Individuals, families, businesses, properties and assets are exposed to different types and levels of risks like death, health, assets, property, etc.
Ahmed RezeikSenior Counsel,Transport & Insurance
Passant MansourAssociate,Transport & Insurance
The world we live in is full of uncertainties and risks. Individuals, families, businesses, properties and assets are exposed to different types and levels of risks. These include risk of losses of life, health, assets, property, etc. While it is not always possible to prevent unwanted events from occurring, financial world has developed products that protect individuals and businesses against such losses by compensating them with financial resources. Insurance is a financial product that reduces or eliminates the cost of loss or effect of loss caused by different types of risks.
Apart from protecting individuals and businesses from many kinds of potential risks, the Insurance sector contributes significantly to the general economic growth of the nation by providing stability to the functioning of businesses and generating long-term financial resources for the industrial projects.
As we highlighted earlier, in 2019 Kuwait has introduced a new insurance law (Law No. 125 of 2019 concerning the Regulation of Insurance (New Insurance Law)), which repealed the previous insurance law from 1961.
One of the most notable changes introduced by the Insurance Law is the establishment of the Insurance Regulation Unit (IRU), which is a new regulatory body to supervise insurance operations in Kuwait.
The New Insurance Law also provides for the establishment of the Supreme Committee of the IRU whose role is to oversee the development and supervision of the insurance sector in Kuwait. These are both likely to be welcomed developments in the Kuwaiti insurance sector.
By the developments made in this sector, the insurance market is expected to grow by 8.2% between 2019 and 2024, in part due to population growth and the making of certain insurance covers obligatory. For example, in March 2019, the Kuwaiti National Assembly issued a legal requirement for visitors to Kuwait to obtain health insurance coverage during their stay in Kuwait.
As such, The New Insurance Law comes to light and applies to all insurance companies (whether Kuwaiti or foreign branches) by undertaking insurance business in the country. Where Kuwait established that the risks can only be insured by insurance companies licensed by the IRU, either as a joint stock company incorporated in Kuwait or through a branch of a foreign insurer. Similarly, insurance brokers and insurance agents and/or any insurance professionals must be authorised by the IRU to carry out insurance activities in Kuwait.
Through this article, we will focus on the new IRU requirement which applies on the foreign branches of the foreign insurance companies, which have a branch in Kuwait or are keen to open new branches of their company in Kuwait, where the IRU had a particular requirement according to the new law along with its executive regulation for these branches to apply thereon.
There are some basic requirements which shall be hold with any Foreign Insurance Company to keep their licence or for those who are willing to establish a new branch in Kuwait, where of course will be supervised by the IRU. In addition, the IRU provides some new requirements, such as that the companies must provide the proves that they are practicing and providing insurance services which is not provided by any existing insurance company in Kuwait market, bearing in mind that the parent company are practicing the same activity. In addition, the company must be rated and classified by an international Insurance Company rating agency listed in the Unit’s decision that identifies the rating required.
In the Past, the process of renewing the current licence or opening a new branches of a foreign insurance companies was limited to some specific requirements regulated by some ministry decrees, however these decrees replaced by the new requirements which issued from the IRU in order to be able to renew or open a branch in Kuwait which was mainly divided into three sections , firstly, related to the documentation needed, secondly appointing general manager of the branch and third, related to the company presentation of Financial position which all the branches shall comply with.
At the time being, the IRU introduced some new requirements including but not limited to bring a branch license from Kuwait Investment Promotion Authority (KDIPA) is a specialized public authority that is responsible for promoting direct investment in Kuwait through developing, promoting, advocating, and regulating. The site provides general information about Kuwait, available services in Kuwait, the Kuwaiti economy, and relevant legal economic laws. In addition, the site provides information about investment opportunities, data, and statistics, where will be going forward opening the door for receiving new application / request from any foreign insurance company seeking for establishing a branch in Kuwait, it sounds like now that any new applicant may go directly to KDIPA to start the establishment of the same.
Establishment through KDIPA: The Foreign Direct Investment Law no. 116 of 2013 (“FDI Law”), provides that investment license may be sought for (i) companies with limited liability, shareholding companies or single person companies, (ii) branch offices of a foreign company licensed to operate within Kuwait, and/or (iii) a representative office whose main purpose is limited to the study of markets and production. In addition to up to 100% foreign ownership of a Kuwaiti company, the FDI Law also offers certain exemptions and incentives such as: exemption from income tax or any other taxes for a period not exceeding ten years; exemption from taxes, customs duties or any other fees that may be payable on imports of machinery and equipment and their spare parts, raw materials, for a period of five years; employment of foreign labour; employment of required foreign manpower without being subject to local manpower requirements; and allocation for use of land and real estate for the investors.
Article 1 of Ministerial Resolution No. 75 of 2015 (Specifying a List of the Direct Investments which are not subject to the Provisions of Law 116 of 2013) sets out the “Negative List” which specifies the ten different sectors which are not eligible for an investment license which is not including insurance activities.
Therefore, so long as a foreign investor’s activities do not fall under the Negative List, it should be eligible to submit an application for a foreign investment license. It does not appear that insurance activities fall under the Negative List and therefore, in theory insurance activities should be eligible for an investment license.
Generally, KDIPA will be requesting the applicants to be carrying particular legal documents to be submitted along with the application form, and he interesting thing is that KDIPA’s team members will be with you throughout the entire process, offering continued facilitation and aftercare services. Therefore, there is an account manager will be assigned for each of the submitted project, and their team will be working alongside during your application process up to the establishment of your entity, ensuring that your experience with KDIPA is exceptional.
The main documents divided to documents needed from the parent company that make sure that the same is existed, certified and registered in their country, and documents needed from the branch itself which are listed as follows:
Legal document supporting the designated for managing the “Branch” to be established in the State of Kuwait issued by the concerned authority in the Mother Company and showing the scope and date of its validity.
A hard and an electronic copy of the project’s initial study.
Lists of imports, costs, sources of origin, and value.
Total national and foreign labor and the percentage of each according to the nature of the work, annual costs, and the proposed internal and external training programs.
The above-mentioned required documents shall be submitted by the applicant who will be holding a Civil ID or Passport along with a POA / authorized letter from the parent company.
Bearing in mind that any original copy in English shall be certified by the Embassy of Kuwait in the country of the parent company and making sure that all the submissions are in Arabic
Now, IRU called all current licenced insurance branches in Kuwait and the companies that need to establish a new foreign branch in Kuwait to apply to KDIPA immediately through a new application to issue a new insurance licenses for the branches of a foreign insurance company.
In the above article, we highlighted a few requirements that must be submitted from any companies to move forward for proceeding on establishing a new branch of foreign insurance company, however, we will remain available should you require any advice regarding the establishing of the licence.
For further information, please contact Ahmed Rezeik or Passant Mansour.
Published in November 2022
