The UAE Insurance Authority proposed multiple revisions to Insurance Broking regulations back in May 2012. These initial proposals were amended upon consultation and published in November 2013. Now these changes are to be implemented this November and are designed to provide regulation and licensing procedures to an industry that was previously lacking in both. The new laws also target insurance brokers and relates to the standard of financial advice offered to clients.
The regulations are aimed at consolidating the industry within the UAE and maintaining a level of professionalism. The repercussions for smaller brokerages are that they may well be forced out of the industry, or face serious consequences if they decide to flout the laws and take their chances. The new regulations are outlined below:
There is a requirement now for any brokerage to have in place increased paid up share capital and also professional liability insurance if they are to be a licensed brokerage, the amounts of capital and cover vary between local and foreign brokerages.
Local Brokerages
Any local companies must have:
- 3 million AED paid up share capital
- 3 million AED bank guarantee for head office
- 1 million AED bank guarantee for each branch
- 2 million AED of professional liability insurance
Foreign or Free-Zone Brokerages
- 10 million AED paid up share capital
- 5 million AED bank guarantee for head office
- 3 million AED bank guarantee for each branch
- 3 million AED of professional liability insurance
As well as these requirements, brokerages must also maintain separate bank accounts for premiums paid and accounts used for other purposes. There are also new auditing requirements with reports to be submitted on a quarterly and annual basis.
One of the biggest and perhaps most challenging changes for many of the brokerages within the UAE is that the following roles must be filled by individuals with the relevant and full qualifications:
- Managing Director or Chief Executive
- Operations Manager
- Internal Auditor
- Branch Manager
- Head of Operations for each line of business
Previously a single person would have been used to fill many of these roles, this is no longer allowed. Each employee must pass an Insurance Authority examination before being allowed to take on one of these specific roles.
Finally, terms of business must be in place with each insurer with which they deal, and they must be in Arabic.
There are expectations that instead of leaving, many companies unable to afford the massive capital requirements to do business in the region will find a way to continue to do so, but with imprisonment as the penalty it is not generally viewed as being a good idea.
With regulations now starting to be enforced and reviewed by the authorities, industry experts expect to see the UAE’s reputation restored as honest and credible brokers once again restore faith in an industry that has been sadly undermined by poor and unqualified advice.
