates (UAE) consists of a combination of federal and local regulatory bodies and a separate regulatory framework for offshore companies operating in free zones.
The primary regulatory body for the onshore insurance market is the UAE Central Bank, which oversees all insurance businesses in the country, including insurers, brokers, and other insurance service providers. In addition to the UAE Central Bank, there are separate regulators with oversight for the health sector in some of the individual Emirates, such as the Dubai Health Authority, the Sharjah Health Authority, and the Health Authority Abu Dhabi. The primary legislation governing onshore insurance in the UAE is the Insurance Law, which requires that UAE-based risks be insured by insurance companies licensed and regulated by the Insurance Authority.
For offshore companies operating in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) free zones, the regulatory framework is separate from the onshore insurance market. Companies registered in the DIFC are regulated by the Dubai Financial Services Authority, while the Financial Services Regulatory Authority regulates those reported in the ADGM.
Overall, the regulatory framework in the UAE is designed to protect policyholders and ensure the insurance industry’s stability and solvency through issuing licenses, setting minimum capital requirements, and enforcing compliance with regulatory requirements.
Agreements for Insurance and Reinsurance Coverage
In the UAE, all onshore insurance and reinsurance contracts are regulated by the UAE Central Bank, and only licensed insurers are allowed to insure risks onshore in the country. Any insurance contract entered into by a non-licensed insurer is considered void under UAE law. The non-licensed insurer may be required to pay damages to the insureds and face regulatory sanctions. Foreign reinsurers can reinsure insurance contracts entered into in the UAE, but they must be regulated in their home jurisdiction and meet specific rating requirements. On the other hand, offshore insurers can only insure risks within their free zone, but they may reinsure UAE-based risks.
In addition to traditional insurance, the UAE also allows for Takaful, a form of insurance/reinsurance based on Islamic principles. Insurance contracts entered into within free zones in the UAE will be governed differently than those concluded onshore. Licensed insurance companies are only permitted to practice the activities for which they are licensed. There is a general prohibition on insurance companies providing life assurance and fund accumulation along with property and life insurance. Insurance brokers are also prohibited from acting as insurance agents or any other insurance entity.
Ownership Restrictions
Insurance and reinsurance providers in the United Arab Emirates (UAE) are regulated by the Central Bank of the UAE and the Insurance Authority. To operate in the UAE, insurance and reinsurance companies must meet certain requirements and adhere to specific regulations.
Managers of insurance companies in the UAE must hold a university degree and have completed approved courses in insurance or related fields. They must also have at least five years of experience in the insurance business if they are UAE citizens or ten years if they are non-citizens. Additionally, they must have worked as managers in a licensed insurance company and must not have been dismissed from any job for disciplinary reasons within the previous five years.
Employees of insurance companies who carry out controlled function activities, such as directors, chief executive officers, compliance officers, finance officers, and money laundering reporting officers, must be approved by the Central Bank. Insurance companies regulated by the Central Bank must also circulate the Insurance Authority’s Instructions concerning the Rules of Professional Conduct and Ethics to their employees and develop internal professional codes of conduct.
Insurance and reinsurance companies incorporated in the UAE must have at least 51% of their capital owned by UAE or GCC nationals or by legal entities wholly owned by them. However, there are different ownership requirements for certain insurance-related professionals. For example, insurance agents must be 100% owned by UAE nationals or companies. In November 2020, a new Decree was announced by President His Highness Sheikh Khalifa bin Zayed Al Nahyan overhauling foreign ownership rules for commercial companies.
Insurers are also subject to minimum capital requirements. The minimum capital requirement for establishing an onshore insurance company is AED 100 million. While the need for establishing a reinsurance company is AED 250 million. The exact capital requirements apply to takaful operators.
Entities established in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) are subject to different restrictions on the ownership or control of insurance-related entities. These entities are also subject to individual ownership requirements.
Innovation within the Insurance Sector
In 2021, the UAE insurance sector underwent further innovation by implementing the insurance regulatory sandbox by the UAE Central Bank. This controlled environment allows for small-scale, live testing of innovations by private firms. It encourages the development of new products, technologies, and business models. The sandbox accepted applications during March/April and September/October 2021. And successful applicants were granted six or 12 months to participate in the experimental environment. Any new products and technologies resulting from this process will likely be implemented by the mid-end of 2022.
In addition, the UAE Central Bank launched a four-week consultation on the “Guidelines for Financial Institutions Adopting Enabling Technologies” in collaboration with the Securities and Commodities Authority, the Dubai Financial Services Authority (DIFC), and the Financial Services Regulatory Authority (ADGM). These guidelines aimed to promote the safe adoption of innovative technologies by financial institutions in the UAE and manage the risks that may arise from their adoption.
As the UAE and the Middle East continue to digitize and transform their insurance markets into innovative insurance markets, it is expected that the UAE Central Bank will continue to encourage collaboration between traditional insurers and insurtech firms, which focus on technological innovations to improve the efficiency of insurance policies. While the UAE may currently need to catch up in insurance development compared to other mature insurance jurisdictions, the implementation of the sandbox and the adoption of enabling technologies show a solid commitment to driving innovation in the sector.
Insurance and Reinsurance Markets Trends
The insurance sector in the United Arab Emirates (UAE) has had a relatively calm year, partly due to the ongoing impact of COVID-19 and the merger of the UAE Insurance Authority into the UAE Central Bank. Despite this, there has been some notable progress in the industry. The first “syndicate in a box” initiative in the UAE was approved by Lloyd’s and is expected to commence underwriting in 2022. This will be the first syndicate to operate from Lloyd’s Dubai platform, marking a significant milestone for the insurance industry in the UAE.
Sales and Marketing
Marketing and sales are crucial components of the insurance industry, as they help to attract new customers and build brand awareness for insurance companies. To ensure that marketing and sales efforts conduct ethically and in compliance with the law, the Insurance Authority of the United Arab Emirates has established a set of rules and guidelines for insurance companies operating in the state.
According to the Insurance Authority Decision No. 3 of 2010, insurance companies must present any insurance policy or program they plan to advertise to the Central Bank for review before it releases to the public. This ensures that the information provided to the public is accurate and complies with the law and technical rules. Additionally, insurance companies must ensure that their advertisements and publications do not contain false or misleading information. It is such as inaccurate statistical figures or fraudulent representations about the company’s financial position.
Insurance companies must also be transparent about pricing, clearly stating whether prices are inclusive or exclusive of duties and taxes. They must also ensure that the content of their advertisements or publications is consistent with the range of the insurance policies they are promoting.
What types of insurance are available in the UAE?
There are various types of insurance available in the UAE, including:
Health insurance: It covers the cost of medical treatment for individuals and families.
Life insurance: provides financial protection for the policyholder’s family in the event of their death.
Motor insurance: In this insurance, it covers damages to vehicles and third-party liabilities resulting from road accidents
Home insurance: This covers damages to homes and their contents
Travel insurance protects travelers against unforeseen events such as trip cancellations, medical emergencies, and lost luggage.
FAQS
Is it mandatory to have insurance in the UAE?
Certain types of insurance, such as motor and health insurance, are mandatory in the UAE. All vehicles in the UAE must be insured with a minimum of third-party liability coverage. And expatriates in the UAE must have health insurance coverage as a condition of their residence visas.
Can I choose my own insurance company in the UAE?
Yes, you can choose your own insurance company in the UAE. Shopping around and comparing quotes from different insurance companies to find the best coverage and premiums for your needs is essential.
Can I cancel my insurance policy in the UAE?
Yes, you can cancel your insurance policy in the UAE at any time. However, you may require to pay a cancellation fee. And you may not be entitled to a refund of any premiums already paid.
What should I do if I have a complaint about my insurance company in the UAE?
If you have a complaint about your insurance company in the UAE, you can contact the IA to file a complaint. The IA will investigate your complaint and take appropriate action to resolve the issue.
Can I purchase insurance online in the UAE?
Yes, many insurance companies in the UAE offer online insurance policies, which can be purchased and renewed online. It is essential to thoroughly research and compare different insurance options before buying online to ensure you get the best coverage for your needs.
