In January 2010 the Qatar Financial Centre Regulatory Authority ("QFCRA") issued Consultation Paper 2010/01 ("Paper") inviting comments in relation to possibly allowing general insurers to offer certain short-term life insurance policies in or from the Qatar Financial Centre ("QFC").

The QFC Financial Services Regulations ("FSR") categorise certain types of insurance as either "general insurance" or "long term insurance" (ie life insurance). The QFC, as with many regulated jurisdictions, prohibits insurers from offering both general and life insurance products from the same entity ("composite insurers") except in limited circumstances. The exception to this general prohibition relates to a life insurer's ability to offer 2 categories of general insurance: accident and sickness. An insurer that wants to offer both general and life insurance is required to establish two separate entities for the two different categories of products.

However, the QFC has acknowledged that such a prohibition has created some issues where general insurers have sought approval to offer certain short term life policies. The FSR categorizations do not differentiate between "short term" and "long term" life insurance and accordingly any life insurance policy will be considered as a "long term insurance policy", regardless of the policy's term.

In order to address these concerns, the QFCRA is currently considering an alternative approach consisting of the following options:

  • Where a general insurer wants to offer short-term life insurance policies, the insurer would be required to establish a life insurance subsidiary in order to do so;
  • restrict the scope of authorization of the life insurance subsidiary to short term group life contracts (but not annuities); and
  • in recognition of the limited business that the subsidiary would be authorized to undertake in or from the QFC, provide certain conditional waivers and modifications to the requirements that would normally apply to a life insurer established in the QFC.

The QFCRA's approach to short-term life insurance differs significantly from the approaches adopted by the Central Bank of Bahrain ("CBB") and the Dubai Financial Services Authority ("DFSA"). Both the CBB and the DFSA definitions of "long-term insurance business" identify them as contracts for a period of more than one year, and do not automatically categorise life insurance written on an annually renewable basis as requiring the additional protections associated with "long term" life insurance. On the basis of these definitions, general insurance companies in these jurisdictions are able to offer short-term life insurance, provided the policy period is no longer than one year, without the need for a new subsidiary. Annually renewable group life insurance business is a popular and necessary product for most Middle East companies. Given the complexities associated with the establishment of an entity in a regulated environment, the requirement for a general insurer to establish a new subsidiary in order to offer such policies may put the QFC at a comparative disadvantage where this type of insurance is concerned.

In proposing this alternative approach, the QFCRA has posed a further few questions relating to the identification of potential barriers to the implementation of such a structure, appropriate levels of base capital for short-term life insurance subsidiaries, whether a common management structure would be feasible, and practical issues regarding the segregation of assets and liabilities between the two entities. The deadline for receiving comments was 24 February 2010.

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