United Arab Emirates: Bancassurance Regulations In The GCC

Introduction

Insurance distribution in the Middle East has traditionally been procured through the insurance intermediary markets, such as brokers and insurance agents despite the fast-growing alternative distribution channels available to insurance providers. Bancassurance is one of the fastest growing distribution channels of insurance in the Gulf Cooperation Countries (GCC), in addition to the influence of technology platforms, such as insurance market aggregators.

This publication focuses on Bancassurance regulations in the GCC with the growing trend and potential scope for Middle East insurance providers to seek wider distribution of their products and banks to source new avenues of income.

Bancassurance Defined

Bancassurance is dependent on a mutual partnership between a bank and insurance provider offering insurance products or insurance benefits to the bank’s customers thereby providing an alternative distribution channel for insurance providers. Often, in many jurisdictions, commissions are shared between banks and insurance providers related to the sold products. The bank is the client point of contact although some regulators do not permit such arrangements [see below].

Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia is possibly and perhaps the most developed of GCC markets when it comes to a legal framework for bancassurance.

Insurance Intermediaries Regulation of 2011 governs the conduct of bancassurance, which restricts the selling of insurance products through an insurance agency approved and licensed by the Saudi Arabian Monetary Agency (SAMA). Qualification is a key requirement and the staff of approved agencies must have minimum insurance qualifications and receive regular training. Importantly, to avoid mis-selling, staff are not permitted to sell both insurance and bank products but are limited to only selling either insurance or bank products as one line of sale and bank products must not be mingled with insurance products.

While the legal framework is a welcome measure to consumer protection, there is suggestion that the Insurance Intermediaries Regulation of 2011 have in fact slowed down growth of the Saudi bancassurance market in terms of the additional financial burdens placed on banks. Achieving a regulatory and commercial balance is always a challenge for regulators however, it seems certain that bancassurance will grow in Saudi and offer benefits to all concerned parties including, paradoxically, SAMA which is leading the way in regulating bancassurance in the GCC.

Bahrain

The legal framework for bancassurance is Bahrain is regulated through the Central Bank of Bahrain's (CBB) Rule Book – section GR-9 in Volume 3 which outlines the key provisions for appointed representatives. Appointed Representatives are permitted to sell through the banks if they are appropriately qualified in insurance services.

Bahrain follows an appointed representative model, which places an emphasis on a well-qualified sales force. The chief regulator of Bahrain's insurance market is the CBB, the successor to the Bahrain Monetary Agency. From 2003 to 2004, the CBB undertook the development of new comprehensive regulations for the insurance sector in line with the International Association of Insurance Supervisors (IAIS) concepts. The CBB is also the only MENA representative on the executive committee of the IAIS. The bank has encouraged the expansion of international insurance companies operating in Bahrain.

Appointed representatives are governed by the rules of section GR-9 in Volume 3 CBB, which outlines the key provisions for appointed representatives. An appointed representative is defined as "an agent, who is not licensed by the CBB as insurance firm, insurance broker or insurance consultant, appointed by an insurance firm (licensed principal) as its representative according to the rules in Chapter GR-9. Insurance providers therefore use appointed representatives with the insurance expertise to sell and market the products through the banks with commission sharing agreements in place. Bancassurance is developing well in Bahrain albeit a relatively small market. With strict conduct of business regulations through the CBB Rule Book and laws, bancassurance is highly regulated and offers solid consumer protection.

Kuwait

There is no legal framework in Kuwait for the distribution of bancassurance and Kuwait is yet to develop and promulgate a regulatory framework for this form of insurance distribution. Law No. (24) of 1961 (1) regarding Insurance Companies and Agents regulates the activities of insurance and reinsurance. In addition, the Kuwait Civil Code (Decree No 67 of 1980) is also part of this regulatory framework.

Insurance brokers and insurance agents must be authorised by the Insurance Department of the Ministry of Commerce and Industry (MOCI). There are generally no restrictions on the marketing or sale of insurance services to policyholders other than restrictions on insurance providers dealing with and placing insurance through unlicensed insurance intermediaries.

Although there is no legal framework for bancassurance in Kuwait, Law No 39 of 2014 relating to Consumer Protection (Consumer Protection Law), does provide protection for consumer rights, which is relevant to bancassurance. It is anticipated that Kuwait will eventually provide a regulatory framework for bancassurance in time given that this distribution channel is also growing in Kuwait in context of growing FinTech platforms in the region.

Qatar

The Law of the Qatar Central Bank and the Regulation of Financial Institutions ("Financial Institutes Law") designates the QCB as the supreme regulatory authority for the financial services industry, including oversight of the insurance/reinsurance markets. The Qatar Financial Centre (QFC), is a separate off-shore financial centre within Qatar, regulated under Law No. 7 of 2005 as amended (QFC Law). It has its own legal and regulatory regime and does regulated bancassurance through QFC Law. The Financial Institutions Law and QFC Law fall in line with international industry standards and the Insurance Core Principles set by the International Association of Insurance Supervisors (IAIS).

The Financial Institutions Law is yet to be put in place. Nevertheless, it is anticipated that the law will covers both prudential and business conduct requirements for insurers including rules and requirements in respect of marketing and distribution of insurance products. It is anticipated that approvals will be required for policy terms, rules for advertising, product disclosure rules and general oversight including information and disclosures on distributors charges.

Currently there is no prescriptive legal/regulatory requirements for on-shore bancassurance in Qatar other than general consumer protection laws obligations under QCB laws. Banks in Qatar traditionally sell insurance through dedicated teams with insurance expertise, normally via their websites and these include multiple retail lines of risk.

Growth has been slow in Qatar in respect of bancassurance related to very few compulsory insurance requirements in Qatar. Third-party motor liability and professional liability for engineers are the only two categories currently obligatory, unlike other GCC countries. This, however, is set to change with new categories of insurance likely to become mandatory.

It is anticipated that new statutory provisions will recognise distribution methods such as online and direct marketing distribution, which in turn may lead to prescriptive bancassurance regulations.

Oman

Bancassurance in Oman provides a stable regulatory framework pursuant to Capital Market Authority Administrative Decision N. E/21/2010 and Circular BM 971.

The Central Bank of Oman (the “CBO”) and the Capital Market Authority (the “CMA”) regulate bancassurance in Oman and permit this distribution model through compliance with certain obligations, limitations and restrictions imposed on banks and insurance companies.

Capital Market Authority Administrative Decision N. E/21/2010 and Circular BM 971 ('the Law"), prescribe the bank and insurance provider enter into agreements to regulate their relationships. The agreements must set out the party's obligations, including the terms and conditions, the insurance lines and scope of insurance offered, training requirements of the staff and competency in insurance services -both bank and insurance staff, marketing and sale procedures signed off by management, disclosure of commission payments, the share of marketing costs between the bank and insurance company and the details of any branch distribution from the bank.

Customers must have a free choice and no conflicts or interests arising out of the customer's relationship with the bank must influence the customer's choice of insurance products. There must be certainty of contract only between the insurance company and the customer and the bank should not be a contracting party to the insurance policy. Banks are only permitted to act as insurance agents in broad terms and not as insurance brokers and there must be contractual provisions in the agreement between the banks and insurance companies to reflect this position.

The Law permits the sale and distribution of life insurance and general insurance and banks are only permitted to enter into agreements with two insurance companies for distribution of their products, one for life and the other for general insurance. The Law prohibits banks to sell the same line of insurance from more than one insurer as the CMA would deem such conduct in breach of the requirements given that the banks would be for all intents and purposes acting as a broker.

It is expected that Takaful bancassurance arrangements will be put in place in Oman in the next few years.

United Arab Emirates

The UAE regulator, the Insurance Authority (IA) issued a circular in September 2011 setting out rules and guidance for insurance providers to follow pending a proposed draft resolution regulating the marketing of insurance policies by banks. On May 23rd, 2018, IA issued Decision No. (13) of 2018 regulating bancassurance in the UAE (the “Circular”).

The Circular is far reaching in that it provides limitations on the bank's capacity to act as "insurance agency, insurance brokerage, insurance consultancy, or any insurance-related profession" and these regulatory requirements must be set out in the contractual language of the agreement between the bank and the insurance provider. This limits banks as a pure marketing channel unlike Oman and KSA bancassurance.

Insurance providers and banks will need to be authorised by the IA and UAE Central Bank respectively to carry out activities of bancassurance. This obligation is specified in Article 2 of the Circular and licenses can be obtained for a period of one year and renewable thereafter.

Pursuant to Article 2 of the new instructions of the IA, no insurance company will be able to conduct bancassurance without obtaining the prior approval from the IA.The Circular requires all insurance providers wishing to market insurance policies through banks to be established in the UAE, and to be licensed to operate in the UAE (whether through a branch, foreign branch or an insurance agent). This will prohibit foreign unlicensed insurance providers from setting up arrangements with UAE banks, which has historically happened.

Certain prescribed contractual terms must be in place in a written agreement between the bank and the insurance provider. These include commission arrangements including calculations, procedures for collection and payment dates; written statements showing that the bank is authorised to receive insurance premiums; obligation of the bank to transfer all premiums to the insurance provider providing regular detailed statements.

For the first time, the IA will be permitted to inspect and audit banks in respect of their bancassurance arrangement to enforce the compliance requirements, subject to approval of the UAE Central Bank.

Bancassurance in the UAE is a very well-developed market despite the recent enactment of the Circular. That said, the new rules will take time to play out and change current attitudes where banks and insurance providers will need to comply with the strict limitations in the Circular.

Conclusions

While bancassurance is still developing in the GCC, the potential for growth is enormous. Regulators need to find a balance between regulatory oversight set against a developing insurance distribution market in order not to discourage banks and insurance providers to reach a wider consumer base allowing consumers greater access to insurance products.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
BSA Ahmad Bin Hezeem & Associates LLP
BSA Ahmad Bin Hezeem & Associates LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
BSA Ahmad Bin Hezeem & Associates LLP
BSA Ahmad Bin Hezeem & Associates LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions