Navigating the new UAE insurance landscape
The legislation took effect on 30 November 2023, and firms that were subject to the law had until 29 May 2024 to implement the necessary changes.
An important point to note is that Article 114 of the new law states that decisions and circulars based on the previous insurance law will remain in effect, providing they do not conflict with the new insurance law. They will remain valid until they are either contradicted by the new law or replaced by new decisions and circulars issued by the Central Bank of the UAE (‘CBUAE’). With a backdrop of the CBUAE revoking or restricting insurance firms’ licences; it is worth noting that as recently as July 2024, an insurance broker2 had its licence revoked due to a weak compliance framework and failure to comply with its regulatory obligations.
Key changes and enhanced regulatory oversight under Decree-Law
No. 48 of 2023
- Enhanced regulatory authority – the CBUAE now holds expanded supervisory and enforcement powers, this includes rigorous oversight to ensure financial stability and regulatory compliance, bolstering protections for policyholders.
- Streamlined dispute resolution – the law introduces a revised framework for resolving insurance-related disputes, aiming to reduce the time and complexity involved, providing a clearer and faster path to resolution for all parties involved.
- Updated regulatory framework:
- Scope of regulation – the CBUAE is now the central authority overseeing all insurance activities in the UAE, replacing the previous Insurance Authority. This centralisation aims to provide consistent and effective regulation.
- Licensing requirements – new detailed guidelines govern the licensing of domestic insurers, foreign insurer branches, and representative offices, setting clear operational and compliance standards.
- Corporate governance and conduct standards – insurers must adhere to higher management standards and conduct requirements to enhance transparency and ethical practices.
- Prudential standards – the law establishes new capital adequacy and risk management requirements to ensure the financial resilience of insurers.
- Portfolio transfers – the process for transferring insurance portfolios has been simplified, reducing the advertisement requirement and shortening the objection period.
- Mergers and acquisitions:
- Control changes – any significant changes in control or ownership of an insurer require CBUAE approval.
- Mergers – mergers between insurers must be approved by the CBUAE, which also has the authority to initiate mergers if necessary.
- Enforcement powers:
- Inspection and penalties – the CBUAE has broad inspection powers and can impose severe penalties, including fines up to AED 100 million for non-compliance, this includes fines for operating without a license.
- Insurance-related professions:
- Licensing – individuals and entities engaged in various insurance-related roles must be licensed by the CBUAE, this includes new provisions for third-party administrators and allows for the expansion of regulated professions.
- Non-admitted insurance:
- Regulations – the prohibition on non-admitted insurance remains, with new exceptions allowing coverage from foreign insurers only if local options are unavailable.
- Mandatory insurance and insurance pools:
- Mandates – the CBUAE can mandate insurance for specific risks and establish insurance funds and pools for various purposes.
- Dispute resolution mechanisms:
- BIDRU – the new Banking and Insurance Dispute Resolution Unit (‘BIDRU’) replaces the previous Insurance Dispute Settlement Committee, aiming to streamline and expedite dispute resolution processes.
- Emirates Insurance Federation:
- The Emirates Insurance Association has been replaced by the Emirates Insurance Federation; the CBUAE will supervise the work of the Emirates Insurance Federation and approve its articles of association.
Future implications and developments under Federal Decree-Law
No. 48 of 2023
The transition to the new regulatory framework is expected to continue to evolve. The CBUAE is expected to issue further regulations and guidelines, particularly regarding the competence and ongoing education of key employees. Further clarifications may also be required to address certain ambiguities in the law, including the roles and responsibilities of insurance agents.
The new law’s increased enforcement powers suggest a more rigorous regulatory environment, which will likely have a significant impact on insurers and insurance-related professions. Future developments may include changes to the moratorium on new insurance licenses and the formalisation of new dispute resolution procedures.
Overall, Federal Decree-Law No. 48 of 2023 represents a comprehensive update aimed at modernising the UAE’s insurance sector, enhancing regulatory oversight, and improving industry practices.
How can Waystone support you?
Our team of regulatory experts can help firms to seamlessly adapt to the new Federal Decree-Law No. (48) of 2023. With the regulator’s proven commitment to enforcing these rules, up to and including the revocation or restriction of licenses, it’s crucial to act now.
Waystone can provide the following services:
- Gap analysis – we will perform a comprehensive assessment to identify any discrepancies between your current framework and the new regulatory requirements.
- Policy and procedure development – whether you need to enhance existing policies or create new ones, we will ensure they align with the latest standards.
- Training and development – we can equip your team with the necessary knowledge and skills by providing tailored training programs.
Waystone works with you to safeguard your business and ensure that your firm meets regulatory expectations and avoids potential sanctions. If you would like to find out more about this topic, please reach out to your usual Waystone representative, or contact us below.
1 https://uaelegislation.gov.ae/en/legislations/2148
2 https://www.centralbank.ae/en/news-and-publications/news-and-insights/press-release/cbuae-revokes-the-licence-of-galaxy-insurance-broker/