As a market participant, it is crucial to effectively communicate with the regulator to avoid pitfalls that arise out of misunderstandings with regard to expectations and applicable standards, explains Barry Greenberg.
Anyone engaged in the UAE insurance market, whether on behalf of an insurer, claims administrator, broker, advisor, or other capacity, is aware that the various UAE based regulators with jurisdiction over the market have in the last several years, significantly increased both the number and scope of applicable regulations. Additionally, not only have the regulations themselves increased, but the enforcement thereof has also become much more rigorous.
Specifically, the regulatory schemes for brokers (Insurance Authority (IA) Board of Directors Resolution No. 15 of 2013), claims administrators (IA Resolution No. 7 of 2015), and insurers (IA Board of Directors Decisions No. 25 and 26 of 2014 – known as the Prudential Regulations) have each been recently altered, with the IA promulgating much more stringent requirements for the licensing, reporting obligations, and financial solvency, of the various market participants.
The result of this is a drastic increase in the interaction between the regulators and the industry participants, as well as a concomitant increase in the expectations and standards that the regulators require that market participants adhere to. As a market participant, it is therefore crucial that one effectively communicates with the regulator so that there are no misunderstandings with regard to the expectations and applicable standards, and that both regulator and participant understand each other’s perspective and position. This will smooth the interaction and will greatly aid the participant in most efficiently meeting the regulator’s expectations and standards, thus freeing the participant to expend its energy and efforts in the pursuit of its business objectives.
The How and Why
Proper understanding requires having adequate knowledge and ability to communicate as to three aspects of the regulations at issue. The rationale of the regulation itself comes first. Not simply what it says, but its purpose and rationale as well. Was the regulation enacted to address a particular market challenge, and if so, has it been adequate to deal with that challenge?
Or is the regulation more aspirational in nature, intended to set guidelines for overall market conduct? Knowledge of the purposes of the regulation and whether it is tightly targeted at particular conduct or perhaps more malleable in nature, will greatly assist the participant.
It is noted that the insurance industry is regulated by various regulators in addition to the IA, each of whom will have their own strategic imperatives and reasons for promulgation and enforcement of the applicable regulations. In health insurance related matters, much of the regulatory activity is handled on the individual Emirate level: in Abu Dhabi by the Health Authority of Abu Dhabi (HAAD), and in Dubai by the Dubai Health Authority (DHA). Likewise, the various Emirates’ departments of economic development (including DED and ADED) will exercise some regulatory authority over insurance operations by virtue of their role in granting commercial licenses, and it will be incumbent upon the participant to interact with their personnel appropriately as well.
By no means is this a finite list of UAE-based regulators that the insurance market participant will be interacting with. For example, the Emirates Securities and Commodities Authority (SCA) recently issued its Resolution No.9 of 2016 Concerning the Regulation of Mutual Funds, which imposes certain new obligations upon life insurers.
Likewise, those familiar with corporate PRO responsibilities note the constant interface with, among other Ministries, the Ministries of Labour, Ministries
of Higher Education, and Ministry of Foreign Affairs.
The Value of Precedent
Secondly, it is crucial to understand how the regulation has been applied in the past. Precedent is key: a regulator is likely to apply precedent should the circumstances warrant. The converse of this is also true; should the participant face a regulation averse to its current positon, it behoves them to have the understanding of how their particular situation may differ from prior instances where that regulation may have been applied. Such differentiation of circumstances is only possible where one is armed with knowledge of the prior precedent.
Obvious or Not?
Thirdly, and while it should go without saying, the participant also needs to speak the regulators’ preferred language.
Unfortunately, it is too often the case in the UAE that participants fail to acknowledge this seemingly obvious fact, and become bogged down in their regulatory
interactions because of a simple failure to speak in the manner that is expected and understood by the regulator.
This form of proper language can actually be divided into two differing but equally important and interrelated languages: firstly, the spoken language – that being Arabic – and secondly the proper technical phrasing in which the insurance professional transacts their business.
As to the former, it is commonly understood that the English language is considered the ”Lingua Franca” in the UAE. That is to say, business is conducted in the English language as a common tongue understood to many, if not most businesspersons in the UAE. This, however, ignores that the ofﬁcial language to be used in all ofﬁcial governmental communications is Arabic. While some governmental ministries and agencies present their outward facing portals as dual language accessible – particularly those relating to the general public, all ofﬁcial communications, particularly with respect to the IA, are to be drafted in Arabic. The same is true for all in-person contacts. While individual regulators may, as a courtesy, speak in English, the ofﬁcial language for such meetings remains Arabic.
Likewise, all technical terminology does not necessarily translate on an exact word-for-word basis. In fact, some English terms do not have precise correlating terms in Arabic. Since the controlling laws and regulations are issued in Arabic, such are best discussed in their original Arabic, as that remains the regulators’ decisional and controlling language. Should a regulatory determination be based upon technical terminology, such should therefore be predicated upon discussions of the impact of that terminology in the language as drafted, and not merely on translations.
There exists an ever increasing cornucopia of regulators that the insurance market participant will need to familiarise themselves with – and with whom they need to tailor their interactions accordingly to maintain the best possible outcomes in their dealings. Additionally, on-site inspections and oversight by the IA and HAAD have become much more prevalent in the last year or so, along with the imposition of ﬁnes and other sanctions for non-compliance with regulations. Clearly then, exercise of the proper regulatory understanding and linguistics, handled by persons ﬂuent with the appropriate technical expertise, is crucial to the venture’s success.