, Partner and Maamoon Ashraf, Associate at BSA Ahmad Bin Hezeem & Associates LLP (former Bin Shabib & Associates LLP) discuss Qatar's new Central Bank Law and elaborate on some of the changes that have paved way for the Qatar Central Bank to act as as single financial regulator for Qatar's insurance sector.
A growing insurance marketplace:
The insurance sector in Qatar is a buoyant market and in recent years, has shown signs of positive growth witnessing an impressive annual growth rate of over 11 percent since 2006. The market is expected to grow by more than five percent this year, primarily as a result of government-led infrastructure work.
Given the remarkable growth shown by the insurance market, the Qatari government is keen to make changes in regulation and is stepping up the pace for implementing a robust regulatory framework for effective regulation of the insurance industry. This change of regulatory environment is expected to eventually result in boosting efficiency and standard throughout the insurance sector.
New Central Bank Law:
Early this year, the Government of Qatar introduced the new Central Bank Law, Law No.13 of 2012 (“Central Bank Law”), which has updated the outgoing legislation, Law No. 33 of 2006.
What does the Central Bank Law seek to do?
Under the new law, Qatar Central Bank’s supervisory reach has effectively been extended to cover the insurance sector and the Qatar financial sector. The Central Bank Law also addresses other commercial activities, which now fall within the QCB’s ambit such as Islamic banking, mergers and acquisitions of financial institutions, credit rating agencies, insurers and recovery of banks, which are on the verge of insolvency.
Qatar Central Bank (QCB):
The Qatar Central Bank (QCB) is the main regulator of financial institutions operating within Qatar. Under the Central Bank Law, the QCB is tasked with the regulation and supervision of financial services and businesses that take place within the Qatar Financial Centre (QFC) and the Qatar financial markets. Their respective regulators, which are the Qatar Financial Centre Regulatory Authority and the Qatar Financial Markets Authority, (which will remain independent regulators) will now come under the exclusive authority of the QCB.
Licensing of Insurance firms:
The Central Bank Law provides that the QCB will be responsible for licensing and having regulatory oversight over all insurance companies, reinsurance companies and insurance intermediaries that were previously licensed by The Ministry for Business and Trade.
Insuring risks outside Qatar:
The Central Bank Law prohibits funds and properties located in Qatar from being insured abroad. What this effectively means is that risks in Qatar must be insured by a local insurer or by a representative office of a foreign insurer.
Individual money collection insurance:
Under the Central Bank Law, insurers licensed to provide individual and money collection insurance are required to employ suitably qualified staff and accountant(s) for such operations. An annual special budget must also be prepared and published together with a balance sheet. Further, insurers cannot discriminate between insurance policies of a single type of insurance, whether in regard of insurance prices, cumulative monetary values achieved by the policy every year, the profits distributed among policyholders, or other conditions or requirements. There are certain exemptions, which apply.
Transfer of policies/suspension of operations:
The Central Bank law provides that insurers wishing to transfer their policies with respect to their operations within the State, to one or more companies, or deciding to suspend their operations, in total or in part, in one type of insurance or more, are required to obtain QCB's
Bankruptcy/liquidation of insurance and reinsurance firms:
There are provisions in the Central Bank Law, which provide for the priority of debts in the event of an insurer’s insolvency. The policyholders are to have ‘privilege’ over the company’s funds and assets. This privilege will rank second after public treasury debts, judicial fees and the amount of the final judgement. Rights of policyholders of life, personal accidents, death indemnity, physical damages and money collection insurance shall be given priority over the rights of other policyholders.
Technical expertise for estimating claims:
Under the Central Bank Law, insurers may not seek the assistance of experts not employed by them for inspection and damage estimation purposes, unless the experts are mentioned in a special register. This requirement may be waived in the event that suitably qualified experts are needed to assess a claim.
Approval for insurance policy forms:
Insurance and reinsurance companies must obtain QCB’s approval when publishing insurance policy forms and when making any changes to them. QCB will consider the contents of these policies and may reject any data that contradicts public interest.
Qatar’s insurance market is well positioned for positive growth and the market has witnessed an annual average growth rate of 11.3 percent. Strong economic progress, heavy investment in infrastructure development and an increasing population of the State have prompted this
In addition to bolstering Qatar’s insurance regulatory framework with the enactment of the Central Bank Law, the government of Qatar has taken positive steps to promote the development of the country’s insurance sector in a bid to secure Qatar's status as the ‘key hub’ in the region.
Such steps include the Qatar International Court and Dispute Resolution Centre embarking on a pioneering insurance dispute resolution project with a view to developing a specialist dispute resolution scheme for high-value insurance and reinsurance claims – the first of its kind in the Middle East. There is no doubt that Qatar’s insurance sector is experiencing a boom period, propelled by factors such as strong economic growth, a substantial focus on infrastructure development and compulsory insurance. Other potential growth drivers stemming from the energy, marine and construction sectors also provide the insurance sector with a significant opportunity to expand in the coming years.
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