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How is the writing of insurance contracts regulated in your jurisdiction?
The UAE is often described has having two separate but interconnected and interdependent insurance markets: the ‘onshore’ UAE market and the ‘offshore market’ which comprises the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), of which the latter two are largely wholesale ‘offshore’ reinsurance centres.
With the exception of the DIFC and ADGM, until recently, the UAE insurance market was supervised by the UAE Federal Insurance Authority (IA) pursuant to Federal Law No. 6 of 2007 on the Establishment of the Insurance Authority and Regulation of its Operations as amended by Federal Law No. 3 of 2018 (the Insurance Law). However pursuant to Article 3 of Federal Decree Law No.25/2020 issued on 27 September 2020, the Insurance Authority was merged into the Central Bank of the UAE (CBUAE). In January 2021, the CBUAE announced the commencement of operational procedures aimed at assuming the supervisory and regulatory responsibility of the insurance sector, which resulted in the Insurance Authority coming under the supervisory authority of the UAE Central Bank.
The CBUAE oversees all insurance business in the UAE. However, for the offshore insurance market i.e. insurers based within the DIFC or the ADGM, the Dubai Financial Services Authority (DFSA) and the Financial Services Regulatory Authority (FRSA), respectively, regulate DIFC and ADGM-based insurers and reinsurers. Each regulator has its own specific requirements for the authorisation, licensing and regulation of companies offering insurance services.
In addition to the above, there are separate dedicated regulators for the health insurance and reinsurance sector in certain individual Emirates. These are the Dubai Health Authority, the Department of Health of Abu Dhabi and the Sharjah Health Authority.
In relation to the actual writing of insurance contracts and policy wording, the majority of policies executed in the UAE incorporate London/international market wordings. Policies issued in the UAE are to be issued in Arabic (Article 28 of the Insurance Law) (although there are certain exceptions in relation to various commercial risks), and may be translated into any other language. If there is a difference in interpretation between the two languages, the Arabic version will prevail.
Should there be uncertainty as to the meaning of a policy term, it will be construed by the court in favour of the obligor (Article 266(1) Civil Code). It is permissible to construe ambiguous wordings in policies against the party that put it forward or the party that benefits from it if they are deemed to be contracts of adhesion (Article 266(2) Civil Code). Should there be scope for interpretation of the policy, the court will make enquiries into the ‘mutual intentions of the parties’, as well as the nature of the transaction, and the trust and confidence that should exist between the parties (Article 265(2) Civil Code). However, where the wording of a policy is clear, it may not be departed from by way of interpretation to ascertain the intention of the parties (Article 265(1) Civil Code).
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Are types of insurers regulated differently (i.e. life companies, reinsurers?)
The regulation of insurers offering different lines of insurance varies within the UAE. A key example of this is the regulations governing life insurers. As per the Insurance Law, a guarantee of 4million UAE Dirhams must be submitted to a UAE bank in order to write life insurance, whereas all other types of insurance (property and liability insurance) must have a guarantee of 2million UAE Dirhams (Article 42 Insurance Law).
The separation between life insurers and non-life insurers is set to increase further due to the IA’s Regulations for Life Insurance and Family Takaful Insurance (Decision No. 49 of 2019) which were issued in October 2019 and came into force on 16 October 2020. The regulations place an upper limit on any commission paid to any ‘Distribution Channels’, which are defined as insurance agents, insurance brokers and the marketing of insurance policies through banks or finance companies, and the direct promotion of a company through its employees. The limits apply to the sale of ‘Pure Protection Products’ (any insurance product that has a protection benefit for a covered peril, but has no cash value) and ‘Savings Products’ (any insurance product that has a cash value). The regulations stipulate that indemnity commission will be payable over the term of the product rather than as an up-front cost. There are also new provisions regarding the transparency of information provided to customers, so that they are aware of fees and commissions.
Further, Takaful insurance (an alternative system of cooperative Islamic insurance) is primarily subject to the same UAE laws as non-Takaful insurance, although there are some differences, for example, relating to policy content (the Regulation on Takaful Insurance issued by the CBUAE on 24 November 2022) and premium distributions. The CBUAE Regulation on Takaful Insurance establishes minimum requirements with which Takaful insurance companies must comply in relation to their Takaful insurance activities and businesses.
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Are insurance brokers and other types of market intermediary subject to regulation?
An insurance broker in the UAE must be licensed and registered with the CBUAE (Article 70 of Federal Law No. 6 of 2007 on Establishing the Insurance Organisation and Regulating Insurance Activities as amended by the Insurance Law). In addition, a broker must comply with IA Board of Directors’ Decision No. 15 of 2013 Concerning Insurance Brokerage Regulations as amended by IA Board of Directors’ Decision No. 14 of 2020 (the Broker Regulations) and other regulatory requirements.
There is a distinction between a broker and an agent under UAE law. Whereas a broker must act independently as an intermediary, an agent acts directly and exclusively for one (re)insurer (Article 69 of the Insurance Law). Insurance agents are also required to be registered and licensed to practice insurance business in the UAE (Article 3 of IA Board of Directors’ Resolution No. 8 of 2011 on Instructions concerning the Regulation of Insurance Agents Business (the Agent Regulations), and are regulated by the CBUAE.
It is prohibited to combine broker and agency activities pursuant to Article 3(3) of the Broker Regulations and Article 3(7) of the Agent Regulations.
The concept of an insurance producer was introduced in the UAE in 2020 by IA Board of Directors’ Resolution No. 27 of 2020 Concerning the Instructions for Licensing Insurance Producers (the Producer Regulations). An insurance producer acts on behalf of a licensed insurer and its activities are limited to the marketing of insurance policies by attracting customers and allowing them to familiarise themselves with the products sold by the insurer (Article 3(1) of the Producer Regulations). All producers must be registered with the CBUAE and insurers are not permitted to deal with unlicensed producers (Article 2 of the Producer Regulations).
In 2018, the IA passed a number of regulations in relation to brokers and insurance intermediaries, the rationale of which was to widen the scope of the IA’s powers and provide additional protection to policyholders. Specifically, the IA introduced the Resolution of the Insurance Authority Board Decision No. 12 of 2018 On the Law of Licensing and Registration of Insurance Consultants (‘Registration of Insurance Consultants’). This included the prohibition of persons from practising the profession of an insurance consultant without a licence from the IA (Article 2 of the Registration of Insurance Consultants). A consultancy licence is valid for one year and renewable annually (Article 9 of the Registration of Insurance Consultants) with stipulations governing a consultant’s professional indemnity.
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Is authorisation or a licence required and if so how long does it take on average to obtain such permission? What are the key criteria for authorisation?
As discussed above, intermediaries require a licence to conduct or service business in the UAE. In relation to insurance companies, it is compulsory for any business wishing to conduct insurance activities (including the servicing of such activities) within the UAE to obtain a licence from the CBUAE. In addition to a licence from the CBUAE, Third Party Administrators (TPAs) and insurers dealing with medical insurance are also required to obtain a permit from the relevant healthcare authority, depending on the emirate in which they conduct business.
The timeframe from the submission of the initial application and approval by the CBUAE is estimated to be 60 days for an insurer. The CBUAE estimates that the application process will take 30 days for a broker and 15 days for an agent.
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Are there restrictions or controls over who owns or controls insurers (including restrictions on foreign ownership)?
Towards the last quarter of 2018, the UAE introduced a new Direct Foreign Investment Law (Federal Decree-Law No. 19 of 2018), permitting 100 percent foreign ownership of businesses located in on-shore UAE. The rationale behind the law was to promote further foreign investment in a manner consistent with the development policies of the UAE. Despite this, several economic sectors and activities are prohibited from being 100 percent owned by foreign investors including insurance (Article 7(2)(d)).
Insurance activities may be exercised within the UAE either by way of a public joint-stock company, listed on a UAE stock exchange and with UAE nationals owning at least a 51 percent stake in the company; a branch of a foreign insurance company; or an insurance agent (Article 24 of the Insurance Law).
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Is it possible to insure or reinsure risks in your jurisdiction without a licence or authorisation? (i.e. on a non-admitted basis)?
Non-admitted insurers are strictly prohibited under UAE law from writing direct business in the UAE. This prohibition applies to all types of insurance business. Article 26 of the Insurance Law provides that it is not permissible for insurers based outside the UAE to write insurance on property or on liabilities within the state. In addition, it is not permissible to carry out broking activities except with a company registered with the CBUAE. The DIFC and ADGM also prohibit non-licensed insurers operating within their jurisdictions. However, it should be noted that an insurer may reinsure both in and outside of the UAE.
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Is a branch of an overseas insurer, insurance broker and/or other types of market intermediary in your jurisdiction subject to a similar regulatory framework as a locally incorporated entity?
All insurers are regulated in the UAE and whether a branch of a foreign insurer or locally established entity, their activities must be registered and licensed by the CBUAE.
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Are there any restrictions/substance limitations on branches established by overseas insurers?
There are no restrictions on the activities of a UAE branch of a foreign insurer (or broker), however, there are additional requirements with which they must comply before being licensed in the UAE. A branch of a foreign insurance company must appoint an authorised manager for its branch, and must empower such authorised manager with all necessary powers to manage the branch (Article 55 of the Insurance Law).
In addition, a branch of a foreign broker must be licensed to practice insurance brokerage activities in its country (or financial zone) of origin in the same insurance type and class. Further, a branch of an overseas broker should be subject to the control of a counterpart supervisory authority, with a minimum of five years of practice in insurance brokerage (Article 1.1 of the Broker Regulations).
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What penalty is available for those who operate in your jurisdiction without appropriate permission?
In accordance with Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the IA (now the CBUAE), any person carrying out insurance or reinsurance activities within the UAE, without obtaining a licence from the CBUAE is liable to a fine of 250,000 UAE Dirhams. The CBUAE may report the defaulter to the regulator in its country of origin.
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How rigorous is the supervisory and enforcement environment? What are the key areas of its focus?
Since its inception in 2007, the IA (now the CBUAE) has made huge strides in bringing the regulation of the UAE insurance market in line with international best practices. With regard to the CBUAE, there has been a progressive increase in regulation (particularly since 2014), creating a robust legal framework in which insurers must operate. In the past year, the CBUAE has introduced new regulations on takaful insurance companies and the corporate governance of insurance companies. As the scope of CBUAE governance includes insurance and reinsurance companies and licensed insurance intermediaries located or operating in the UAE it is evident that the supervisory environment is both wide-reaching and rigorous. In addition, the UAE has also witnessed an increase in regulators working together, in order to strengthen confidence in the insurance market. Both the CBUAE and the Emirates Securities and Commodities Authority (ESCA) recently launched the Middle East’s first financial advisory aggregator site (whichfinancialadviser.com (WFA)) which lists insurance advisory firms licensed and approved by the CBUAE, the aim of which is to protect consumers from cold calling advisers and scammers. Generally, the CBUAE has been more proactive in its scrutiny of entities in the insurance sector and its review of licensing applications than its predecessor, the IA.
Not only has the regulatory landscape increased but so has the enforcement of such regulations. Much of the enhanced scrutiny by the CBUAE in relation to insurers and insurance intermediates has resulted in increased cooperation between the regulators and insurers and insurance intermediaries, which in turn provides both a strong and stable market providing conditions in which the market can thrive.
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How is the solvency of insurers (and reinsurers where relevant) supervised?
Both the Board of Directors’ Decision No. 25 of 2014 on the Financial Regulation of Insurance Companies and the Board of Directors’ Decision No. 26 of 2014 on the Financial Regulation of Takaful Insurance Companies (together the ‘Financial Regulations‘) establish the regulations insurers must adhere to in relation to their solvency and minimum capital requirements.
In addition to the provisions outlining minimum capital requirements for insurers and reinsurers (as discussed in detail below), the Financial Regulations impose the need for insurers to ensure that their assets are diversified with new limits in respect of aggregate exposures in individual asset classes and sub-limits for exposures to a single counterparty being imposed. The maximum limits for aggregate exposure in a particular asset class include 30 percent in real estate, 80 percent in government securities issued by A rated countries, 100 percent in UAE government securities and 30 percent for loans secured by life policies. It should be noted that the Financial Regulations also impose a minimum 5 percent to be invested in cash deposits with a UAE state bank.
Section 3 of the Financial Regulations sets out detailed guidelines in relation to the calculation of unearned premium reserves, unexpired risk reserves, outstanding loss reserves, incurred but not reported reserves, allocated loss adjustment expense and unallocated loss adjustment expense reserves and mathematical reserves.
Significantly, all insurers must appoint an actuary who is registered with the CBUAE to review and approve the above calculations. Insurers must report quarterly to the CBUAE in relation their calculation provisions. Further, insurers must submit annual reports to the CBUAE which have been certified by the actuary, authenticated by the external auditor and endorsed by the insurer’s Chairman. The Financial Regulations also set out the minimum content that must be contained in an actuary’s annual report which is to be provided to the CBUAE.
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What are the minimum capital requirements?
The Financial Regulations dictate that the minimum capital requirements are 100million UAE Dirhams for insurers and 250million UAE Dirhams for reinsurers. In addition, the Financial Regulations now require that:
- Insurers maintain a minimum guarantee fund, which is not less than one third of the Solvency Capital Requirement;
- Insurers calculate their solvency margin using the template developed and amended by the CBUAE;
- An insurer’s Solvency Capital Requirement must take into account underwriting risk, market and liquidity (investment) risk, credit risk and operational risk;
- The Financial Regulations require insurers to notify the CBUAE immediately in the event of non-compliance with the Minimum Capital, Solvency Capital Requirement or Minimum Guarantee Fund.
As per the Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority, the failure of an insurer to comply with the Solvency Margin and the Minimum Guarantee Fund in accordance with the provisions of the Financial Regulations will result in a fine of 150,000 UAE Dirhams.
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Is there a policyholder protection scheme in your jurisdiction?
Currently, there is no Policy Protection Scheme in the UAE that protects policyholders in the event of a failure of an insurer.
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How are groups supervised if at all?
In practice insurers are not regulated on a group-wide level. The regulator (for example, the CBUAE), will have regard to the particular activities of the entity in determining its regulatory requirements (for example, capital and solvency requirements). Further, if activities are outsourced to third-party providers then they too may come within the regulatory oversight of the applicable regulator.
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Do senior managers have to meet fit and proper requirements and/or be approved?
The non-objection of the CBUAE must be obtained prior to the nomination, appointment or renewal of any board member (Article 5(9) of the Central Bank Circular No. 24 of 2022 on Corporate Governance Regulation for Insurance Companies (the Corporate Governance Regulation). Pursuant to paragraph 5.20(e) of the CBUAE’s Corporate Governance Standards, certain fit and proper criteria must be satisfied for board members and senior management candidates, including (i) the possession of necessary knowledge, skills and experience, (ii) having a record of integrity and good repute, (iii) having sufficient time to fully discharge their responsibilities, (iv) providing for collective suitability and added value to the board or senior management, (v) being free from any conflict of interest, and (vi) having a record of financial soundness.
In addition, a person may not occupy certain senior roles in an insurance company if they have been condemned for certain offences, declared bankrupt and not yet rehabilitated, or is considered by the board to be liable of a serious violation of the Insurance Law or the Companies Law in that persons capacity as a General Manager or board member of a company (Article 30 of the Insurance Law).
As per Article 5 of Broker Regulations, the CBUAE must approve individuals working as technical staff such as Chief Executive Officers, General Managers and Operations Managers for an insurance broker. Such technical staff must have no criminal record and never have been the subject of bankruptcy proceedings.
Further, Article 3(12) of Board Resolution No. 3 of 2010 on Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies Operating in the UAE (the Code of Conduct) makes provisions for an insurer regulated by the CBUAE to circulate the Instructions concerning the Code of Conduct and Ethics to be observed by Insurance Companies operating in the UAE to its employees, as well as develop internal professional codes of conduct for the company and its employees.
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To what extent might senior managers be held personally liable for regulatory breaches in your jurisdiction?
The CBUAE has the power to bar individuals from the UAE insurance sector. It may also withdraw, replace or restrict the powers of the Senior Management or members of the Board of an insurance company and may provide for the interim management of the company (Article 14 of the Corporate Governance Regulation)
In respect of brokers, Article 23 of Broker Regulations provides for the CBUAE to sanction employees that commit regulatory breaches with the following penalties:
- Warning;
- Suspension from practicing the activity for a maximum period of two months; and
- Cancellation of the accreditation in case of excessive breach of the Law, regulations, instructions, resolutions or circulars issued by the CBUAE.
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Are there minimum presence requirements in order to undertake insurance activities in your jurisdiction (and obtain and maintain relevant licenses and authorisations)?
There is no minimum requirement for a foreign insurance company or a branch of a foreign insurance company to perform insurance activities provided that it has an established presence in the UAE and a licence pursuant to Article 26 of the Insurance Law.
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Are there restrictions on outsourcing services, third party risk management and/or operational resilience requirements relating to the business?
There is no general provision under UAE law which authorises insurers to outsource parts of their business. Rather, specific activities are authorised to be outsourced to service providers such as:
- Health insurance administrators under the IA Board Resolution No. 9 of 2011 Concerning the Instructions for Licensing Health Insurance Third Party Administrators (TPAs) and Regulation and Control of their Business
Providers of health insurance can outsource claim handling, developing and managing health insurance programs, and negotiating agreements with medical service providers to TPAs that specialise in health insurance and that are licensed by the CBUAE. Health insurance TPAs may also provide consultancy services in underwriting; however, they may not sell or market health insurance policies directly or indirectly to consumers.
- Surveyors and loss adjusters under the IA Board Resolution No. 6 of 2010 Concerning Surveyors and Loss Adjustors’ Regulations
Insurers can outsource the surveying and investigating of the causes of damage, the loss adjustment of such damage, determining whether the damage is covered and the amount of payable compensation under the insurance policy to surveyors and loss adjusters licensed by the CBUAE.
- Insurance Agents under the Agent Regulations
An insurer can authorise an insurance agent licensed by the CBUAE to practice its insurance business on its behalf. An agent is not authorised to act as an insurance broker nor act for more than one insurer.
- Consultants under the IA Board Resolution No. 12 of 2018 Concerning the Regulation on Licensing and Registration of Insurance Consultants and Organization of their Operations
Insurance consultants provide services to insurers such as opining on the legal, technical and financial aspects of any insurance or reinsurance operations, study and evaluate the risks to be covered by insurance and the conditions of insurance coverage, help assess the assets and liabilities of insurers, opining on claims and study and prepare reinsurance programs. An insurance consultant cannot combine its services with any other insurance-related profession and it must be licensed by the CBUAE.
- Actuaries under the IA Board Resolution No. 9 of 2017 Concerning the Regulations on Licensing and Registration of Actuaries and Regulation of their Operations
Actuaries can report on an insurer’s portfolio of risks, review an insurer’s pricing policy for insurance products and the soundness of its underwriting policy, review the sufficiency of its reinsurance coverage, and the appropriateness of an insurer’s liability retention.
- Insurance Producers under the Producer Regulations
Insurance producers can market insurance policies by attracting customers and allowing them to familiarise themselves with the products sold by a licensed insurer, on behalf of such insurer. All producers must be registered with the CBUAE and insurers are not permitted to deal with unlicensed producers.
Outsourcing of Electronic Insurance Operations: Article 13 of the Insurance Authority Board Resolution No. 18 of 2020 Concerning the Electronic Insurance Regulations deals with the Outsourcing of Electronic Insurance Operations (attached below). Outsourcing can be split into two forms: (1) The outsourcing of the development, management, maintenance or other operations relating to the Website to a third party; and (2) The outsourcing of the sale of insurance products through a website owned by a third party. With regards to (1), there is no requirement for the third party to be licensed. Instead, the parties must simply include a special provision in the outsourcing contract confirming that the third party will apply the provisions of the Regulations. With regards to (2), there is a requirement for the third party to be licensed which suggests that only licensed entities (such as insurance brokers or agents) may sell insurance products electronically on insurers’ behalf. Insurers should also be aware of the apparent prohibition on dealing with price comparison websites unless they are licensed insurance brokers.
The service providers named above are subject to the CBUAE Code of Conduct and are required to abide by its ethical rules just as the insurers which employ them.
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Are there restrictions on the types of assets which insurers or reinsurers can invest in or capital requirements which may influence the type of investments held?
The Insurance Authority Board Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies imposes restrictions in relation to the domicile of investments. Insurers operating in the UAE are permitted to hold assets for UAE liabilities in a foreign jurisdiction with a sovereign rating which is better or at least equivalent to the sovereign rating of the UAE. Total invested assets held outside the UAE must not exceed 50% of the total invested assets or 100% of the total technical provisions for policies outside the UAE only (excluding unit-linked funds), whichever is greater (Article 6).
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Are there requirements or regulatory expectations regarding the management of an insurer's reinsurance risk, including any restrictions on the level / type of reinsurance utilised?
The board of directors of an insurance company shall elect a risk management committee which is , inter alia, responsible for proposing a reinsurance strategy for the company and ensuring appropriate oversight and consistent implementation of reinsurance programmes. In doing so, the committee must consider the company’s business objectives, levels of capital and business lines, with particular reference to (a) risk appetite, (b) large exposures and frequency of perils, (c) level of diversification, and (d) the ability of reinsurers to fulfil their obligations (paragraph 5.20(b)(3) of the Corporate Governance Standards). Such reinsurance strategy must be submitted to the CBUAE when an insurer is applying to renew its registration.
In addition, the board of directors of an insurer is required to prepare (and review annually) a three-year plan concerning the retention and reinsurance for each type and class of insurance that it carries out, pursuant to Article 27 of the IA Board of Directors’ Decision No. 23/2019 Concerning Instructions Organising Reinsurance Operations (the Reinsurance Regulations). The plan is required to contain information including treaty limits, relevant leading and following reinsurers, the reasons for the selection of any reinsurance brokers and the plans to protect the insurer’s retention in cases of accumulation or catastrophe.
If an insurer’s liability is unlimited in respect of a particular class of direct insurance, any reinsurance treaty in relation to such liability should also be unlimited, as per Article 29 of the Reinsurance Regulations.
There are no restrictions on the level or type of insurance that can be utilised in the UAE.
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How are sales of insurance supervised or controlled?
Insurance products can only be sold in the UAE by insurers and insurance brokers and agents licensed by the CBUAE (the Insurance Law). In addition, the sale of bancassurance is permitted in the UAE under the IA Board of Directors’ Decision No. 13 of 2018 whereby there are bancassurance arrangements between a locally licensed insurer and a UAE-based bank.
In relation to policy pricing, Article 5 of the Code of Conduct states that insurers must not add any excessive surcharges to the net premium or offer prices lower than the technical level, which may (i) put the insurer’s financial position at risk; (ii) expose the insured interest to loss; and (iii) constitute uncontrolled competition in the insurance market.
Electronic marketing
In April 2020, the CBUAE issued Decision No. 18/2020 Concerning the Electronic Insurance Regulations (the Regulations) relating to electronic insurance and these showed the CBUAE’s clear intent to take on an active role in the regulation of online insurance. The scope of the Regulations is wide and the definition of ‘Electronic Insurance Operations’ specifically includes not only the sale of insurance policies, the collection of premium and the handling of claims, but also the marketing of insurance policies. The Regulations impose a requirement to obtain pre-approval from the CBUAE to practice insurance online and the CBUAE must pre-approve the classes of insurance products intended to be sold online. There is also a requirement to establish an IT department and appoint a Communications Officer to manage online activity.
The Regulations expressly authorises brokers to deal with price comparison websites provided: a) the website is registered with the CBUAE and, b) a copy of the agreement between the broker and the website has been provided to the CBUAE. The Regulations also place certain restrictions on price comparison websites. For instance, they are prohibited from communicating with the customer; such communications must only come from the broker.
The Regulations also provide clarity on the lines of insurance business that can be sold online and imposes disclosure obligations on insurers selling insurance products online. In particular, the insurance company is now obliged to show the effects of cancelling the contract, and the manner in which the premium is to be refunded in the event of a cancellation. It is also notable that the Regulations reference the future introduction of regulations relating to digital licensing.
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To what extent is it possible to actively market the sale of insurance into your jurisdiction on a cross border basis and are there specific or additional rules pertaining to distance selling or online sales of insurance?
Insurance products can only be marketed in the UAE by one of the following ways pursuant to Insurance Law:
- Insurers licensed by the CBUAE (that is, direct sales).
- Insurance brokers, agents or agents licensed by the CBUAE.
In addition, banks licensed in the UAE may market insurance products via bancassurance arrangements between a locally licensed insurer and the bank if approval is obtained from the CBUAE. (IA Board of Directors’ Decision No. 13 of 2018 on Instructions Concerning Marketing Insurance Policies through Banks). Similarly, an insurance producer may market the products of a licensed insurer in the UAE pursuant to the Producer Regulations.
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Are insurers in your jurisdiction subject to additional requirements or duties in respect of consumers? Are consumer policies subject to restrictions, including any pricing restrictions? If so briefly describe the range of protections offered to consumer policyholders
The CBUAE grants further protection to any policyholder (including consumers), whereby any arbitrary terms, breach of which would have had no effect on the cause of the incident insured against, are void.
In relation to the incorporation of terms within an insurance policy, an insurance policy must contain all of the terms and conditions that pertain to it (Article 7 of the Code of Conduct). In addition, Article 28 of the Insurance Law stipulates that clauses contained within the policy that exempt the insurer from liability must be written in bold characters, in a different print colour and be initialled by the insured. Failure to comply with this requirement can lead to a fine of 50,000 UAE Dirhams (Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority).
The CBUAE provides policyholders also with further rights of recourse, should the insurance claim be rejected. Should a policyholder have any complaints in relation to a claim, the insurer is required to investigate each complaint within 15 days of the date of its submission. Each complainant (whether it is the insured or the beneficiary), may appeal the insurer’s decision to the CBUAE. An insurer may be fined 50,000 UAE Dirhams if it is found to have delayed or failed to provide clarifications on the complaints.
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Is there a legal or regulatory resolution regime applicable to insurers in your jurisdiction?
On 15 July 2019 the IA (now the CBUAE) issued Board Resolution No. (33) of 2019 Concerning the Regulation of the Committees Responsible for the Settlement and Resolution of Insurance Disputes (the IDC Resolution), which entered into force in October 2019.
The IDC Resolution established an Insurance Disputes Resolution Committee (IDC) which has the mandate to hear certain insurance disputes. This is mandatory before these specific insurance disputes can progress to the onshore UAE Courts.
The CBUAE has granted extensive powers to the IDC including the power to compel the production of documentation where necessary, to seek the assistance of experts and witnesses and to adopt any alternative measures required for the settlement of disputes.
The IDCs are made up of at least three persons (one chairperson and two or more members of the CBUAE). These will all be specialised in and will have jurisdiction to hear insurance disputes of all classes and types arising from complaints made by an insured, beneficiary or an affected person who has a right to bring a dispute against an insurance company incorporated in the UAE and any foreign insurance company licensed to carry out insurance activities in the UAE through a branch or through an insurance agent. This means that any claim by an insurance company against the insured would fall outside the jurisdiction of the DRC(s).
The DRC’s are not empowered to deal with the following:
- Urgent applications and provisional attachment orders;
- Disputes filed with the courts before the Regulations came into effect; and
- Disputes subject to an arbitration clause.
The IA (now the CBUAE) issued Board Resolution No. (9) of 2020 on the Amendment of some provisions of the DRC Resolution dated on 12 March 2020 added to the above exceptions falling outside the jurisdiction of the DRC:
- The exercise of subrogation rights, by insurers.
- Claims between insurers and the adjustment of balances.
- Claims between insurance-related professionals and insurers.
The UAE law provides that an insured must first file a complaint before an IDC before it can bring a claim before the UAE Courts. A party to a dispute heard by the IDC may only appeal to the applicable Court once a decision has been rendered by the committee.
The IDC Regulation only provides for such a claim to be brought by an insured and does not contemplate any dispute raised by an insurer (for instance, in respect of premium).
The DIFC Court has recently held that it may be a competent court for the purposes of hearing an appeal of a decision of the IDC. In addition, the DIFC Court has suggested that the parties can agree to by-pass the IDC stage and bring a claim in the DIFC Court. It has also held that an insurer can bring a claim against an insured in the appropriate Court.
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Are the courts adept at handling complex commercial claims?
There are three stages of litigation in the onshore UAE:
- First, the Court of First Instance
- Second, the Court of Appeal
- Third, the Supreme Court
UAE federal law applies in each emirate of the UAE, and will have primacy in the case of conflict with any local laws enacted by an emirate. The courts of the UAE are well accustomed to dealing with complex commercial cases. In onshore proceedings, either party has an automatic right to appeal judgments of the Court of First Instance to the Court of Appeal. Appeals to the Supreme Court from the Court of Appeal can only be made on points of law (in accordance with the specific grounds set out in the Civil Procedure Code).
However, it may be difficult to interpret UAE law with a high degree of certainty given that it does not have a system of binding judicial precedent. Furthermore, it is of note that the UAE Courts are heavily reliant upon court appointed experts.
In addition to the onshore courts of the UAE and each emirate, the free zones of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) form separate “offshore” jurisdictions with their own laws and court systems. The DIFC and ADGM both have common law judicial systems, and their judiciaries are comprised of Emirati judges as well as judges from various other countries, including the United Kingdom. In contrast to the onshore courts, the DIFC and ADGM Courts have a binding system of precedent and also treat English and other Commonwealth judgments as highly persuasive.
Although the UAE legal system has the benefit of a dual system (onshore and offshore), the interplay between the two systems can cause confusion and potentially parallel proceedings. Where such proceedings give rise to conflicting judgments, the Union Supreme Court will determine which judgment is upheld.
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Is alternative dispute resolution well established in your jurisdictions?
Methods of alternative dispute resolution have been well established and utilised in the UAE for many years. In April 2021 the UAE Government passed Federal Law No. 6 of 2021 On Mediation for the Settlement of Civil and Commercial Disputes. The new law brings into force a robust framework in which mediation can occur in the UAE and sets out the obligations of mediators. The new law sets out two mediation regimes, ‘judicial’ and ‘non-judicial’, and the obligations for drafting a mediation agreement. The new laws provide parties with a robust framework in which to come to agreement. Importantly, any discussions in the context of mediation is confidential (i.e. privileged).
Arbitration is an increasingly popular form of dispute resolution in the UAE, particularly in the advent of the Federal Law No. (6) of 2018 on Arbitration (the Arbitration Law), which is based on the UNCITRAL Model Law on International Commercial Arbitration. Arbitration clauses are commonly found in insurance policies, however, they are required to be in a separate document to the policy (Article 28(d) of the Civil Code) as well as meet the other formal requirements of the Arbitration Law.
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Is there a statutory transfer mechanism available for sales or transfers of books of (re)insurance? If so briefly describe the process
Articles 71 and 72 of the Insurance Law allow for the transfer of insurance policies/portfolios. Only companies that carry out the same type of activities are allowed to transfer their portfolio including all rights and obligations attached to the policies. An application of the transfer must be submitted to the Director General of the who will then publish it in the Official Gazette and two Arabic and one English-language daily papers. If no objections are received within the deadline provided the transfer takes place.
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What are the primary challenges to new market entrants? Are regulators supportive (or not) of new market entrants?
The UAE market has developed in a considerably short period of time and the classes of business and products which are written reflect business in any sophisticated market. That being said the market suffers from the cyclical nature of the insurance market; for example softening of rates caused by competition, liquidity flows in terms of remittance of insurance premiums. In addition, whilst new products are being developed in connection with “electronic/connectivity” risks globally, the penetration in the UAE market is less marked, despite there being significant and quantifiable losses.
The regulatory environment of the insurance industry is strengthening, and when coupled with increasing operating costs it is becoming difficult for smaller entrants to retain a steady level of growth and profitability. Indeed, there seems likely to be an increasing emphasis of consolidation over the next few years.
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To what extent is the market being challenged by digital innovation?
Digital innovation will impact the insurance market in many ways from policy wording to the electronic sale of policies. However, the main effects of digital innovation on the UAE insurance market are twofold.
Firstly, it will heavily influence the types of insurance products that are sold. Developments in FinTech, digital innovation and cybercrime may cause the insurance market to experience an increase in the need for cyber insurance policies in order to meet these risks. Digital innovation is therefore key to winning new business streams.
Secondly, not only will digital innovation influence the types of insurance products that are sold, but also the way in which policies are sold. As digital innovation increases, it is expected that contracts between parties can be executed electronically; for example, contracting by ‘click-to-accept’ (where an insurer indicates their consent to the insurance contract by ticking a box online), will overtake the sale of policies by physical channels. There has been a significant increase in the use of machine learning and artificial intelligence in the UAE, with the technologies being used in product design, pricing and claims handling. This growth is expected to continue as companies in the insurance market seek both to economise and to provide services that are more focused on customer experience.
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How is the digitization of insurance sales and/or claims handling treated in your jurisdiction, for example is the regulator in support (are there concessions to rules being made) or are there additional requirements that need to be met?
The scope of the IA Board Resolution No. 18 of 2020 is wide and the definition of ‘Electronic Insurance Operations’ specifically includes not only the online sale of insurance policies, the collection of premium and the handling of claims, but also the marketing of insurance policies. The regulations impose a requirement to obtain pre-approval from the CBUAE to practice insurance online and the CBUAE must pre-approve the classes of insurance products intended to be sold online. There is also a requirement to establish an IT department and appoint a Communications Officer to manage online activity.
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To what extent is insurers' use of customer data subject to rules or regulation?
Those who collect and process personal data must comply with the new Federal Decree-Law No. 45 of 2021 (which was announced in November 2021 and came into force from 2 January 2022) (the Data Protection Law). The new law is designed to protect “personal data”, which is defined as “any data related to a specific natural person or related to a natural person that can be identified directly or indirectly by linking the data”. Thus, insurers who use customer data are subject to the new law. Data Protection Law implements regulations surrounding (i) data processing controls; (ii) consent requirements and data subject rights; (iii) data transfers; and (iv) penalties. Insurers will have to bear in mind that the processing of personal data must be limited to a specific and clear purpose. They must have technical and organisational measures in place to correct or remove incorrect personal data and the data must be protected from any data breaches or unauthorised access. Personal data should not be retained after the purpose of processing has been fulfilled. It should be noted that additional regulations are expected in order to clarify certain aspects of the law, including the scope.
The new data protection laws are to work alongside the Data Protection Law Dubai International Financial Centre Law No.5 of 2020 and Abu Dhabi Global Market’s Data Protection Regulations 2021 (which is based on European GDP data protection regulations). They also do not apply to government entities or government data.
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To what extent are there additional restrictions or requirements on sharing customer data overseas/on a cross-border basis?
Under the new Data Protection Law, personal data can be transferred outside the UAE subject to the approval of the UAE Data Office, a new national data privacy regulator. The Data Office will look at the protection given to the personal data and the rights of the data in the jurisdiction where the personal data is to be transferred. Data can be transferred to jurisdictions which do not have data protection laws if the parties within the UAE and the parties within those jurisdictions have an agreement in place which requires the parties in the foreign jurisdiction to apply the UAE’s Data Protection Law. This includes imposing measures on the processor and controller via a competent authority in that jurisdiction.
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To what extent are insurers subject to ESG regulation or oversight? Are there regulations/requirements, including in connection with managing climate change and climate change related financial risks specific to insurers? If so, briefly describe the range of measures imposed.
In 2020, the Securities and Commodities Authority (SCA) issued Decision No. 3/2000 Concerning Adaptation of the Governance Code (the Governance Code). Under Article 76 of the Governance Code, public joint stock companies listed on the Dubai Financial Markets (DFM) and the Abu Dhabi Securities Exchange (ADX) must publish a sustainability report. A clarification of Article 76 of the Governance Code was published in 2021 and provides more detail as to what is to be included in the report and confirmed that the report must be published on an annual basis. Both DFM and ADX have published guidance to assist companies in their sustainability reporting. For example, reports must include commentary on the company’s environmental, society and governance practices and must set out the company’s long-term strategy in these three areas.
Currently, there are no regulations/requirements aimed specifically at insurers.
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Is there a legal or regulatory framework in respect of diversity and inclusion to which (re)insurers in your jurisdiction are subject?
There are various anti-discrimination laws in the UAE and, in particular, all employers in the UAE must comply with Federal Decree-Law No.33/2021 on Regulation of Labour Relations (the Labour Law). Article 4 of the Labour Law prohibits discrimination on the basis of race, colour, sex, religion, national origin, social origin, or because of disability, which would impair equal opportunities or prejudice equality in obtaining or continuing employment. In addition, female worker must also be granted a wage equal to that as a male is earning if she were performing the same work (Article 4(4) of the Labour Law).
In the context of insurance, the board of directors must be “sufficiently diverse in its composition” pursuant to Article 5(1) of the Corporate Governance Regulation. The Corporate Governance Standards expand upon this requirement to state that one of the factors that the board should take into account in terms of its collective suitability is “whether members of the Board have a range of knowledge and experience in relevant areas and various backgrounds to promote diversity of views” (paragraph 5.1(a)). However, the Chairman and the majority of the members of the board must be UAE nationals pursuant to Article 5(3) of the Corporate Governance Regulation.
In addition, Article 5(8) of the Corporate Governance Regulation specifies that at least 20% of candidates for consideration for the membership of the board of an insurance company must be female.
Furthermore Pursuant to Article 3 of the Code of Conduct, an insurer is prohibited from rejecting an insurance proposition, abstaining from renewing a policy or otherwise discriminating between policyholders with regard to insurance rates and the terms and benefits of insurance cover unless such discrimination is based on technical or actuarial reason, or due to the insurer’s experience and expertise with the relevant client.
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Over the next five years what type of business do you see taking a market lead?
As businesses recover from the rapid global spread of the COVID-19 pandemic, the outlook within the insurance market continues to change, there has been escalation, resulting in insurance implications across multiple lines: business interruption, health, life, workers compensation, travel and trade credit to name but a few. The slight marginal growth in premium in the UAE insurance market in 2020 was mainly due to higher volume of the new business written in the first half year 1. Over the next five years, as the remaining Emirates, including Ajman and Sharjah, follow suit and implement the requirements for mandatory health insurance we may witness exponential growth across the UAE for health insurance and life insurance.
We expect to see an increase in the placement of cyber risks reflective of the growing digitisation of business in the UAE. In addition, we predict that the number and nature of political risks placed in the UAE will continue to increase as a result of the war in Ukraine and other geopolitical tensions.
United Arab Emirates: Insurance & Reinsurance
This country-specific Q&A provides an overview of Insurance & Reinsurance laws and regulations applicable in United Arab Emirates.
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How is the writing of insurance contracts regulated in your jurisdiction?
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Are types of insurers regulated differently (i.e. life companies, reinsurers?)
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Are insurance brokers and other types of market intermediary subject to regulation?
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Is authorisation or a licence required and if so how long does it take on average to obtain such permission? What are the key criteria for authorisation?
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Are there restrictions or controls over who owns or controls insurers (including restrictions on foreign ownership)?
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Is it possible to insure or reinsure risks in your jurisdiction without a licence or authorisation? (i.e. on a non-admitted basis)?
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Is a branch of an overseas insurer, insurance broker and/or other types of market intermediary in your jurisdiction subject to a similar regulatory framework as a locally incorporated entity?
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Are there any restrictions/substance limitations on branches established by overseas insurers?
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What penalty is available for those who operate in your jurisdiction without appropriate permission?
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How rigorous is the supervisory and enforcement environment? What are the key areas of its focus?
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How is the solvency of insurers (and reinsurers where relevant) supervised?
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What are the minimum capital requirements?
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Is there a policyholder protection scheme in your jurisdiction?
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How are groups supervised if at all?
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Do senior managers have to meet fit and proper requirements and/or be approved?
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To what extent might senior managers be held personally liable for regulatory breaches in your jurisdiction?
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Are there minimum presence requirements in order to undertake insurance activities in your jurisdiction (and obtain and maintain relevant licenses and authorisations)?
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Are there restrictions on outsourcing services, third party risk management and/or operational resilience requirements relating to the business?
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Are there restrictions on the types of assets which insurers or reinsurers can invest in or capital requirements which may influence the type of investments held?
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Are there requirements or regulatory expectations regarding the management of an insurer's reinsurance risk, including any restrictions on the level / type of reinsurance utilised?
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How are sales of insurance supervised or controlled?
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To what extent is it possible to actively market the sale of insurance into your jurisdiction on a cross border basis and are there specific or additional rules pertaining to distance selling or online sales of insurance?
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Are insurers in your jurisdiction subject to additional requirements or duties in respect of consumers? Are consumer policies subject to restrictions, including any pricing restrictions? If so briefly describe the range of protections offered to consumer policyholders
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Is there a legal or regulatory resolution regime applicable to insurers in your jurisdiction?
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Are the courts adept at handling complex commercial claims?
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Is alternative dispute resolution well established in your jurisdictions?
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Is there a statutory transfer mechanism available for sales or transfers of books of (re)insurance? If so briefly describe the process
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What are the primary challenges to new market entrants? Are regulators supportive (or not) of new market entrants?
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To what extent is the market being challenged by digital innovation?
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How is the digitization of insurance sales and/or claims handling treated in your jurisdiction, for example is the regulator in support (are there concessions to rules being made) or are there additional requirements that need to be met?
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To what extent is insurers' use of customer data subject to rules or regulation?
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To what extent are there additional restrictions or requirements on sharing customer data overseas/on a cross-border basis?
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To what extent are insurers subject to ESG regulation or oversight? Are there regulations/requirements, including in connection with managing climate change and climate change related financial risks specific to insurers? If so, briefly describe the range of measures imposed.
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Is there a legal or regulatory framework in respect of diversity and inclusion to which (re)insurers in your jurisdiction are subject?
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Over the next five years what type of business do you see taking a market lead?