Year in Review: UAE INSURANCE REGULATORY ROUND-UP 2017
The insurance industry in the United Arab Emirates (UAE) witnessed further increases in premiums and profitability in 2017. With the UAE insurance market projected to grow to USD18.1 billion by 2021, underpinning such growth will be the continued development of a robust and responsive regulatory framework across general and specialised lines of insurance and reinsurance.
There were a number of regulatory developments in 2017, which should serve to enhance the prudential oversight, competitiveness and quality of the UAE insurance sector in the coming years. These included:
- Tightening the control on motor insurance premium pricing;
- Licensing of actuaries;
- Issuing of draft regulations on life insurance, which is a potential game changer in the life insurance sector;
- Continued expansion of compulsory health insurance;
- Reduction in the minimum shareholding by UAE nationals in local insurers from 75% to 51%;
- Issuing of draft regulations on reinsurance which may facilitate greater retention by local reinsurers; and
- Imposition of a commission cap on medical insurance provided by participating insurers.
In this article, Kennedys' Corporate Insurance Team provide an overview of the key regulatory developments arising in 2017, issued by the onshore regulators.
UAE Insurance Authority
February 2017 – "Circular No (5) of 2017 concerning the compliance to the limits of the basic and ancillary Deductible on Motor Vehicle insurance policies against loss and damage" sanctions insurance companies from charging additional amounts to motor vehicle policyholders in addition to those specified under "Ministerial Resolution No (54) of 1987 regarding the Unification of Motor Vehicle Insurance Policies".
March 2017 – "Circular No (6) of 2017 concerning handling the claims and complaints on insurance companies received through the E-services of the Insurance Authority" requires insurance companies to maintain online complaints handling systems relating to insurance policies and claims, including strict complaint response times.
March 2017 – "Circular No (7) Regarding Enforcement of Solvency Requirements for Foreign Branches in Section (2) of the Financial Regulation" provides clarity on the solvency and capital requirements for insurers established in the UAE as foreign branches.
March 2017 – "Insurance Authority Board of Directors Decision No (9) of 2017, concerning the Regulations on Licensing and Registration of Actuaries and Regulation of their Operations" provides a regulatory framework for the profession of actuaries including establishing the licensing, role, obligations and other functions of actuaries within the insurance sector.
April 2017 – "Circular No (12) of 2017 draft regarding Life Insurance and Family Takaful Business in the UAE" is the second draft of the Life Insurance and Family Takaful Regulations, issued by the UAE Insurance Authority (IA) which proposes to (i) cap the commission structure; (ii) set a mandatory free-look period; (iii) provide clarity on indemnity commission; (iv) create disclosure requirements; and (v) other much needed changes for the life insurance sector. The final regulations have not been issued yet and are envisaged to be finalised in 2018.
May 2017 – "Cabinet resolution No (16) of 2017 on the amendment of some provisions of the Cabinet Resolution No 42 of 2009 Concerning Insurance Company Minimum Capital Regulations" reduces from 75% to 51% the mandatory ownership by local shareholders in UAE insurance companies. This move is a significant step towards broader liberalisation in the UAE insurance sector and possible consolidation.
July 2017 - "The Board of Directors' Decision No (22) of 2017 concerning the Application of the Investment Limits Stipulated in the Financial Regulations for Insurance Companies and the Financial Regulations for Takaful Insurance Companies" stipulates procedures for asset distribution and allocation limits in accordance with both "Board of Directors' Decision No (25) of 2014 Pertinent to Financial Regulations for Insurance Companies" and "Board of Directors' Decision No (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies".
September 2017 – "Board of Directors Decision No (32) of 2017 concerning Common Standards Reporting Regulation" reinforces the UAE's commitment to sharing financial data in accordance with the OECD's "Common Reporting Standard" and provides the framework for the reporting, maintaining and verification by the IA of financial data held and disclosed by companies and individuals supervised by the IA. The Regulations also impose Penalties for breach of the duties and/or obligations set out therein.
September 2017 – "Circular No (19) of 2017 concerning the reimbursement of the ambulance and medical transportation service for the injured and deceased as a result of insured incidents" provides clarification on "Board of Directors' Decision No. 25 of 2016 to issue the Regulation of the Unified Motor Vehicle Insurance Policies" vis-à-vis the obligations of an insurance company to pay AED 6,770 to the provider of ambulance services and medical transportation, subject to certain conditions being met, without awaiting a Court judgment.
October 2017 – "The Board's Decision No (37) of (2017) concerning the instructions for the licensing and registration of the points of sale affiliated to insurance companies and the organization of their operations" provides the conditions and procedures to operate a "Point of Sale" by an insurer or broker (at for example, travel agencies, motor vehicle showrooms, shopping centres) from which they can issue motor, health or travel insurance policies, identifying vehicle damage and receiving documents.
November 2017 – "Draft Regulations Concerning the Organisation of Reinsurance Operations" proposes the establishment of regulations for carrying out reinsurance in the UAE. Whilst the draft lacks clarity on some important aspects, it appears that there will be a push towards more local retention in reinsured risk.
Dubai Health Authority (DHA)
January 2017 – "Executive Council Resolution No (6) of 2017 on approval of the Stages of Application of Health Insurance in the Emirate of Dubai" stipulates implementation dates for the various stages for compulsory health insurance. For example, compulsory health cover is required for all visitors to the UAE from 31 December 2017. This Resolution also stipulates that the fines set out in "Executive Resolution 7 of 2016" shall apply to the employer/sponsor if they fail to provide the required minimum health insurance cover.
February 2017 – "Administrative Resolution No (14) of 2017, approving the Regulations of Referral of Patients for Treatment Abroad" sets the provisions applicable to patients referred abroad for medical treatment.
February 2017 – "Administrative Resolution No (30) of 2017, approving the Regulations of Telehealth Care Services" sets out the terms and conditions for registering and operating telemedicine services within the Emirate of Dubai.
April 2017 – The DHA imposed fines on 25 facilities for violation of the Dubai Mandatory Health Insurance Law, including charges of fraudulent activities on 6 clinics pursuant to the Executive Resolution 7 of 2016. The fines were in the range of AED 10,000 to AED 80,000.
September 2017 – Local media reported that the DHA proposes to include treatment of cancer within the Essential Benefits Plan (EBP) for private health cover by 2018.
October 2017 – "Standards Notice Number 1 of 2017 (SN 01/2017)" provided that the maximum commission that can be paid to an intermediary on all health insurance policies that are being issued to Low Salary Band employees (employees with salary below AED 4,000 per month), is to be capped at 5% of the annual premium. Subsequently, General Circular Number 4 of 2017 (GC 04/2017) was also issued warning Participating Insurers against violation of the commission cap set by the DHA.
October 2017 – "Policy Directive Number 2 of 2017 (PD 02/2017)" clarifies the position regarding "Emergency" cover vis-à-vis that it is "the emergency medical condition of the patient, not the diagnosis, which drives the necessity for immediate treatment."
November 2017 – "General Circular Number 5 of 2017 (GC 05/2017)" provided clarification on some of the important terminology being used in the regulations issued by the DHA, such as the approval requirement for General Practitioner visits, coverage of members post deletion and backdating of policies.
Health Authority of Abu Dhabi (now Department of Health, Abu Dhabi) (HAAD)
March 2017 – HAAD announced that effective from 1 April 2017, all hospitals accepting Daman's health insurance are required to accept an Emirates ID to provide health care services to Daman health insurance policyholders.
March 2017 – HAAD announced that it had successfully implemented the revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10 CM) for all healthcare facilities operating in the Emirate as of 1 January 2017.
April 2017 – His Highness Sheikh Mohamed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces announced that the 20% co-payment that was applicable to holders of Thiqa insurance cards (UAE nationals) when receiving treatment at private healthcare facilities would no longer be applicable.
August 2017 – HAAD announced that effective from 1 September 2017, patients seeking a second appointment of subsequent outpatient appointments for the same speciality within 21 days without a doctor's referral would only be covered if the patient obtains pre-approval.
2018 and beyond
As the UAE continues to diversify its economy, including in the aviation, health, education, logistics, tourism, construction and retail sectors, there will be complimentary growth in the underwriting of risks associated with these businesses. To facilitate this growth, in 2017 His Excellency Ibrahim Obaid Al Zaabi, the Director General of the IA, announced that 13 new regulations will be implemented over the next three years including, for example, the introduction of regulations on reinsurance.
For foreign insurers and investors looking to capitalise on the growing insurance market, it remains to be seen whether insurance will be one of the sectors identified in the much-anticipated UAE investment law, which will allow up to 100% foreign ownership of onshore UAE companies. The draft law is awaiting approval of the UAE Federal National Council, and, according to His Excellency Sultan bin Saeed Al Mansouri, UAE Minister of Economy, is expected to be issued in the first quarter of 2018.
Kennedys will continue to monitor the key regulatory developments affecting insurers and policyholders in the UAE and the liberalisation of the insurance sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.