UK: Regulation Watch: GCC Insurance Sector

Last Updated: 27 April 2011
Article by Wayne Jones

Previously published in the MENA Insurance Review


Insurance Authority




Insurance Authority Board of Directors Resolution No. 4 of 2010 - Takaful Insurance

In force from 29 July 2010

The Insurance Authority (IA) has published resolution No. 4 of 2010 concerning Takaful Insurance.

The Takaful Regulations provide for the establishment of a Supreme Committee for Fatwa and Shari'a Supervision within the IA that is empowered to issue rulings on Shari'a issues binding upon the Takaful operators in the UAE.

The Takaful regulations provide that Islamic insurance shall be undertaken using either a wakala or combined wakala / mudaraba model. A Takaful subscription agreement is to be issued to policyholders as distinct from the Takaful policy describing the insured risks.

Takaful operators are required to establish a Shari'a Supervisory Committee comprising 3 scholars who satisfy the eligibility criteria specified in the Takaful regulations. The members of the board of another Takaful operator. The operator must also appoint a Shari'a controller to monitor and audit the operations.

Conventional insurers are not permitted to operate Islamic windows for the sale of Takaful products.

Insurance Authority draft regulations concerning Instructions on Licensing, Regulating and Monitoring the Business of  Health Insurance Claim Management Companies

Draft for consultation

Insurance Authority Board has published the Directors Resolution  No. ( ) of 2010 regarding Instructions on Licensing, Regulating and Monitoring the Business of  Health Insurance Claim Management Companies.

The regulation proposes that the activities of 'health insurance claim management' be regulated by the Insurance Authority, and that entities wishing to undertake these activities, which include claims administration and payment, underwriting services  and other back office functions for health insurers, be required to register with the Insurance Authority.  The draft requirements include a capital requirement of AED5m, registration as a local UAE company (i.e. not in the UAE Free Zones), and set out a comprehensive list of obligations to be observed by health insurance claim management companies.  There is no deadline specified for comments to be received.

Insurance Authority draft regulations concerning marketing the insurance policies through the banks

Draft for consultation – circulated on 4 January 2011 The period for comments and responses ends on 11 April 2011.

The Insurance Authority (IA) published its draft regulations regarding marketing the insurance policies through the banks in January 2011.

The draft regulations provide that: (i) the bank must obtain approval from the UAE Central Bank to market insurance products; (ii) the insurer must obtain approval from the IA to enter into a distribution arrangement with a bank; and (iii) the distribution agreement must be registered with the IA. Existing distribution arrangements with banks are valid until 12 months after the implementation of the draft regulations. Banks may only distribute certain specified classes of retail insurance products and may not be involved in the issuance of policies or the settlement of claims. Either the bank must employ staff qualified in insurance business or the insurance company must second staff to the bank. The insurer must also provide training to the bank's staff. The draft regulations also provide that any distribution agreement between a bank and an insurer must include certain specified provisions.

Insurance Authority Board draft decision  concerning instructions pertinent to the basis of investing the rights of policyholders

Draft for consultation

The Insurance Authority (IA) published its draft instructions relating the investment activities of insurers in January 2011.

The draft instructions provide general principles applicable to the investments of insurers and focus on the need for insurers to ensure that their assets are adequately diversified. They require that insurers establish an investment department, develop investment and risk management policies and establish procedures to monitor compliance with these policies. Separate investment strategies are required for life and general insurance business. The instructions include asset distribution and allocation limits for different types of investments. Investments in derivatives are permitted only for legitimate hedging purposes. Investments in assets outside of the UAE must not exceed more than 20% of the investment portfolio. Investment activities may be outsourced to a third party provider.

Insurance Authority draft instructions concerning the calculation of the solvency margin and minimum guarantee fund of UAE insurance companies.

Draft for consultation – circulated on 8 January 2011 The period for comments and responses ends on 11 April 2011.

The Insurance Authority (IA) has published its draft instructions on the calculation of the solvency margin and minimum guarantee fund of UAE insurance companies. The instructions confirm that the minimum capital for insurers in the UAE is the higher of: (1) AED 100 million and AED 250 million for reinsurers (as was previously provided by Federal Law No. (6) of 2007); and (2) one third of the solvency margin. Any default on these minimum capital requirements is to be rectified within 60 days and the IA may suspend the licence of any insurer who does not satisfy the minimum capital requirements.

The solvency margin is to be calculated by reference to the quantifiable risks to which the insurer is exposed in respect of existing business and business anticipated to be written in the following 12 months. The instructions specify a detailed list of the quantifiable risks, including underwriting risk, investment risk, credit risk, liquidity risk, and operational risk. However, no detailed methodology is provided into the risks as to how these risks should be quantified.

Insurers are required to submit solvency information (as specified in the instructions) on an annual basis and as otherwise rquired by the IA. The instructions also provide that insurers must have a documented risk management framework including risk management policies and procedures and stress testing framework.

Insurance Authority draft instructions concerning the calculation of technical provisions by UAE insurance companies.

Draft for consultation – circulated on 4 January 2011 The period for comments and responses ends on 11 April 2011.

The Insurance Authority (IA) has published its draft instructions on the calculation of technical provisions by UAE insurance companies. The draft instructions provide details of the methodology to be used by insurance companies when calculating their technical provisions in respect of Unearned Premium Reserves, Unearned Risk Reserve, Outstanding Loss Reserves, Incurred but not Reported Reserves, Unallocated / Allocated Loss Adjusted Expense Reserves, Actuarial Reserves and Catastrophic Risk Reserves. Insurers are required to report their technical provisions on a quarterly basis to the IA and to submit an actuarial certification and Board of Directors certification to the IA on an annual basis.

The instructions require that each insurer appoint an actuary accredited with the IA to assess the quality of the data used for calculating the technical provisions. The actuary is responsible for reporting exceptional and significant risks to the Board of Directors of the insurer. The methodology used by the actuary to calculate IBNR is required to be approved by the IA. This methodology is to be consistent from year to year.


DFSA Consultation Paper No. 73 concerning the regulatory policy and process sourcebook and enhancements to DFSA's rulebook

Consultation period ended on 17 January 2011.

The Dubai Financial Services Authority (DFSA) issued Consultation Paper No. 73 (CP) in December 2010.  The CP describes the manner in which the DFSA intends to introduce enhancements to the DFSA's Rulebook. The CP sets out a new Regulatory Policy and Process Module (RPP), which effectively proposes to incorporate the provisions previously found in the General (GEN), Authorisation (AUT) and Supervision (SUP) Modules of the DFSA Rulebook into one new RPP Module.  The consultation period ended on 17 January 2011.  The DFSA has indicated that it is currently reviewing responses, and will publish formal amendments in due course.

DFSA Signatory to IAIS Multi-lateral Memorandum of Understanding

Signed and in effect from on 3 November 2011.

The Dubai Financial Services Authority (DFSA) has been accepted as a signatory to the IAIS Multi-lateral Memorandum of Understanding (MMoU).

The MMoU is a framework for co-operation and the exchange of information between insurance supervisors to facilitate effective oversight of insurance and reinsurance companies which are active in more than one jurisdiction. It sets minimum standards to which signatories must adhere and these include the purposes for which information provided by another insurance supervisor can be used and the confidentiality of information received. The DFSA is the only regulator in the GCC, and the first in the Arab World, to be admitted as a signatory.


Saudi Arabian Monetary Agency

Saudi Arabian Monetary Agency draft regulation concerning investment

The draft investment regulations were issued on 16 January 2011, and responses are requested 60 days after this date.

The Saudi Arabian Monetary Agency (SAMA) has published the draft Investment Regulation to be implemented by insurance companies and reinsurance companies in Saudi Arabia.

The draft Investment Regulation contains general principles and standards that should be met by insurance companies, including branches of foreign insurance companies, and reinsurance companies licensed by SAMA to manage their investments.

Saudi Arabian Monetary Agency  draft regulation concerning Online Insurance Activities for insurance companies, insurance brokers and agents

The draft regulations were issued on 16 January 2011, and responses are requested 60 days after this date.

The Saudi Arabian Monetary Agency (SAMA) has published the draft of Online Insurance Activities Regulation for insurance companies, insurance brokers and agents.

This draft regulation specifies the requirements and provisions for conducting insurance activities by insurance companies, insurance brokers and agents over the internet. The draft regulations applies to all online insurance activities conducted by insurance companies, insurance brokers and agents licensed according to the Law on Supervision of Cooperative Insurance Companies promulgated by Royal Decree M/32 dated 2/6/1424 H.

Saudi Arabian Monetary Agency draft regulation concerning insurance intermediaries regulation

The draft regulations were issued on 11 February 2011, and responses are requested 60 days after this date.

The Saudi Arabian Monetary Agency (SAMA) has published regulation concerning insurance intermediaries.

The draft regulation specifies the principles and minimum standards that should be met by insurance agents and (re)insurance brokers when dealing with insurance companies and their existing and potential clients.

Saudi Arabian Monetary Agency  regulation concerning Reinsurance activities

Published in October 2010

The Saudi Arabian Monetary Agency (SAMA) published in late 2010 the new Regulation of Reinsurance Activities (the Reinsurance Regulations), which had previously been published in draft at the end of 2008. The Reinsurance Regulations must be read in conjunction with the Law on Supervision of Co-operative Insurance Companies and its implementing regulations.

The Reinsurance Regulations provide the "general principles and standards" applicable in relation to reinsurance in Kingdom of Saudi Arabia (KSA).  The Reinsurance Regulations apply to all insurance and reinsurance companies and to "insurance related service providers" (including insurance and reinsurance brokers). 

The Reinsurance Regulations need to be read in conjunction with the Insurance Law and the Implementing Rules of the Control of Cooperative Insurance Regulations 2004 (the Implementing Regulations).  It remains the position, pursuant to the Implementing Regulations that insurance companies in KSA must retain not less than 30% of the total written premiums and cannot cede more than 40% of its premiums to reinsurers outside of KSA without SAMA approval.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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