Having been appointed by the UAE Insurance Authority to assist in redrafting the UAE insurance law, Irshied Tayeb, head of insurance, Rima Mrad, partner, and Michael Kortbawi, partner at BSA Ahmad Bin Hezeem & Associates LLP ( Former Bin Shabib & Associates) discuss the measures to enhance the regulatory framework.
Bringing the UAE insurance law in line with international standards, both from a prudential regulation and a corporate governance viewpoint, is a key function of the role played by Bin Shabib & Associates, according to its head of insurance, Irshied Tayeb.
Speaking to Mena Insurance Review, Tayeb says: “This specific regulatory exercise has been longwaited. It started when it was decided to create
an independent regulator in 2007. Following that, there have been a number of regulatory requirements put in place.”
He adds: “The UAE is a very unique economy and the insurance and reinsurance dynamic in the UAE is very unique. The dependency on reinsurance is extremely high and that increases the need for a regulatory framework that is both firm and fair and in line with international standards.”
Tayeb stresses there will be a less of a “price war” because the regulatory updates to be introduced will enhance the overall market condition in terms of competing on services, rather than just prices. When it was announced in October 2013 that Bin Shabib & Associates would assist the UAE Insurance Authority, the law firm said it would conduct several workshops with the UAE Insurance Authority in Dubai, Abu Dhabi and other Emirates to obtain market feedback before the legislation is enacted.
Since then, Tayeb says: “We hear a very positive response and feedback from the industry in regards to what the Insurance Authority is doing.”
The changes will not involve a new insurance law in the UAE, but instead amendments, which are expected to be made by mid-2014. The amendments will be implemented gradually depending on their nature.
Rima Mrad, says: “The expected changes aim at introducing additional regulations and amending existing provisions of the law and executive regulations to expand the scope and powers of the Insurance Authority and develop the prudential and
corporate governance standards and guidelines.
“The proposed amendments are expected to be issued within the course of next year.”
Given that the amendments will be implemented gradually depending on their nature, Mrad says regulations that have been subject to discussion and consultation will be issued with a moderate time frame for regulated entities to comply with, such as prudential (including solvency and technical reserves), and financial guidelines while the ones that are new will be circulated as drafts for consultation first before being issued.
Asked if the updates to the to the UAE’s insurance law will negatively impact insurance players, Mrad said any material change in the regulations
is expected to create confusion in the market in the initial phase of implementation and will require some time to be fully understood and complied
She says there are not expected to be any negative effects from the proposed changes as the Insurance Authority is maintaining a direct and
transparent relationship with all regulated entities and assisting them to put in place a solid compliance policy.
Broker law signed
Mrad adds that a new law dealing with insurance brokers was recently signed, but it has not been formally announced yet.
According to Mrad, the law puts in place additional requirements for insurance brokers to be licensed including the legal forms for insurance
brokerage firms, minimum capital and the required financial guarantee.
She notes: “The law further imposes additional penalties in case of breaches or non compliance with the terms of the law and the basis for the
cooperation arrangements between insurance companies and brokers.”
The comments from Mrad on the broker law come after Mena Insurance Review reported last month (MIR 58) that according to sources, the
Insurance Authority had been consulting with a panel of brokers, notably a selection of global and market-leading brokers from the region, on the appropriateness of a new set of broker licensing rules first proposed over a year ago.
Commenting on broker regulation, Michael Kortbawi, says: “We will develop a system where brokers are tested before they can exercise their duties.”
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|Publication:||Mena Insurance Review|
|Title:||A long-awaited initiative: Measures to enhance the regulatory framework in the UAE|
|Practice:||Insurance and Reinsurance|
|Authors:||Rima Mrad, Michael Kortbawi, Irshied Tayed|