The UAE Insurance Authority ('IA') has now promulgated and issued the 'Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority' ('the Resolution'), which was issued by His Highness Mohammed Bin Rashid Al Makhtoum, the Prime Minister of UAE on 6 January 2019, followed by its publication on the IA's website earlier this month. 1
The Resolution applies to all licensed United Arab Emirates ('UAE') insurance companies and insurance related professionals such as TPAs and Loss Adjustors, defined in the Resolution as 'Company' and 'Insurance-Related Professionals' respectively. The Resolution provides an extensive list of violations and administrative fines for breach of the listed violations. The list of violations/fines are set out in the Schedule to the Resolution can be accessed here 2
The penalties are far reaching in that UAE insurance providers could be exposed to fines of up to AED two (2) million . 3 Any fine issued by the Board of the IA can be appealed within 15 days of the publication and the Board shall provide a decision on the appeal within 60 days of filing the appeal. 4
Historically, the fines and penalties under Federal Law No 6 of 2007 were mostly restricted to licensed entities and left scope for evasion of the penalties. The violations and fines listed in the Resolution are likely to be strictly enforced by the IA. By way of illustration, any entity carrying out re-insurance in UAE without the necessary license from the Authority can now be fined AED 250,000. 5 Similarly, Representative Offices of foreign insurance companies carrying out their business in UAE without prior approval from the Authority will attract a fine of AED 250,000. 6 In addition, insurance mediation with a non-licensed UAE insurance company is not permitted and attracts a fine of AED 100,000. 7 Reinsurance and insurance mediation violations within the Resolution provides an interesting interpretation in the context of current UAE reinsurance and insurance mediation operations in the UAE, which might expose insurance providers and their insurance counterparties inadvertently to penalties. 8
The Resolution comes into force from 6 April 2019 and is significant in terms of the 204 listed violations and the financial costs to the stakeholders of the UAE insurance industry should they not correct their regulatory position within 5-6 weeks.
Many UAE insurance providers will need to audit their regulatory position including meeting the UAE solvency obligations under the UAE Financial Regulations 9 as well as their operational and distribution requirements in order to avoid risk of violating the provisions of the Resolution. Insurance providers should carefully review the provisions of the Resolution and the attached Schedule to correct any violations or potential violations to avoid costly and unnecessary penalties. No upper limit has been prescribed for the fines, nor are there any provisions for compounding of the fine, perhaps suggesting that the fines will be multiplied by the number of times the violation occurred. For further information and guidance on the Resolution please contact our team of insurance experts at BSA Ahmad Bin Hezeem.
3 see Article 3(2) – Violations and Penalties of Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority
4 see Article 4 (1) & (2) Grievance – of Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority
5 see No. 13 of Schedule to the Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority
6 see No. 15 of Schedule to the Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority
7 see No. 17 of Schedule to the Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority
8 Current overseas reinsurance arrangements with cedent companies and fronting arrangements may need scrutinising in the context and construction of the violation wordings but more guidance should be sort from the regulator
9 Board of Directors' Decision Number (25) of 2014 Pertinent to Financial Regulations for Insurance Companies & Board of Directors' Decision Number (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies
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