Abstract

New regulations are on the horizon for the UAE's fast-growing insurance market, which accounted for 40 billion AED in premiums and 73.7 billion AED in assets in 2016. BSA Ahmad Bin Hezeem and Associates LLP (BSA) hosted HE Ibrahim Obaid Al Zaabi, the Director General of the UAE Insurance Authority where he talked about his vision for the future and then answered questions at an event which was held on 24 May 2017 at the Capital Club DIFC.

Analysis

What was the most interesting point about this development?

There are 13 upcoming new development and regulations from the Insurance Authority over the next three years. With draft circular 12 on life insurance and Takaful, this is definitely one of the hot topics in the insurance market at the moment. However the issuing of Regulation 7 on the preparation and issuing of a legislative framework for the licensing of reinsurance companies is also important as once in  force it will impact on reinsurance companies particularly in terms of mergers and acquisitions. Smaller companies will end up leaving the market.

Regulation 1 on insurance through banks and Regulation 3 on administrative penalties are two other interesting regulations on the horizon which will have a radical effect on the way insurance companies exist and operate in the UAE.

How important is this development?

Regulation 7 is of high impact because it a new development and will potentially result in heavy fines, or the loss of accreditation/licensing if ignored. The industries which will be most affected are reinsurance companies. It could have a positive effect as it will open up possibilities for the local reinsurance market which could see local insurance companies grow.

Regulation 13 on the registration of insurance consultants regulating their work will also have a high impact as their firms will have to meet higher capital requirements in order to be licenced.

Regulation 3 is likely to have a medium impact. It will be compulsory for all insurance companies who will have to comply with it to avoid hefty fines. It is likely insurance companies will comply more with the Insurance Authority's regulations and standards to ensure they can continue to operate in the UAE.  The Insurance Authority has the power and aims to regulate the insurance market in the UAE.

How quickly will people have to act on it?

The Insurance Authority usually gives a grace period to comply with regulations. The grace period varies depending on the regulation itself. Before the regulation comes into effect, the draft and circular are open to the insurance industry to feedback and comment on.

Industry

This will mostly affect the insurance industry, especially those in reinsurance. In addition those selling life insurance products will be affected.

Jurisdictions

Companies based in the UAE, including international firms with offices in the UAE will be affected.

The impact of this development on inhouse lawyers?

Inhouse lawyers will need to be up to speed with the new regulations and laws.

What is your personal opinion of this change?

It is important to see inhouse lawyers as new regulations are coming in to force and an inhouse lawyer will help understand & interpret the new regulations to give the right advice to the company.

Inhouse lawyers should maintain relationships with the regulators to stay up to date and to be able to give the best advice.

Key take aways?

It depends if the Insurance Authority will give a grace period for the regulations, which it generally does.

Legal costs will increase because of registration and administrative costs. It will be manageable if the company has a dedicated team & allocates the time to implement the changes.

Originally published by Lexis Nexis Middle East.

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