Key Updates in UAE Insurance Regulation Effective February 2025

Effective 15 February 2025, the new Insurance Broker’s Regulation will come into effect.

The Regulation applies to onshore UAE-regulated entities such as insurance brokers, insurance companies, and foreign branches of insurance companies licensed to underwrite primary insurance and reinsurance (including Takaful), reinsurers, and all primary insurance operations.

Companies incorporated in the free zones are excluded.

The Regulation brings significant changes regarding the structure and operation of the industry by introducing some new elements.

Governance: A comprehensive, robust corporate governance framework must be implemented. Companies should consider the governance standards that the CBUAE has issued for the industry.

Licensed activity: Companies cannot combine their role as insurance brokers with the role of any other insurance-related profession, nor may they be partners or agents of any other insurance broker.

Bank Guarantee & Capital Requirements: Although the capital requirements have not changed, the bank guarantee is in addition to it.

Capital: Insurance Brokers must notify the CBUAE immediately if their net equity position falls below 100%, along with a plan to re-establish it, within 15 days of falling below. No new business will be carried out until the breach is closed.

External Auditors: All insurance brokers are obligated to appoint external auditors who are registered with the CBUAE.

Premium Collection: The responsibility now lies with the insurance companies. Insurance brokers are no longer allowed to collect premiums for any line of business. Companies should consider the escrow requirements.

Claims: Insurance brokers are also prohibited from collecting claims settlements on behalf of their clients. Reinsurance brokers are exempt.

Commission: Since insurance brokers are no longer allowed to collect premiums and deduct their commission, insurance companies must pay the relevant commission within ten business days of receipt of the premium. In the case of premium instalments, the commission must be paid accordingly.

Outsourcing: Any outsourcing of material business activity requires the NOL from the CBUAE. Outsourcing outside the UAE is no longer allowed.

Discounts & Commission: Insurance brokers are not allowed to offer any discount which is related to their commission. Any discounts provided should come only from the insurance companies.

Cyber security: Part of the governance framework is a sound risk management framework. The companies must maintain adequate policies and procedures to identify, assess and treat risk events related to cybercrime.

Data Protection & Retention: Companies must maintain sound DP policies to prevent, identify and treat any data security breaches. The data should be kept in the UAE and a backup must be maintained in a separate location for 10 years.

Originally published by Afroditi Boura on 26 September 2024.