Federal Decree-Law No. 6 of 2025: A Closer Look at the UAE's New Banking and Insurance Law

Summary

On 8 September 2025, the UAE issued Federal Decree-Law No. 6 of 2025 Regarding the Central Bank, the Regulation of Financial Institutions, their Activities, and Insurance Business (the Law).

Effective 16 September 2025, the Law replaces previous frameworks and consolidates supervision under the Central Bank of the UAE (CBUAE). With a one-year transition period ending on 16 September 2026, insurance entities must adapt to stricter licensing and operational standards.

Highlights:

• Repeals the 2018 Central Bank Law and the 2023 Insurance Law.
• Unifies regulation for banking and insurance, excluding the DIFC and ADGM.
• Maximum administrative fines increased to AED 1 billion for institutions.
• Formalises licensing for virtual assets, DeFi, and the Digital Dirham.
• Mandates No Objection Certificates (NOCs) for insurance activities in non-financial free zones (e.g., DMCC, JAFZA) by 31 December 2025.

WHAT IS FEDERAL DECREE-LAW NO. 6 OF 2025?

This Law represents the culmination of a regulatory merger that began in 2020 when the UAE Cabinet approved the integration of the Insurance Authority into the Central Bank. While it became effective in September 2025, Article 183 ensures that existing regulations remain valid until the CBUAE explicitly replaces them, facilitating a stable transition.

WHAT ARE THE PRIMARY OBJECTIVES OF THIS NEW LAW?

The Law promotes financial stability, strengthens supervision, and integrates sustainable finance and digital technologies, applying to all persons and institutions conducting Licensed Financial Activities in the UAE, excluding DIFC and ADGM. These changes have direct implications for structuring, governance, and compliance strategies typically advised upon by a corporate law firm and lawyers in the UAE operating in the financial services sector.

HOW HAS THE REGULATORY LANDSCAPE SHIFTED?

The most significant change is the Consolidation of Oversight. Previously governed by separate frameworks, all prudential and conduct supervision for the insurance and banking sectors now falls under the CBUAE. This unified approach materially affects acquisition structures, portfolio transfers, and group reorganisations within regulated entities - areas frequently overseen by a mergers and acquisitions (M&A) law firm and lawyers in the UAE.

Enhanced Powers and Enforcement: The CBUAE now holds broad early intervention and resolution powers, including the ability to mandate recovery plans, change management, and write down liabilities. Enforcement is significantly stricter:

• Fines: Institutions face up to AED 1 billion, while "Authorised Individuals" can be fined up to AED 5 million.
• Technology: Article 62 extends licensing to technology-enabled activities (apps, protocols, platforms), while Article 187 grants the Digital Dirham full statutory recognition.

Consumer Protection: Article 149 mandates robust fraud prevention and swift customer notification regarding security breaches. It also emphasises transparent disclosure of fees and risks while maintaining strict data confidentiality.

WHAT ARE THE SPECIFIC IMPACTS ON THE INSURANCE INDUSTRY?

Insurance activities, including licensing, solvency, actuarial oversight, and Takaful operations, fall fully within the CBUAE’s supervisory remit. The Law defines "Insurance Company (Insurer)" as any juridical person licensed to carry on insurance business and activities in the State, "Reinsurance Company" as any juridical person licensed to carry on reinsurance business, and "Takaful Insurance" as a scheme achieving solidarity among participants to address risks in accordance with Islamic Shari'ah principles.

The Higher Shari'ah Authority is preserved with enhanced remit for Islamic financial institutions, including Takaful operations, ensuring binding resolutions on Shari'ah compliance. Creditor hierarchies in resolution prioritise customers, including insured parties.

WHO IS REQUIRED TO HOLD AN INSURANCE LICENSE?

No entity can engage in insurance or related activities without a CBUAE license. This extends to:

• Agents, Brokers, Loss Adjusters, Actuaries, and Third-Party Administrators (TPAs).
• Any platform facilitating insurance distribution or premium collection.

Licensing requires a comprehensive application including technical pricing bases and a bank certificate confirming a fixed deposit (AED 6 million for property/liability or AED 4 million for persons/fund accumulation). Foreign companies are licensed based on their specific UAE operations rather than the parent entity.

WHAT ARE THE REQUIREMENTS FOR FREE ZONES?

Entities in non-financial free zones, such as DMCC, JAFZA, SAIF Zone, RAKEZ, and Meydan, must obtain a No Objection Certificate (NOC) from the CBUAE to conduct insurance-related activities. The transition period ended on 31 December 2025, after which operations without approval constitute a breach of federal laws and free zone directives.

DMCC issued a circular on 1 July 2024 requiring NOCs for insurance activities. Financial free zones like DIFC and ADGM are exempt, remaining under local supervision.

WHAT PENALTIES APPLY FOR NON-COMPLIANCE?

Operating without a license carries criminal weight, including imprisonment and fines ranging from AED 50,000 to AED 500 million. For licensed entities, breaches of conditions or obstructing examinations can lead to license revocation, disgorgement of profits, and public disclosure of penalties on the CBUAE website.

HOW DO THE TRANSITIONAL ARRANGEMENTS WORK?

Article 184 provides a one-year transitional period until 16 September 2026 for entities to regularise licensing and compliance. Legacy regulations issued under the 2018 Law and 2023 Insurance Law remain effective until replaced. The CBUAE has discretion to extend this period for specific entities or activities. For non-financial free zones, the NOC transition ended on 31 December 2025.

WHAT SHOULD INDUSTRY STAKEHOLDERS DO NOW?

For Insurance Companies: Companies must review recovery and resolution planning, governance structures, and related-party controls. Prudential requirements, including capital, liquidity, and reporting standards, must be updated. Consumer protection, cybersecurity, and fraud controls should be enhanced to meet Article 149 obligations.

For Insurance Intermediaries: Brokers, agents, and other intermediaries must meet licensing requirements under the expanded definition of insurance-related professions. The new Insurance Brokers' Regulation, approved in December 2025, strengthens supervision and requires updates to internal policies.

For Technology Providers: Fintech companies and technology providers enabling insurance services must assess whether they fall within the expanded regulatory perimeter under Article 62. Platforms facilitating insurance distribution, claims processing, or premium collection may require licensing.

The Law establishes fit-and-proper standards for board members and Authorised Individuals. The CBUAE must pre-approve appointments and may refuse or remove candidates to protect public interest. Related-party transactions are restricted.

KEY TAKEAWAYS

Federal Decree-Law No. 6 of 2025 centralises the UAE financial sector under the CBUAE. With heightened capital requirements and expanded oversight into digital technologies, stakeholders must utilise the transition period ending in late 2026 to ensure full compliance with the new prudential and ethical standards.