Regulations

Regulations

Insurance Industry Background

  • Until the recent credit crunch, the countries of the Gulf Co-operation Council (GCC) experienced an economic boom fuelled by construction, real estate and tourism areas. A strong financial services industry is needed to support these core industries, encourage foreign investment and develop the regional economy. Insurance is definitely an important player during an economic boom, as it allows the transfer of risks from these sectors to the financial sector (insurance). This is probably why in the last few years important evolutions in the insurance regulation took place.
  • The GCC has historically presented an acceptable risk environment, which has enabled it to grow despite the lack of a full-fledged insurance regulation. Many under-capitalized local insurers were indeed operating in a cozy environment with no or low foreign competition, with limited risk retention and high level of fronting, meaning that local insurers were in fact trading risks to foreign reinsurers. This is why the need was felt by the authorities and business people alike, for change in the insurance sector to spur its growth as is normal in fast emerging countries, to meet the demands resulting from the ongoing economic growth.
  • The law governing the UAE’s ‘on shore’ industry which dates back to 1984 was replaced by a new insurance law which came into force in August 2007 establishing a new regulatory body (the Insurance Commission) in charge of the regulation of the industry. The Commission’s take over at a time when the 100% restriction on foreign ownership of local insurer has been relaxed to 75% and new foreign insurers are finally permitted to set up in the UAE.
  • In 2004, the Financial Free Zone based at the centre of the regional hub of Dubai, the Dubai International Financial Center (DIFC) came into existence, along the lines of a new Singapore or Hong Kong. De facto, the DIFC emerged as a bespoke regulatory, legislative and judicial framework, overseen by the Dubai Financial Service Authority (DFSA), which itself has drawn on both talented people and tried & tested systems from other established financial services regimes.
  • Recent regional implementation of compulsory health insurance requirements for expatriate workers is a direct acknowledgement of the importance of insurance to the region.
  • Self-regulation, industry codes of conduct, effective corporate governance codes and standards, etc will develop along with the regulation itself. Other evolutions are also expected in other areas, like the legal framework for dispute resolution, company laws, etc.

Legal Frame Organizing Insurance Industry:

  • The Insurance Sector in the United Arab Emirates is organized by the Federal Law No. (9) of 1984 concerning insurance companies and agents, which was enforced as of 1/7/1984 following the issue of the Ministerial Resolution No. (32) of 1984 and Executive Regulation thereof.
  • Ministerial Resolutions organizing insurance related professions were also issued in 1985 regarding survey and damage assessment experts, insurance consultants, insurance arithmetic experts and insurance brokers.
  • Ministerial Resolution No. (54) of 1987 regarding unification of motor insurance policies and resolutions amending thereto was issued and put in force on 1/1/1988 through the form of the third party liability insurance policy and another policy for loss, damage and third party liability.
  • Federal Law No. (6) of 2007 regarding the incorporation of the insurance Authority and work regulation was issued on 5/2/2007, effective since 28/8/2007.