Understanding UAE's New Insurance Regulations: A Comprehensive Guide
Check the comprehensive Federal Decree-Law No. 48/2023 on insurance in the UAE, which enhances governance, transparency, and compliance in the sector. Learn about the law’s scope, applicable entities, insurance types, and regulatory measures. Discover how corporate lawyers in Dubai can assist with navigating these new regulations and ensuring compliance. For more information, contact us 24/7 at +971 4 355 8000.
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00:00Understanding UAE's New Insurance Regulations, a Comprehensive Guide
00:06The new insurance law in the UAE, as outlined in Federal Decree Law No. 48-2023,
00:12brings comprehensive regulations to the insurance sector,
00:15covering a wide range of aspects, from the scope of implementation to licensing requirements.
00:20The law aims to ensure effective governance, transparency,
00:24and compliance among insurance companies operating in the country.
00:27Scope of the law
00:28The new insurance law grants the Board the authority to issue controls
00:31governing the operation of these companies within the insurance business.
00:35Notably, the provisions of the decree law do not extend to companies operating in financial free zones,
00:40except for what is explicitly provided for in the law.
00:43Applicable Entities and Criteria
00:45Article 2 describes the applicable entities, including companies and insurance-related professions,
00:51along with holding companies meeting specific criteria.
00:54Controlling or Acquiring
00:5615% of the insurance activity in the UAE,
00:59or having more than 50% of revenues from insurance activity and related services.
01:04The Board has the authority to issue controls governing the operation of these companies within the insurance business.
01:10The Notion of Insurance
01:12Article 3 defines insurance as a contractual arrangement
01:15where the insurer commits to providing financial compensation to the policyholder or beneficiary
01:21if a specified event occurs,
01:23depending on the payment of premiums by the policyholder to the insurer.
01:27Types of Insurance Business
01:28Article 4 classifies insurance business into two types,
01:32Individuals and Capitalization Insurance and Property and Liability Insurance.
01:37The Central Bank is authorized to define the specifics of each type
01:40and impose mandatory insurance against specific risks, establishing rules for such insurance.
01:46According to Articles 6 and 7, the Central Bank collects supervision and monitoring fees
01:51and allows the Central Bank to establish funds with independent juristic personality
01:55to protect policyholders, beneficiaries, and injured persons,
01:59with the Board determining their formation, objectives, financing, and dissolution procedures.
02:04Central Bank's Competencies
02:06Article 9 outlines the extensive competencies of the Board in regulating the insurance business,
02:11covering aspects such as solvency margin, technical reserves, reinsurance criteria,
02:16asset investment, accounting policies, licensing controls, minimum capital requirements,
02:22customer protection, and combating financial crimes.
02:26Additionally, the Board is tasked with regulating Takaful insurance,
02:30ensuring amortization targets in the sector,
02:33and controlling financial reporting and external audits.
02:36The Governor is entitled to implement these provisions,
02:39issuing necessary policies, regulations, and instructions,
02:44and allowing the assignment of competencies when required.
02:47Furthermore, the Governor is responsible for ensuring compliance with the decree law,
02:51Central Bank regulations, and Board decisions,
02:54with the authority to authorize responsibilities in writing for a specified duration.
02:59Entities permitted for insurance business
03:02Article 10 describes the entities permitted to engage in insurance business,
03:06including local insurance companies and branches of foreign insurance companies.
03:10The law emphasizes the separation of operations for companies involved in both individual and capitalization insurance,
03:17as well as property and liability insurance.
03:19Insurance arrangements with foreign companies
03:22Article 12 explains insurance arrangements with companies outside the state,
03:27specifying conditions for insurance brokerage, reinsurance, and exceptions.
03:31The law mandates the drafting of insurance policies in Arabic,
03:35with provisions for translations and electronic issuance.
03:38Effective governance standards
03:40Chapter 5 of the Federal Decree Law No. 48-2023
03:44establishes a robust governance framework for insurance companies in the UAE.
03:49It highlights the Central Bank's role in setting rules for board activities and member requirements,
03:54outlines conditions for appointing key personnel,
03:57addressing conflicts of interest and competitive activities.
04:00It mandates timely reporting of board vacancies,
04:03and meeting minutes to the Central Bank.
04:05The law grants the Central Bank authority to mediate for operational smoothness
04:09and outlines procedures for resignations or vacant positions.
04:13It regulates the publication of meeting invitations,
04:16specifies rules for retained reserves and earnings,
04:19mandates the appointment of a financial analyst,
04:22and permits collective risk-sharing arrangements, insurance pools, with Central Bank approval.
04:27Obligations for UAE insurance companies
04:30Chapter 6 outlines various obligations for UAE insurance companies,
04:34authorizing the prompt payment of compensation as specified in insurance policies,
04:39particularly in the case of accidents or insured risks.
04:43All vehicles in the UAE require insurance coverage,
04:46with rates decided by the board based on risk severity.
04:49Companies may provide required data to the Central Bank,
04:52undergo inspections and audits,
04:55and submit detailed annual reports and financial statements.
04:58The law emphasizes transparency in dealings with policyholders and beneficiaries.
05:03It also sets rules for appointing auditors,
05:06submitting insurance policy forms, and following disclosure principles.
05:10Regulations and Penalties
05:12Chapter 7 outlines measures, penalties, and grievance procedures for insurance companies in the UAE.
05:17The Central Bank may conduct inspections for financial stability and compliance,
05:22and noncompliance may result in warnings, corrective actions, or penalties,
05:27including appointing a temporary neutral committee to replace the board.
05:31Penalties may include fines capped at 100 million dirhams.
05:34Additionally, the Central Bank may suspend, revoke, restructure, or liquidate a company for severe violations.
05:41A grievance committee addresses issues with Central Bank decisions,
05:45and fines for violations are specified by the board.
05:48The Central Bank is authorized to inspect and investigate companies,
05:52with businesses required to cooperate.
05:54Any attempts to obstruct these investigations may lead to penalties,
05:59Funds and Financial Obligations
06:00Chapter 8 mandates that insurance companies deposit a specified cash amount in a local bank.
06:05As a guarantee to meet their obligations, the deposit amount may vary based on the type of insurance.
06:11The bank deposit can only be utilized to settle debts arising from the insurance business,
06:16with written permission from the Central Bank.
06:18Licensing Requirements
06:20Chapter 9 outlines licensing requirements for insurance companies.
06:24Article 41 states that no insurance company can be established
06:28or foreign branches opened without Central Bank approval.
06:31Licensing controls and requirements are set by the board,
06:35and the board may revoke a license based on incorrect information.
06:38Reinsurance controls, fiscal year specifications, and other regulations are detailed in subsequent articles.
06:45Article 44 explains the procedures for the suspension and revocation of licenses,
06:50including the regulations for foreign insurance companies and representation offices.
06:54Specific rules governing individuals and capitalization insurance companies are defined,
06:59including the Guidelines on Savings Bonds and the Estimation of Policy Values.
07:04Individuals and Capitalization Insurance Companies
07:07Chapter 12 focuses on individuals and capitalization insurance companies,
07:11emphasizing the importance of treating all policies equally, without discrimination,
07:17unless there are valid reasons, and the Central Bank can approve lower prices in specific situations.
07:22Articles 55 and 56 underline the periodic examination of financial positions through an actuary,
07:29with the requirement to submit necessary reports to the Central Bank within specific time limits,
07:34transfer of insurance policies, and suspension of operations.
07:38Under Chapter 13 of the Decree Law, Article 66 allows a company to transfer insurance policies,
07:44including all associated rights and obligations, to another company engaged in the same type of insurance.
07:50The process involves submitting a transfer application to the Central Bank,
07:54which includes announcing the transfer in local newspapers.
07:57If no objections are raised within the specified period, the Central Bank grants approval,
08:02and the decision is published in the official Gazette.
08:05In case of objections, the transfer is settled through an agreement or a final judgment
08:10with the approval of the Central Bank transfer under certain conditions.
08:14Article 68 specifies that the provisions of Articles 66 and 67
08:19apply to the suspension of insurance operations.
08:22A company may show proof of meeting obligations for all policies in the state affected by the suspension.
08:27Takaful Insurance Companies
08:29Chapter 14 introduces rules for Takaful Insurance Companies,
08:33ensuring they follow Islamic Sharia principles.
08:36Article 69 states that adherence to Sharia principles might be part of the company's Memorandum of Association.
08:42The Board sets specific conditions and rules for these companies
08:46and mandates the establishment of a Takaful Insurance Fund supervised by the Central Bank.
08:50Article 71 includes the higher Sharia authority in overseeing internal Sharia control committees,
08:56whose decisions are binding.
08:58It also establishes committees for Sharia compliance,
09:01with disputes referred to the higher Sharia authority.
09:04Moreover, it requires an annual report on Sharia compliance,
09:08subject to approval by the higher Sharia authority before submission to the General Assembly.
09:13Ownership and Mergers
09:14Articles 74-76 emphasize that any individual, either alone or with connected parties,
09:20can own or increase a controlling interest in an insurance company
09:24without acquiring approval from the Central Bank.
09:27Violations may result in various measures,
09:29including warnings, restricting profits, voting restrictions,
09:33and even suspension or revoking Board membership.
09:35The Board is responsible for defining connected parties and ownership ratios.
09:39Article 75 states that insurance companies, along with connected individuals,
09:44cannot own shares in another insurance company or convertible bonds
09:48without following controls and instructions set by the Board.
09:51Additionally, Article 76 establishes controls on mergers, acquisitions and the assignment of obligations,
09:58necessitating prior Central Bank approval.
10:01Additionally, the Board can create additional regulations and instructions.
10:05Financial Restructuring and Liquidation
10:08Chapter 16 of the Decree Law addresses the unstable financial position of companies
10:13and outlines the procedures for restructuring and liquidation.
10:16Article 77 empowers the Board to develop an agenda for restructuring,
10:21allowing the Central Bank to seize a financially distressed company's asset.
10:25A restructuring committee may be formed to manage negotiations with creditors
10:29and propose a restructuring plan.
10:31The process involves informing creditors,
10:33suspending legal actions and publishing reports.
10:36If restructuring fails, the Board may suspend procedures or initiate bankruptcy.
10:41Article 82 describes the appointment of a liquidator,
10:44detailing the effects of the liquidation decision,
10:47such as adding under liquidation to the company's name.
10:50The liquidator is responsible for debt settlement,
10:53and creditors are informed to submit claims.
10:56The liquidation process includes interim and final accounts,
10:59with notifications sent to relevant parties through various means.
11:03It also addresses canceling the mortgages
11:05and guarantees within specific timeframes and conditions.
11:08Emirates Insurance Federation
11:10The final Chapter 17 of the Decree Law introduces provisions
11:14regarding the Emirates Insurance Federation,
11:16granting it the legal capacity to undertake activities aligned with its objectives.
11:21It mandates all insurance-related companies and professionals
11:24to join this Federation.
11:26The Central Bank supervises the Federation's activities,
11:29approving its statute, tasks, responsibilities and relationships.
11:33It also replaces the Emirates Insurance Association,
11:36transferring its contracts, rights and obligations
11:39to the Emirates Insurance Federation.
11:41Conclusion
11:43The Federal Decree Law No. 48-2023 establishes a comprehensive framework
11:47for the insurance sector in the UAE,
11:49covering various aspects from licensing requirements
11:52to governance frameworks.
11:54The law aims to enhance transparency, compliance
11:56and effective governance in the industry.
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