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New Insurance Law Opens Up Opportunities

The new insurance law has made it easier for insurers to issue policies in a foreign language, thus expanding their business opportunities, but there are downsides when it comes to insurance disputes, says Francois Chemaly, Head of Corporate at BSA Abu Dhabi.

Insurance is an important sector that contributes to the stimulation of the United Arab Emirates’ economy. The Emirati Legislator continuously endeavors to develop the insurance framework and to enhance transparency, especially since insurance companies are publicly listed entities, and accordingly subject not only to the supervision of the Insurance Authority (IA) but also to another government agency, namely the Securities and Commodities Authority.

One of the latest developments in industry - the promulgation of Federal Law No. 3 of 2018, which was published in Official Gazette no. 629 amending certain provisions of Federal Law No. 6 of 2007 regulating the insurance sector has an impact on both insurers and insureds.

Federal Law No.3 of 2018 has made it easier for insurers to issue insurance policies since they no longer have to be paper-based and the language in which the are adopted is no longer necessarily Arabic. In accordance with this law, it is particularly possible from the date of its coming into effect, to issue insurance documents electronically in a foreign language (non-Arabic) based on a decision issued by the director general of the IA.

From a practical perspective, such an amendments would certainly facilitate the transactions between insurance companies and their 'non-Arab' customers and/or those residing in other countries, continents, without being restricted to dealing within a particular framework.

Under the new law, insurers are also given the possibility of expanding their businesses by allowing them to combine life insurance operations, fund formation, property insurance and liability under specific conditions - opportunities which were not previously possible.

The practical translation of this new legal development is that local restrictions are removed and a new commercial approach is established whereby an insurance company may issue insurance policies covering different types of risks, electronically, in a foreign language. However, this positive legislative step may not be fully carrying solutions, in particular with regards to insurance disputes: if a right holder would like to make an insurance claim, he may no longer resort, firstly and directly, to the courts for dispute resolution, as it was the case before; he must now submit a complaint to the insurance authority and wait for clarifications from the other party; then he can request to refer the dispute to the competent committee for settlement.

As such procedure has become mandatory under the new law, the courts of first instance are not recently considering a case brought directly before them, without verifying that it was first duly submitted to the IA or committees. That said, the formation of committees has not been finalized yet, and the IA is leaning to consider that only courts are currently competent for this purpose, which raises two questions: (a) theoretically a challenge as to what is the correct interpretation of the law, and (b) practically, by creating a problem to identify who the competent authority is, which in turn does not help fulfilling the purpose of the law.

A comprehensive set of insurance provisions addressing the existing problems resulting from the legal gaps should be in place in the near future.

Published in the Middle East Insurance Review.

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