Insurance Regulation overview in Saudi Arabia, UAE and Kuwait
Transport & Insurance Focus
Anand SinghSenior Counsel,Transport & Insurance
Ahmed RezeikSenior Counsel,Transport & Insurance
Melody HuangAssociate,Transport & Insurance
Passant MansourAssociate,Transport & Insurance
Veena ShankarParalegal,Transport & Insurance
The regulator is called Insurance Regulatory Unit “IRU”. The IRU is an independent IRU with a board consisting of a chairman, a deputy head and three part-time members appointed by a resolution of the Minister of Commerce and Industry ( ‘MOCI’) for a one time renewable period of four years, as well as a representative from the Central Bank of Kuwait and a representative from the MCI.
The insurance business and its operations in the KSA is regulated and supervised by the Insurance Authority (“IA”), a unified and independent regulator for the insurance sector. The IA became operational in November 2023. Prior to this, the insurance sector in the Kingdom was under the supervision of the Saudi Central Bank (“SAMA”) and the Council of Health Insurance (“CHI”). The insurance-related competencies of SAMA and CHI are now fully transferred to the IA. We will be referring to the regulator of the KSA insurance sector featured in the insurance law, regulations and circulars as the IA from hereon.
The insurance operation in the UAE is regulated at federal and also at emirate level
At the federal level, the primary legislative framework applicable for the UAE insurance sector is the Federal Decree Law No. (48) of 2023 regulating insurance activities (“2023 Insurance Law”) that repeals the previous legislation of Federal Law No 6 of 2007 concerning the Organization of insurance operations (“2007 Insurance Law”). The 2007 Insurance Law established the UAE Insurance Authority as the unified insurance regulator. However, in 2020, the UAE government announced the merger of the UAE Insurance Authority with the Central Bank of the UAE(“CBUAE”), thereby created a unified regulatory for banking and insurance sector.
At the emirate level, i.e. in Abu Dhabi and Dubai, health insurance is governed by their respective healthcare regulators i.e., the Department of Health (DoH) in Abu Dhabi and the Dubai Health Authority (DHA) in Dubai.
Main objectives of the IRU:
Regulating and controlling the insurance business in a fair, transparent, and competitive manner.
Developing the insurance business and its instruments in line with international best practices.
Providing protection to the parties involved in the insurance business.
Applying policies that ensure fairness and transparency and prevent conflicts of interest.
Ensuring compliance with the laws and regulations related to the insurance business.
Raising public awareness of the insurance business, its benefits, risks, and obligations, and encouraging its development.
The IA has assumed all the competencies and responsibilities related to the insurance sector, contained in the Cooperative Health Insurance Law, issued by Royal Decree No. (M/10) dated 1/5/1420 AH, and the Cooperative Insurance Companies Control Law, issued by Royal Decree No. (M/32) dated 2/6/1424 AH. The IA’s particular mandates include but not limited to:
Develop the national strategy as well as public policies, plans and programs for the insurance sector.
Propose draft regulations related to the authority’s competencies.
Encourage investment in the insurance sector in coordination with the relevant authorities.
Develop procedures for collecting, archiving and using insurance data.
Conduct studies, research and analysis of data and information related to the insurance sector.
Set requirements for licenses to practice insurance business, receive applications for incorporation and grant licenses to practice such business, and set the requirements for practicing each type of insurance.
Prepare and publish bulletins and statistical reports for the insurance sector.
Prepare and implement programs and training courses in the field of insurance.
CBUAE regulates the banking and insurance sectors of the UAE. Article 8 of the 2023 Insurance Law, amongst others, set out the following functions of the CBUAE as an insurance regulator:
Regulation of solvency margin and minimum guarantee fund controls.
Oversight of reinsurance criteria and controls.
Determination of investment basis for company assets.
Specification of records to be maintained by companies and data to be furnished to the CBUAE.
Setting appropriate insurance policy rates based on technical grounds.
Establishment of minimum capital requirements.
Development of rules to protect clients and ensure appropriate insurance coverage.
Approval and regulation of auditors for companies and professionals.
Oversight of Emiratization targets and imposition of penalties for non-compliance.
Regulation of Takaful Insurance business and Sharia Supervisory Committees.
Establishment of regulations and procedures for inspection operations.
DHA and DoH regulate the health insurance business carried out by the insurance companies and the related professionals within Dubai and Abu Dhabi respectively.
No, it is regulated by IRU.
No. KSA follows a cooperative insurance model called Islamic insurance (Takaful), which is an Islamic or Shari’ah-compliant alternative to conventional insurance. The IA regulates the insurance sector which includes Takaful insurance.
No, the CBUAE regulates the insurance sector which includes takaful i.e. Islamic insurance.
No. The IA regulates both the insurance and reinsurance operations. In respect of the reinsurance operation, the main regulation is the Regulation of Reinsurance Activities, published in October 2010.
No, CBUAE regulates the insurance and reinsurance operations. The reinsurance operation is primarily regulated under Decision No. (23) of 2019 concerning instruction organizing reinsurance operations. This decision was issued by UAE Insurance Authority which continues to be in force.
There is no freezone or offshore in Kuwait.
The concepts of onshore and freezone do not exist in KSA.
Yes, the CBUAE regulates onshore insurance in the UAE, whereas the financial free zones have their own regulator. Currently there are two financial freezones in the Emirate of Dubai and Abu Dhabi namely Dubai International Financial Centre(“DIFC”) and Abu Dhabi Global Market (“ADGM”). Entities incorporated within these freezones can carry out financial and insurance services within and from these freezone and are regulated by the Dubai Financial Service Authority (“DFSA”) and Financial Service Regulatory Authority (FSRA)
In addition to the financial freezone, there are over 40 non-financial freezones in the UAE. Insurance being the regulated operations can be carried on in onshore jurisdiction or within the financial freezones, subject to the approval of the respective regulator i.e. CBUAE or the DFSA/FSRA.
One of the key difference between onshore and freezone operations in relation to insurance activity is the foreign direct investment. While the freezones allow 100% ownership, the onshore still restricts any foreign ownership of over 49%. Also, the entities incorporated in the financial freezones jurisdiction are permitted to carry out only reinsurance business in onshore UAE, whereas no such restriction applies on the UAE nationals.
Any person may engage in insurance or reinsurance activities in the State of Kuwait only after obtaining a license from the IRU to engage in such activities. A legal person may obtain one license to practice one or more insurance or reinsurance activities. A register shall be created in the IRU for companies licensed to engage in the insurance business.
The insurance company and the reinsurance company shall take the form of joint-stock companies, with their issued capital being at least as follows:
The company that carries on life insurance: five million Kuwaiti Dinars.
The company that carries on general and liability insurances: five million Kuwaiti Dinars.
The company that carries on life, general, and liability insurances: ten million Kuwaiti Dinars.
The company that carries on conventional reinsurance and Takaful insurance: ten million Kuwaiti Dinars.
In all cases, the issued capital shall be paid in full upon establishment. The minimum issued capital may be increased under a decision of the IRU.
An application to establish the company shall be submitted to the IRU on the form dedicated for this purpose, accompanied by the following documents and data:
The applicant's name, address—including the automatic number—and, in the case of a natural person, the personal identification number or, in the case of a legal person, the commercial register number.
The activities that the applicant intends to practice.
Representations signed by founders of the company that, within the last five years preceding the license application, they have not been subject to final judgments of bankruptcy declaration, an offense involving moral turpitude or breach of trust, or a custodial sentence in one of the offenses stipulated in the Law or any other law, unless they have been rehabilitated.
The amount of the issued and paid-up capital of the company that will practice the activity covered by the license application.
A copy of the memorandum of association of the company that intends to engage in the activity, and any amendments thereto.
An economic feasibility study and a five-year business plan, which must include at a minimum:
Categories of insurance that the company intends to engage in, and the associated risks.
The ability to allocate or accept Reinsurance agreements to the intended categories of Reinsurance.
Product marketing plan.
The anticipated expenditure to initiate business, and necessary sources of funding.
Rates of business growth, taking into account the Solvency Margin requirements.
Expected number of employees, and the plan for staffing and qualification of Kuwaiti nationals.
Annual costs based on the anticipated growth rates of the activity.
Estimated financial statements associated with growth expectations.
Statement of the technical basis of the insurance operations and a certificate by an Actuary confirming that the basis, advantages, and restrictions of insurance operations are sound and practical.
Branch set-up plan.
Names of the persons nominated to occupy executive positions, and their respective qualifications and expertise, along with proof of such qualifications and expertise.
A declaration by the applicant that the information contained in the application and enclosed documents are true and complete, along with any other declaration requested by the IRU.
Receipt of payment of the application examination fee as prescribed in Article (19) of these Regulations.
Any other information or documents as requested by the IRU.
A decision shall be made by the IRU on the compliant application within thirty days from the submission date thereof. If the application is rejected, the rejection decision shall be substantiated. Any person whose application is rejected may file a grievance within the scheduled dates pursuant to the procedures set forth in the Executive Regulations.
Once the approval is made, and the establishment is started, and the license is obtained, the licensed Insurance Companies shall keep a deposit - within three (3) months from the date of granting the license - in one or more banks operating in Kuwait to guarantee the company's insurance obligations. The minimum value of this deposit shall be as follows, plus (20%) twenty percent of the total direct Premiums, after excluding Reinsurance share:
Five hundred thousand Kuwaiti dinars for Insurance Companies that engage in life insurance, fund accumulation, and categories thereof.
Five hundred thousand Kuwaiti dinars for Insurance Companies that engage in general insurance, property insurance, and categories thereof, and/or liability insurance activities and categories thereof.
One million Kuwaiti dinars for Insurance Companies that engage in the activities stipulated in both Clauses (1) and (2).
One million Kuwaiti dinars for companies that
The insurance and/or reinsurance licensing process entails five main steps, namely application submission, file review, Royal decree issuing, IPO and license issuing. The process can take up to 16 months, depending on the content.Article 4 of the Implementing Regulations of the Cooperative Insurance Companies Control Law, Ministerial Decree No (1/596) dated 1/3/1425 H (“Implementing Regulations”) provides that a license application for insurance and/or reinsurance companies shall be submitted to the IA including the completed licensing application, organizational structure, feasibility study etc.
Irrespective of the type of insurance business being incorporated, the licensing process for an insurance operation in onshore UAE involves the following steps:
Submitting the relevant application to the CBUAE along with the business plan to secure their in-principle approval.
Initiating an application before the Department of Economy and Tourism ("Department") of the concerned emirate to obtain the Department's initial approval.
Corresponding with the CBUAE for additional documentary requirements and scheduling a meeting with the CBUAE to interview the technical staff of the applicant company.
Coordinating with the Department for the final commercial license of the applicant company.
Coordinating with the CBUAE for the final regulatory license.
Submitting an application to DHA/DoH if the applicant intends to carry out health insurance operations in Dubai or Abu Dhabi.
Regarding the financial free zones, the steps involved in licensing a new insurance operation are similar to those mentioned above, except for the approval to carry out health insurance operations, which can only be carried out onshore. Additionally, in terms of capital requirements, the onshore jurisdiction requires the applicant to submit a bank guarantee to confirm compliance with the capital requirement. For offshore jurisdiction, the regulator requires evidence confirming that the applicant company has deposited the minimum required capital in its local bank account. Companies in the financial free zone can utilize the capital funds for their operations as long as the minimum required capital is maintained throughout their operations.
There is no specific qualifications required to operate in the insurance industry, however, practically, the IRU require the CV of the managers along with their education and experience certificates in insurance to accept them as a managers in the companies.
There is a general requirement under the Implementing Regulations that insurance and reinsurance companies as well as insurance and reinsurance services providers including brokerage, insurance agency, insurance advisor, insurance claims settlement specialists (Third Party Administrator), actuary, loss assessor and loss adjuster shall qualify their employees to undertake duties related to insurance work (Article Seventy-Seven of the Implementing Regulations).
Specifically, the IA sets the minimum educational requirements related to the licensing and examination of any individual who wish to practice any of the insurance professions.
For onshore insurance operations in the UAE, the technical staff of insurance companies and related professionals must receive approval from the CBUAE. The CBUAE conducts interviews to assess whether the technical staff possesses the necessary skills and knowledge to fulfill their roles and responsibilities effectively. For example, an insurance brokerage company must have a general manager responsible for the overall management and operations of the company. The CBUAE must approve the appointment of the general manager, who must comply with the following criteria:
Holds a university degree or equivalent, or the ACII certificate accredited by the Chartered Insurance Institute of London, or a certificate accredited by a similar professional institute.
Has successfully completed three training courses in insurance or insurance brokerage.
Possesses a minimum practical experience of 10 years in insurance or insurance brokerage, or no less than 5 years of experience if holding a higher academic qualification. If the general manager to be appointed is a UAE national, the experience requirement is reduced to 5 years or 2 years if the individual holds a higher academic qualification.
Any changes in the technical staff of an insurance company or its related professionals must be notified to and approved by the CBUAE.
There is no specific qualifications required to operate in the insurance industry, however, practically, the IRU require the CV of the managers along with their education and experience certificates in insurance to accept them as managers or officers in the companies.
The IA regulates senior positions. “Senior Positions” is defined as the functions, roles and responsibilities entrusted to those positions who take, propose and implement strategic decisions and manage the Financial Institution’s business processes, including the board of directors and senior management. The IA’s written non-objection is required on the appointment or interim appointment of candidates, and other requirements include:
1. Chairman, Board Members, and Senior Managers must be trustworthy and experienced in financial and insurance business to enable them to carry out their duties in the best possible way.
2. An insurance and/or reinsurance company’s board members shall not be a member of the board of directors of any other insurance and or reinsurance Company.
3. The IA may object to the appointment of any of the Board Members, appointed executive managers of the insurance and/or reinsurance company and of the insurance and reinsurance services provider.
4. An insurance and/or reinsurance company shall not nominate a member to its board of directors or to a senior management position without the written approval of the IA in the following circumstances:
A Person who had held similar position in a liquidated insurance and/or reinsurance company;
A Person who had been dismissed from a similar position in another insurance and/or reinsurance company.
Yes, the directors, officers and managers of insurance business and its related professionals are considered as technical staff and should be approved by the CBUAE subject to they comply with the requirements defined by the CBUAE. These requirement differ for insurance company, broker, agent, TPAs, surveyors, consultant.
The Federal Law No. 32 of 2021 concerning the Commercial Company does not set out any requirement for private limited company to establish a board. Therefore, there is no mandatory requirement for insurance broker, agent, TPA, surveyors or consultant who are incorporated as private limited company to establish a board and appoint a director. The requirement for such companies is to appoint a general manager who oversee the day to day management and operation of the company. However, the insurance companies are incorporated as public joint stock company and are required to establish board of directors. The formation of the board of directors and appointment of directors are governed under the Corporate Governance Regulation issued by the CBUAE.
No. The overall requirement applicable for Islamic (Takaful) and non-Islamic insurance companies are the same.
The overall requirement applicable for Islamic and non-Islamic insurance companies are similar, except for the requirement to form Sharia compliant committee which is applicable only for Takaful companies (i.e. Islamic insurance companies)
No, there is no specific rules governing capital adequacy and surpluses for the insurance and reinsurance sector.
Capital adequacy
Article 3(3) of the Cooperative Insurance Companies Control Law, Royal Decree No. M/32 dated 2/6/1424 H (“Insurance Law”) requires the paid-up capital of an insurance company shall not be less than SR 100,000,000 and the paid-up capital of a reinsurance company or an insurance company carrying out reinsurance activities simultaneously shall not be less than SR 200,000,000. The Implementing Regulations set out the minimum capital requirement for other insurance and reinsurance services which are as follows:
SR 3,000,000 for Insurance Brokerage.
SR 3,000,000 for Insurance Claims Settlement Specialist (Third Party Administrator).
SR 500,000 for Insurance Agency.
SR 500,000 for Loss Assessor and Loss Adjuster.
SR 150,000 for Insurance Advisor.
SR 150,000 for Actuary.
The Implementing Regulations further set out the margin of solvency requirements for insurance and reinsurance companies, in respect to its general and health insurance business, which is the maintenance of an equivalent to the highest of the following three amounts:
Minimum Capital Requirement.
Premium Solvency Margin.
Claims Solvency Margin.
Surpluses
The Implementing Regulations require that 10% of the net surplus shall be distributed to the policyholders directly, or in the form of reduction in premiums for the next year. The remaining 90% of the net surplus shall be transferred to the shareholders’ income statement. The IA subsequently issued a Surplus Distribution Policy in February 2015 with general principles to be applied for distribution of surplus to placeholders.
In onshore UAE, the minimum subscribed and paid-up capital requirements for insurance companies are as follows:
AED 100 million or the equivalent for insurance companies.
AED 250 million or the equivalent for reinsurance companies.
These capital requirements are also applicable to Takaful operators. Additionally, life insurers are required to make a cash deposit of AED 4,000,000, and general insurers must deposit AED 6,000,000 as security. Moreover, foreign insurance branches operating in the UAE must submit an irrevocable bank guarantee to the CBUAE of AED 100,000,000 and AED 250,000,000 for reinsurance business.
The 2023 Insurance Law defines the Solvency Margin as a surplus in the company's existing assets over its liabilities, ensuring the company can fulfill its obligations and make necessary insurance payouts without compromising its business or financial stability.
Decision No. (25) of 2014 concerning the financial regulation of insurance companies, which remains valid and enforceable, outlines the requirements for an insurance company's solvency margin, necessitating the maintenance of:
a. The minimum capital required, as specified above. b. The Solvency Capital Requirement, which is the fund needed to cover current and future operations over the next twelve months, ensuring all quantitative risks are considered. c. The Minimum Capital Guarantee Fund, which is the fund required to cover current and future operations over the next twelve months, at least one-third of the Solvency Capital Requirement, or a greater amount as determined by the regulatory authority.
These three factors—minimum capital requirement, solvency capital requirement, and minimum capital guarantee fund—determine an insurance company's solvency margin. A similar requirement applies to Takaful operations, as outlined in Decision No. (26) of 2014 concerning Financial Regulation for Takaful Companies.
The IRU law is silent in respect of any restrictions for insurance company to undertake other types of business, however, practically, the purpose of the company should include the new business and an approval should be taken from all regulators.
The Insurance Law stipulates that the insurance and reinsurance companies’ principal objective shall be to perform any insurance and reinsurance activity and shall not undertake other objectives unless they are necessary or complementary to its principal object. In addition, insurance companies may not directly own companies or brokerage establishments, and reinsurance companies may not own reinsurance brokerage companies or establishments. However, insurance companies upon the approval of the IA may own companies or establishments that act as brokers in reinsurance activities.The Implementing Regulations further requires that the commercial registration shall be restricted to the licensed insurance activity. The IA shall be supplied with a copy of such registration and any subsequent renewals thereof. Any other unlicensed activities shall not be practiced.
The insurance company is permitted to carry out only insurance business i.e. underwriting the risk and acting as the risk carrier. They are not permitted to carry out any other regulated activities without the approval of the CBUAE. The same restriction applies to takaful operations.
Yes, there are some rules which regulate the companies practicing life insurance and capital formation transactions, where these companies shall examine their balance sheets of the related branch, and shall assess the value of the outstanding obligations of each of them, including all transactions made by the company in Kuwait or abroad, on a case-by-case basis, at least once every three years, by an actuary. The company shall abide by the aforementioned whenever it wants to determine the ratio of dividends distributable to the shareholders and the Policyholders. The IRU may ask for the said assessment without adherence to the period mentioned above in the first paragraph. The company shall send a copy of the examination report to the IRU.
Also, it has to be noted that Companies practicing life insurance and capitals formation transactions may not deduct any amount from the funds of the accounting provision to be distributed as dividends to the shareholders and Policyholders, or to fulfill any obligations other than the obligations emerging from issuance of insurance policies. In this regard, the UnitIRU may deem the company's capitals both inside and outside Kuwait as a single unitunit. Dividends may be distributed from the surplus determined by the actuary in his report to be made after making the examination referred to in the previous paragraph.
Also, they may not lend funds to the company's directors and officials or guarantee them by any type of guarantee, except for the loans guaranteed by any life insurance policies, provided that the loan value granted shall not exceed the policy value at the time of the liquidation thereof.
The Implementing Regulations require that insurance and reinsurance companies shall evaluate the adequacy of its technical provisions on a quarterly basis. The minimum capital requirement shall be used to cover policyholders’ claims in the case whereby the technical reserves are deficient to meet the claims obligations. The IA must be notified if such deficiencies exist.
The requirement for an insurance companies solvency and reserves are set out in detail in Financial Regulation and in addition, the Article 103 of the Federal Law No. 32 of 2021 concerning commercial companies states that the a limited liability company is required to set aside every year 5% from its net profits to form statutory reserve. For public joint stock companies, 10% of the net profits shall be set aside every to be allocated to create statutory reverse, unless the company’s statutes provides for higher percentage.
The insurance intermediaries such as brokers, agents, TPAs are incorporated as limited liability / private limited company, whereas the insurance, reinsurance and takaful companies are incorporated as public joint stock companies.
The New Insurance Law No. 125 of year 2019 (“NIL”) along with its Executive Regulation no. 21 of year 2021 (“Executive Regulations”)
The insurance and reinsurance operations in KSA are primarily governed under the Cooperative Insurance Companies Control Law, Royal Decree No. M/32 dated 2/6/1424 H (corresponding to 31 July 2003) (“Insurance Law”) and Implementing Regulations of the Cooperative Insurance Companies Control Law, Ministerial Decree No (1/596) dated 1/3/1425 H (corresponding to 23 April 2004) (“Implementing Regulations)”.
They apply to all local insurance and reinsurance companies including foreign branches as well as companies or persons carrying out insurance related professions in KSA.
The insurance and reinsurance operations in the UAE are governed by the 2023 Insurance Law, which applies to all local and foreign companies engaged in insurance, takaful operations, and related professions. This law stipulates that supplementary legislations enacted under the 2007 Insurance Law remain effective unless explicitly repealed by the CBUAE.
The UAE Insurance Authority, now under the jurisdiction of the CBUAE, has issued various regulations that oversee the licensing and operations of ancillary insurance service providers, including:
Direct and reinsurance brokers - Governed by Resolution No. (15) of 2013 concerning the operations of the insurance broker, as amended.
Insurance Agents - Regulated by Resolution No. (8) of 2011 concerning the regulations of insurance agents.
Insurance Consultants - Managed under Decision No. (12) of 2018 concerning the licensing and registration of insurance consultants.
Health Insurance Third Claim Administrators - Supervised by Resolution No. (9) of 2011 concerning the licensing and registration of TPAs.
Surveyors - Overseen by Resolution No. (6) of 2010 concerning Surveyors and Loss Adjustors.
Insurance Producers - Regulated by Resolution No. (27) of 2020 concerning the instructions for licensing of insurance producers.
Additionally, electronic insurance operations conducted by insurers and related professionals are governed under the Board of Directors' Resolution No. (18) of 2020 Concerning the Electronic Insurance Regulations, ensuring a comprehensive regulatory framework for the insurance sector in the UAE.
No, all types of insurance products are covered by NIL & Executive Regulations, except the motor insurance, which is regulated by the traffic law as well.
Yes, there are rules for compulsory insurance policies such as:
The Standard Insurance Policy of Medical Malpractice
The Standard Insurance Policy of Professional Indemnity for Auditors of the Entities supervised by the Capital Market Authority
Standard Policy of Inherent Defects Insurance (IDI)
Unified Compulsory Motor Insurance Policy (third party liability only)
Domestic Workers Contract
Marine Insurance Coverage Instructions
There are also rules on essential benefit package of health insurance.
There are two main regulations that govern the life insurance and motor insurance products:
With respect to life insurance products, the UAE Insurance Authority (now regulated by the CBUAE) issued Decision No. (49) of 2019 concerning the instructions for life insurance and family takaful insurance.
With respect to motor insurance products, the UAE Insurance Authority (now regulated by the CBUAE) has issued Decision No. (25) of 2016 pertinent to the Regulation of Unified Motor Vehicle Insurance Policies. In relation to this Decision, the regulator has issued the standard template of motor insurance policy that the local insurer is required to comply with:
Unified Motor Vehicle Insurance Policy against the loss and damage issued pursuant to Decision No. 25 of 2016.
Unified Motor Vehicle Insurance Policy against third-party liability issued pursuant to Decision No. 25 of 2016.
Yes, there are some compulsory insurance rules, such as motor insurance, workmen insurance in some projects…etc.
Yes, the IA sets rules with regards to coverage and limit requirements for compulsory insurance. See above under question 14. Further, the IA requires insurance and reinsurance brokers, insurance agents, actuaries, loss assessors/adjusters, third party administrators and insurance advisors to obtain professional indemnity insurance and sets out minimum limits such insurance must have.
Yes, all the motor vehicles in the UAE should maintain insurance policy to cover the third party liabilities arising due to or in connection with the use of the motor vehicle.
The Unified Motor Insurance Policy issued states that the indemnity limit for such third party liability claim related to death or bodily should be unlimited to the extent of sum awarded by the local courts. In terms of the damage to the third party property, the liability is limited upto AED 2,000,000.
DHA and DOH have set out terms and conditions that apply to the minimum health insurance cover that must be provided to each resident of Dubai and Abu Dhabi. Similarly, some professions require maintaining compulsory professional indemnity insurances.
No there isn’t, except it must be a shareholder company or if it is a branch of foreign company, its parent company must hold the insurance license from its regulator.
Article 38 of the Implementing Regulations requires that:
The insurance and reinsurance companies shall notify the IA of the percentage of ownership of any person who owns five percent or more through a quarterly report.
Any person owning five percent or more of the shares shall notify the IA in writing of their percentage ownership and any changes thereof within 5 working days of the date of occurrence of such event.
Further, according to the Ministry of Investment (“MISA”) manual of January 2020 minimum Saudi Partnership for insurance license is 40% (section No. 11.03).
Yes, foreign investors are not permitted to own majority of shares/ interest in the entities operating in the onshore UAE that carry out insurance business or its related activities. However, in freezones 100%foreign ownership is permitted. Further, the UAE government has issued Cabinet Decision No. 109 of 2023 on the organization of the real beneficiary procedures (“UBO Law”) which requires the entities in onshore UAE to maintain and furnish a registered identifying its ultimate /real beneficial owner, shareholders and the directors. Similar requirement is applicable in the offshore jurisdiction.
There is no specific requirements or restrictions in the law, however, in general, the IRU will require the transaction documents for review and approval.
In addition to Article 38(2) in question 16, Article 39 (1) of the Implementing Regulations further states the IA’s written approval is required for any mergers, acquisitions, transfer of ownership, and opening new branches by any insurance or reinsurance companies or insurance and reinsurance services provider such as brokers, agents, actuaries, loss assessors/adjusters, third party administrators and insurance advisors.
Prior approval from the CBUAE is required for change in ownership of an insurance company. In terms of ancillary service providers such as insurance brokers, agent, consultant, while there is no explicit / clear requirement for the entities to seek CBUAE’s prior approval, they are required to notify the CBUAE about the change in the ownership and secure their approval on such change.
As per the law, all Licensed Persons shall be governed by the rules, systems, and instructions of control prescribed by the UnitIRU, as well as all persons registered in its registers.
The UnitIRU may inspect Licensed Persons to ensure their compliance with the provisions of laws, regulations, statutes, and resolutions issued by the UnitIRU. To that end, the UnitIRU may conduct regular inspections by virtue of a prior notification. The UnitIRU may also conduct unscheduled inspections, without a prior notification, to achieve its supervisory objectives or investigate complaints or infractions received by it.
For conducting such an inspection, the Supreme Committee issued a resolution conferring the judicial officer capacity upon the UnitIRU's employees, upon the nomination of the IRU's president, to detect and investigate the offenses committed in violation of the provisions of the Law, the present Regulations, and resolutions issued in implementation thereof.
In order to carry out their duties, employees who are granted the judicial officer capacity shall have the following powers:
Access premises of persons operating in the field of insurance business and activities or any other entity where the same are found.
Inspect entities governed by the Law and the present Regulations to ensure their compliance with the provisions of the Law and these Regulations, and the rules and resolutions issued in implementation thereof.
Access to records, books, documents, and information or computerized documents, tapes or systems or other data storage and processing media in premises of persons operating in the field of insurance business and activities or any other entity where the same are found in their possession or under control.
The right to obtain information and justifications, upon request, may call witnesses and hear their statements or request any person with technical expertise to express an opinion on any issue related to their duties, and the same shall be recorded in a report.
The supervision process of the IA consists of four activities, namely: continuous monitoring, compliance assessment, off-site examination, and on-site inspection.
Continuous monitoring includes financial monitoring which measures the Saudi insurance market strength in addition to complaint analysis which assesses insurance companies' conduct towards the insured.
The compliance assessment measures companies' compliance with the insurance law and regulations.
Off-site examination helps in developing the risk profile of regulated entities.
On-site inspection helps in completing the risk profile of regulated entities by visiting the company's premises.
Financial strength is measured throughout the year, off-site examination and compliance assessment are conducted annually, and on-site inspection is conducted periodically.
The CBUAE may inspect the books of accounts, the agreements / contracts executed and the entire operations of the insurance company. There are no defined period or frequency within which the CBUAE conducts the inspection. However, the CBUAE generally conducts an inspection atleast once in a year prior to the renewal of the regulatory license to ensure that the insurance company is compliant with the regulation.
Yes, all insurance and reinsurance companies are required to complete and submit an annual return to the regulator
Licensed insurance companies are required to submit the following to the IA:
Annual and quarterly audited financial statements for the IA 's approval before publishing them; and
Monthly, quarterly and annual supervisory data using the financial reporting forms.
Yes, the insurance and reinsurance companies licensed by the CBUAE are required to annually submit the following amongst other documents:
Self-assessment and Annual report on Governance. This report should include the details related to the rights of shareholders and policyholders, general assembly, related party transaction, disclosure and transparency, board committee, training, internal controls and such other matters as determined by the CBUAE;
Risk and Adherence self-assessment form, which shall comprise of detailed related to insurance risk, product design, pricing, credit risk, market risk, operational risk, risk of related party, insurance fraud risk, cyber risk and such other risk as determined by the CBUAE;
Internal Audit report along with the applicable e-form for Internal Audit as determined by the CBUAE;
Risk Management Report along with the relevant e-form;
Reports on Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organizations.
In Kuwait it is called insurance broker and they must hold a license from the same insurance regulator which is IRU, but the law doesn’t mention any particular qualification in the insurance brokerage companies, except that the GM should have a suitable experience in insurance.
No, the IA regulates both insurance and reinsurance companies as well as service providers including intermediaries.
With regard to qualifications, see our response under question 7.
The insurance intermediaries like insurance brokers, agents, consultants are also regulated by the CBUAE, and the DHA/DoH. As mentioned in our response to Q7, all the technical staff of the insurance intermediaries should comply with the minimum qualification / experience requirement as specified in the regulation. There are specific qualification and experience requirement for each such staff as per their risk profile in the entity.
The Implementing Regulations requires the insurance policy issued by the insurance and reinsurance companies to specify in its policy schedule the insurance rates and premium amounts, basis of premium calculation and the amount of commission paid under the policy. Further, insurance and/or reinsurance brokerages are required under the Implementing Regulations to disclose to the insured the commission and/or fees earned for the services provided at the point of sale.
In relation to commission structures, the Insurance Intermediaries Regulation provides the maximum commission rates permitted by the IA, as contained in Appendix A (Maximum Commission Rates Permitted). Article 46 requires that intermediaries to obtain the IA’s approval to receive a commission rate that exceeds the rates specified in this appendix. Article 30 further confirms that the agency or brokerage agreement concluded between the intermediary and the insurance company shall determine the rights and obligations of each of them, including means for calculating the commission of intermediaries for the service provided.
The Resolution No. (3) of 2010 concerning the Code of Conduct and Ethics to be observed by the insurance companies and insurance related professional operating in the UAE (“Code of Conduct Regulations”) stipulates the insurer and its related professionals to provide the customer with appropriate information about the nature of the products, the insurance cover, terms and conditions applicable for such cover along the services provided by the company. In terms of the pricing of the insurance product, the Code of Conduct Regulation sets out the requirement not add any excessive surcharges to the net premium or offer prices lower than the technical level which may put the insurer’s financial position at risk and consequently exposing the insured’s interest at loss which potentially causes uncontrolled competition in the insurance market, and to provide a complete statement of the price offered to the customer.
Commission charged for life insurance products is limited to 10% of annualized premium times the number of years in the policy term for pure protection products. For motor insurance product, the regulation defines the minimum and maximum premium that can be charged by an insurance company depending on the type of the motor vehicle. for example, in case of Salon private motor vehicle with 4 cylinders, the minimum premium of AED 750 can be charged and maximum of AED 1,300 can be charged.
Yes, as per the law, it is prohibited to contract, in any form whatsoever, for any insurance and Reinsurance activities and the Insurance Professions mentioned in the Law and the present Regulations except through licensed persons registered in the IRU's register according to their activities, subject of the contract, except for all types of Reinsurance activities, as per the list approved by the IRU; however, the IRU didn’t provide the list until now, therefore, every company is free to contracting with any re-insurance company.
Article 40 of the Implementing Regulations requires licensed insurance and reinsurance companies in KSA to reinsure 30% of its total premium in KSA. The IA’s written approval is required if it’s difficult to comply with this percentage or it wishes to retain a lesser percentage.
The IA announced in a circular dated 26 October 2022 the implementation of a new mechanism for reinsurance cession to the local reinsurance market. This new mechanism requires insurance companies to gradually cede a share of all their reinsurance treaties (proportional and non-proportional), either directly or through reinsurance brokers, to the local reinsurance market with effect from 1 January 2023. It sets out a course for gradual cession of at least 20% in 2023, 25% in 2024 and 30% in 2025.
Article 42 of the Implementing Regulations further requires insurance and reinsurance companies wishing to engage in reinsurance treaties outside KSA to ensure that the foreign reinsurer is licensed and authorized to transact the kinds of insurance proposed in KSA in its country of domicile, the insurance supervisor of the foreign reinsurer must authorize the exchange of relevant information with the IA, rating requirement etc.
The insurer licensed by the CBUAE is permitted to reinsure the risk within and outside the UAE. However, while reinsuring the risk with a foreign insurer based outside the UAE, the local insurer is required to ensure that the foreign insurer maintains the below minimum required credit rating:
Standard & Poor – BBB
Moody’s – Baa
AM Best – B+
Fitch Rating – BBB
In terms of reinsurance business that can be accepted by a UAE-based insurer, the Reinsurance Regulation provides that the premium of the treaty and facultative reinsurance business shall not exceed 49% of the total underwritten premium of the insurer. In the event the insurer needs to exceed this percentage, specific approval from the CBUAE should be obtained.
There is no specific laws or rules governing the insolvency but there are some rules which regulate the solvency, where the law required the companies licensed to engage in insurance activity to have a Solvency Margin and Technical Provisions that enable them to fulfill their financial obligations. The Solvency Margin and Technical Provisions are calculated at least once every year, provided that the company provides the relevant documents. The calculation of Solvency Margin and Technical Provisions shall be reviewed once every three years by an independent auditing firm approved by the IRU.
Article 66 of the Implementing Regulations require insurance and reinsurance companies, in respect to its general and health insurance business, to maintain a margin of solvency equivalent to the highest of the following three amounts:
Claims Solvency Margin
In case its solvency margin falls below the required margin(s), Article 68(2) of the Implementing Regulations sets out requirements for the insurance and reinsurance companies to restore its solvency margin within a specific period. Further, Article 76(1)(e) of the Implementing Regulations allows the IA to request the license withdrawal of insurance and reinsurance companies or the insurance and reinsurance services provider in case of insolvency, or its assets are not sufficient for carrying on its business.
The protocol for addressing distressed or insolvent onshore insurance or The protocol for addressing distressed or insolvent onshore insurance or reinsurance companies is delineated in Chapter 15 of the 2023 Insurance Law. The CBUAE holds the authority to either liquidate or restructure such companies and can compel the liquidation of their investments. Article 77 of the 2023 Insurance Law empowers the CBUAE to request the relevant authorities in the UAE to temporarily impound the insurer that suffers from an imbalance in its financial position and seize its assets, property, and rights of its shareholders, issue a decision requesting the competent court to liquidate or dissolve the insurer in question, and develop a plan to liquidate or transfer its assets, liabilities, settlements, and clearances, as the CBUAE deems appropriate.
Article 96 of the 2023 Insurance Law provides that the settlement of the insurer's outstanding debts and obligations is mandated to follow a specified hierarchy:
Settlement of the due entitlements of staff and employees for the preceding four months.
Clearing of costs, expenditures incurred by the liquidator, and repayment of loans obtained.
Fulfillment of the rights of the insured and beneficiaries of insurance policies. The liquidator is obliged to allocate the company's assets, representing the technical provision as per legal provisions, to meet these obligations. Any funds acquired by the company through reinsurance arrangements are deemed part of the technical provisions.
Addressing the rights of other creditors in accordance with the hierarchy prescribed by prevailing laws.
Resolving the rights of the shareholders.
Yes, they can.
Generally, third parties lack the standing to make claims under an insurance policy unless the insurance policy expressly grants such rights to the third party.
In the context of motor insurance, a third party is permitted to directly pursue legal action against an insurer to seek compensation for bodily injuries, death, or property damage sustained due the use of motor vehicle insured by such insurer.
As a general rule, the third parties lack the standing to make claims under an insurance policy unless the insurance policy expressly grants such rights to the third party. Nevertheless, when the policy explicitly designates a third party as the beneficiary, the insurer is required to disburse the insurance proceeds to said third party in accordance with Article 1026 of Federal Law No. 5 of 1985, pertaining to the Civil Transactions Law of the UAE.
Moreover under the 2023 Insurance Law, the CBUAE gains authority to intervene in lawsuits involving insurers and related professionals, and all entities subject to the law, are required to inform the CBUAE of any investigations or measures taken against insurers or related professionals.
The subrogation rights of the insurer in the event of claims are usually provided in the contract of insurance. In the context of motor insurance, the insurer is permitted to reserve the right of recovery against the insured, driver or person responsible for the accident under certain situations. The insurer however is required to exercise its right of recovery within a year from the date of the claim settlement.
Article 1030 of the Federal Law No. 5 of 1985, pertaining to the Civil Transactions Law of the UAE permits the insurer to recover the claim amount settled from the third party responsible for such loss. However, there are certain exception to this general rule. For example, if the party that caused the loss was an ascendant or descendant of the insured, their spouse, living in the same household as the insured, or an individual for whose acts the assured is responsible, in such cases, the subrogation rights of the insurer are not available. The subrogation rights of the insurer in the event of the claim are usually provided in the contract of insurance. Subject to its compliance with Article 1030 of Federal Law No. 5 of 1985, the insurer’s subrogation rights are determined under the contract of insurance issued by it.
Under the civil law, any actions stemming from the insurance policy must be initiated within three years from the event that triggers the action, unless the law specifies otherwise. However, the time limitation does not begin to run in the following scenarios:
In the case of concealment of particulars relating to, or of providing incorrect or inaccurate particulars in respect of the risk the object of the insurance, the limitation period starts from the day the insurer became aware of the same.
In the case of the occurrence of the event the object of the insurance, the limitation period starts from the day the interested parties became aware of the occurrence.
When the cause of the insured's case arises from recourse exercised against him by a third party, the limitation period starts from the day of the initiation of the case by such third party, or from the day the third party receives the compensation from the insured.
Article11 of Working Rules and Procedures of the Insurance Disputes and Violations Settlement Committees provides that unless there is an excuse acceptable to the Committees, lawsuits of insurance disputes shall not be heard after the lapse of a period of five years from the claimed amount’s due date.
For matters pertaining to marine insurance, the IA’s Marine Insurance Coverage Instructions which was issued in October 2023 confirm that any claims arising from a marine insurance contract shall not be heard after the lapsed of two years.
In the onshore UAE, the statute of limitations for claims arising from insurance contracts is three years, commencing either from the date of incident or from the date when the insured becomes aware of the incident, as provided under the Article 1036 of Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE.
Marine risk falls within the purview of Federal Law No. 26 of 1981 Concerning Commercial Maritime Law, commonly known as the Maritime Law. The UAE government has recently introduced a new federal maritime legislation, namely UAE Federal Maritime Law No. 43 of 2023, ("New Maritime Law"). This legislation is set to replace the current Maritime Law upon its enforcement on 29 March 2024.
Under the prevailing maritime regulations, the applicable limitation period is typically two years, commencing from either the date of the incident or the moment a third party asserts a claim against the insured. However, under the New Maritime Law, this limitation period is reduced to one year.
No, the punitive damages are uninsurable.
KSA law does not recognise punitive damages and there is no express legislation addressing this issue. From a regulatory standpoint therefore, there are no prohibitions for insurance and reinsurance companies to provide coverage for punitive damages in a policy. That said, we note that the underlying policy wording is subject to a prior approval from the IA before policy issuance, and more importantly, we anticipate that sharia law or public policy could give rise to argument against such coverage.
The UAE law does not recognize punitive damages. Therefore from a regulatory standpoint, there are no prohibition on the insurer for insuring punitive damages as long as the insurer comply with their internal underwriting guidelines which are submitted to the CBUAE. Also, there could be an argument that pursuant to Article 205 of the Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE, insuring fines and penalties (specifically punitive fines and penalties) should not be permissible because that would be contrary to public order or morals.
No there isn’t.
There are no provisions under the insurance regulation that determine the order of payment in case of multiple claims made under the same policy. However, these are usually determined in the contract of insurance itself.
There are no provision under the insurance regulation that determine the order of payment in case of multiple claims made under the same policy. However, these are usually determine in the contract of insurance.
The motor insurance regulations states that if there are multiple insurance cover with more than one insurer, the insurance company is obliged to compensate for damages in the percentage of the amount insured with it to the total insured amounts against the insured risk.
There is no specific rule, but in general, it is the occurrence of the risk insured against or on expiry of the term fixed in the policy, and in this regards, the insurer has an obligation to pay the sum of the insurance due within 30 days to run from the day on which the owner of the right submits the particulars and documents necessary for establishing his right.
There are no specific statutory rules on occurrence, but occurrence-based policies such as property and liability policies must be interpretated as per the terms and conditions of a particular policy.
There are no statutory rules on occurrence, these are determined based on the policy terms and conditions.
There are no specific rules governing the interpretation of insurance, but as a general rules governing the interpretation of all and any contract including insurance, if the wording of a contract is clear it is not permissible to deviate therefrom by interpreting it to ascertain the intent of the parties, however, if there is room for interpretation of the contract, the common intent of the contracting parties must be ascertained from the totality of its tenor and the circumstances of its execution without considering the literal meanings of its words or phrases, and be guided by the nature of dealing and current customs and the good faith and honourable dealing which must be satisfied by the parties.
If it was impossible to clear an ambiguity which surrounds a stipulation of the contract leaving a doubt as to the real intent of the parties in respect thereof, the doubt shall be interpreted in the interest of the party which would suffer injury from enforcement of the stipulation. The doubt shall, in particular, be interpreted in the interest of a debtor, if the enforcement of the stipulation tends to burden him with the obligation or make it weigh more heavily on him.
Article 95(1) of the Civil Transaction Law, Royal Decree No. (D/191) of 1444 A.H.(“Civil Transactions Law”) confirms that all contract executed in KSA including insurance contracts are subject to the concept of good faith. Article 104 further provides guidance on the interpretation of contracts including insurance policies, including:
If the expression of the contract is clear, its meaning shall not be altered under the pretext of interpreting it in search of the will of the contracting parties.
If there is a need to interpret a contract, the shared will of the contracting parties shall be sought, without full reliance upon the literal meaning of the words. The same shall be made in accordance with the customary practice, the circumstances of the contract, the nature of the transaction, the principles set for dealing between the contracting parties and the prevailing requirements of honesty and trust between the contracting parties.
Doubt shall be interpreted in favor of the party bearing the burden of the obligation or of the term, and for the standard form contracts, doubt shall be interpreted in favor of the party having the inferior bargaining position.
All contract executed in the UAE including insurance contracts are subject to the concept of good faith. The contract of insurance are interpreted in strict senses unless adherence of strict wording would unfairly exploit the interest of the party.
No there isn’t, all insurance is supposed to be valid as long as the insurance is based on a lawful economic (of pecuniary value) interest.
There are general references to the concept of insurable interest in the Implementing Regulations (Article 55 requires insurers to take into consideration the insurable interest when reviewing an application for insurance). However, there is no definition of what is meant by “insurable interest” and the current KSA insurance law does not explicitly address provisions or definitions related to uninsurable interest. Generally, however, criminal liability is excluded from the insurance cover.
The insurance laws in the UAE does not explicitly address provisions or definitions related to uninsurable interest. In the local insurance market, various insurers do provide coverage for civil fines and penalties under liability product such as errors / omission policy (also known as professional indemnity policy), product liability cover. There are however some matters which attract penal consequences, but would have generally attracted civil consequences in other jurisdictions, and such matters are usually then excluded from standard covers. An example of this is cheque bounce, which can potentially mean penal consequences for the signatory, who is generally a manager of the company, and would therefore be excluded from a standard form D&O cover.
Where the insurance is against injuries, the insurer has an obligation to compensate the insured for the damage resulting from the occurrence of the risk insured against provided the compensation does not exceed the sum of the insurance.
However, if you mean by that question the increase of the risk, Iif the risks insured have increased by or without the act of the insured, the insurer may claim termination of the policy unless the insured has accepted to increase the insurance consideration commensurately with them increase in the risk. However, the insurer may not, however, adduce the increase in the risks if after having in any manner become aware of them he expressed his wish to keep the policy in force, or in particular if he has continued receiving the premiums, or if he has paid the compensation after the risk insured has taken place.
The insurance law in KSA does not set out any regulation governing excess cover.
The insurance laws in the UAE does not set out any regulation governing excess cover.
See response above in question 31.
There are no provision under insurance regulation which sets out the risk that cannot be insured. As a general rule, the criminal liability are excluded from the insurance cover.
In general, under UAE law, civil, regulatory fines and penalties are insurable, unless expressly excluded under a policy. As mentioned in our response to Q27, there could be an argument that pursuant to Article 205 of the Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE, insuring fines and penalties (specifically punitive fines and penalties) should not be permissible because that would be contrary to public order or morals.
Civil matters routinely involve criminal complaints. For example, in the context of wrongful death and bodily injury, fines can be imposed under Shariah law, such as "Diya" and "Arsh" by UAE courts. These fines are insurable and are often insured, as they are deemed to be compensatory in nature.
As a general rule in all and any contract including insurance contracts, the good faith and honourable dealing must be satisfied by the contract parties.
Civil Transactions Law confirms that all contract executed in KSA including insurance contracts are subject to the concept of good faith.
In addition, the Implementing Regulations set out several good faith expectations, such as requiring insurance and reinsurance companies to price insurance policies fairly, reasonable and adequately (Article 46), and also that claims must be settled at the earliest opportunity and within the set timeframes (Article 44).
Moreover, Rules of Professional Conduct in the Insurance Intermediaries Regulation requires the intermediaries to act in an honest, transparent and fair manner, and fulfill all of their obligations towards clients and insurance and reinsurance companies.
The principle of good faith is firmly embedded under Article 246 of the Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE where the parties are obliged to execute a contract "in accordance with its contents and in a manner consistent with the requirements of good faith."
While the concept of good faith is not explicitly defined, Article 246 elucidates that adherence to the express terms of the contract is not the sole obligation. It encompasses elements intrinsic to it based on the law, custom, and the nature of the transaction. Importantly, parties are prohibited from unfairly exploiting the strict wording of a contract. This provision extends its applicability to insurance contracts as well.
For further information,please contact Anand SIngh, Ahmed Rezeik, Melody Huang, Passant Mansour, and Veena Shankar.
Published in March 2024
