Insurance
Federal law & Executive Regulation
Insurance Authority Laws
Federal Decree-Law No. (48) of 2023 Regulating Insurance Activities
We, Mohammed bin Zayed Al Nahyan,President of the United Arab Emirates,
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Having reviewed:
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The Constitution;
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Federal Law No. (1) of 1972, on the Competences of Ministries and the Powers of Ministers, as amended;
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Federal Law No. (6) of 2007, Regulating Insurance Business, as amended;
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Federal Decree-Law No. (14) of 2018, on the Central Bank and Regulation of Financial Institutions and Activities, as amended;
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Federal Decree-Law No. (32) of 2021, on Commercial Companies; and
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Based on the Proposal submitted by the State's Vice-President, the Deputy Prime Minister and the Minister of Presidential Court, and the Cabinet approval thereof,
Hereby enact the following Decree-Law:
Chapter One Preliminary Provisions
Article (1) Definitions
For the purpose of applying the provisions of this Decree-Law, the following words and expressions shall bear the meanings assigned thereto respectively, unless the context requires otherwise:
The State
:
The United Arab Emirates.
The CBUAE
:
The Central Bank of UAE.
Board
:
The CBUAE's Board of Directors.
Chairman
:
The Chairman of the Board.
Governor
:
The CBUAE's Governor.
Free Zone
:
Any financial free zone established in the State under the provisions of Federal Law No. (8) of 2004, on Financial Free Zones, or any other superseding law.
Insurance Company (Insurer)
:
An insurance company incorporated in the State and a foreign insurance company licensed to engage in insurance business in the State, either through a branch or through an Insurance Agent.
Reinsurance Company
:
A reinsurance company licensed to engage in reinsurance business, either in the State or abroad.
Companies
:
Insurance and reinsurance companies.
The Insured
:
A Person that enters into an insurance policy with the Insurance Company for their benefit or the benefit of the named Insured or the Beneficiary.
Beneficiary
:
A Person who initially acquires the Insurance Policy rights or to whom such rights are legally transferred.
Insurance Policy
:
A contract between the Insurer and the Insured setting out the insurance terms, rights and obligations of both parties or the rights of the insurance Beneficiary, and the annexes attached to the policy constitute an integral part thereof.
Insurance Agent
:
A Person licensed or authorized the CBUAE, and is approved by the Insurance Company and authorized to carry out insurance activities on its own behalf or on behalf of a branch thereof.
Insurance Broker
:
A legal person licensed by the CBUAE and acts as independent intermediary in insurance and re-insurance operations between an insurance or reinsurance applicant on the one side and any Company on the other side, and receives, in consideration of its efforts, a commission from the Company with which insurance or reinsurance is concluded.
Surveyor and Loss Adjuster
:
A Person licensed or authorized by the CBUAE to detect and assess the damage incurred as a result of the insured risk.
Insurance Consultant
:
A Person licensed or authorized by the CBUAE to examine insurance requirements for their clients and give advice in respect of the suitable insurance coverage, assists in preparing insurance requirements and receives their fees from their clients.
Actuary
:
A Person licensed or authorized the CBUAE to set the value and price of Insurance Policies, and to asses the technical provisions, accounts and all matter related thereto.
Health Insurance Claims Management Company
:
A legal Person licensed the CBUAE to engage in health insurance claims management business.
Insurance-Related Professionals
:
Any Person licensed or authorized the CBUAE to operate as an Insurance Agent, Insurance Broker, Surveyor and Loss Adjuster, Insurance Consultant, Actuary or health insurance claims manager, or any other profession related to insurance as determined and regulated by a resolution of the Board.
Branch
:
A branch of the Company that carries out insurance activities in its own name.
Premium
:
An amount of money paid or payable by the Insured under the Insurance Policy and is called "Contribution" in Takaful insurance.
Authorized Manager
:
A natural Person appointed by a foreign insurance Company to manage its branch in the State.
Senior Employee
:
Any Person who occupies an executive position equivalent to the functions of a director-general, Authorized Manager or the deputy or assistant of either one, or any department director, internal audit director or branch manager.
Technical Provisions
:
Provisions which the Insurer must deduct and retain to cover the Insured's accrued financial obligations vis-a-vis the Insured, pursuant to the provisions of this Decree-Law.
Solvency Margin
:
A surplus in the value of the Company's existing assets over its liabilities to such an extent that enables it to fulfil all its obligations and pay the required insurance payouts once they become due without impeding the Company's business or weakening its financial position.
Minimum Guarantee Fund
:
An amount equal to one third of the required Solvency Margin or the amount determined by the Board, whichever is greater.
Auditor
:
A Person authorized to carry out accounting and audit functions in the State.
Takaful Insurance
:
A collective contractual scheme intended to achieve solidarity and cooperation among a group of contributors to address certain risks, where each one pays an amount of money called "contribution" to be deposited in a Takaful insurance fund through which compensation is to be paid to eligible persons when a risk is sustained.
Higher Sharia Authority [HAS]
:
The authority established under Federal Decree-Law No. (14) of 2018, referred to hereinabove.
Person
:
A natural and legal Person.
Commercial Register
:
The Register established with the competent authority under Federal Decree-Law No. (37) of 2021, on the Commercial Register, or any other superseding law.
Article (2) Scope of Application
1.
The provisions of this Decree-Law shall apply to the following categories:
a.
Insurance Companies and Insurance-Related Professions; and
b.
Holding companies that control or acquire (15%) of the volume of insurance business in the State, or whose insurance activity and related services represent more than (50%) of their revenues. The Board shall issue the controls governing the operation of such Companies in the insurance activity.
2.
The provisions of this Decree-Law shall not apply to the Companies operating in the financial Free Zones, save as specifically provided for in this Decree-Law.
Article (3) Insurance Concept
An insurance is a contract whereby the Insurer undertakes to pay the Insured or the eligible Beneficiary an amount of money, an arranged revenue or any other monetary compensation in case the insured incident or risk has occurred, in return for Premiums or any other regular payments to be paid by the Insured to the Insurer.
Chapter Two Insurance Business
Article (4) Insurance Types
The insurance business shall be divided into the following types:
- Insurance of Persons and fund accumulation operations; and
- Property and liability insurance.
The resolutions, statutes, regulations and instructions issued by the Board shall determine the insurance activities that fall under each insurance type of the above.
Article (5) Compulsory Insurance
The Board may impose compulsory insurance against some risks under any regulations whereby the controls and conditions of insurance and other provisions related thereto are identified.
Article (6) Insurance Services Fees
- The CBUAE shall charge fees for supervision and control, in addition to any other chargeable fees for the services provided the CBUAE under the provisions of this Decree-Law, including the services of issuing licenses and permits.
- The Board shall issue a resolution determining the fees referred to in Clause (1) above, and shall publish the same in the Official Gazette.
Article (7) Establishment of Funds
The CBUAE may establish funds with an independent legal person for the purpose of protecting policyholders, Beneficiaries and aggrieved persons. A resolution shall be issued by the Board specifying the method of forming such funds and their objectives, mechanism of finance, risks covered by them and benefits they provide when such risks occur, methods of their termination and the provisions of their liquidation.
Chapter Three Functions of the Board and the Governor
Article (8) Functions of the Board
The Board shall adopt the policies, regulations and rules necessary for regulating insurance business, pursuant to this Decree-Law, including the following:
- The Solvency Margin and the Minimum Guarantee Fund controls according to the generally-accepted international standards in this regard;
- Basis of calculating the Technical Provisions;
- Reinsurance criteria and controls;
- Basis of investing the Company's assets;
- Determining the Company's assets that meet the accrued insuring obligations;
- Accounting policies to be adopted by the Company and the required forms to prepare and present financial statements;
- Basis of developing accounting books and records of the Companies, Agents, and Brokers, along with determining the data to be recorded in such books and records;
- Records which the Company commits itself to maintain and the description of such records, as well as data and documents that must be furnished to the CBUAE;
- Conditions, controls and ethics for practicing the insurance and reinsurance activity and the Insurance-Related Professions;
- Anti-money laundering and combating terrorism financing and the financing of illegal organizations in insurance activities, in cooperation with the relevant authorities;
- Insurance policy rates it deems appropriate and the technical grounds thereof;
- Controls and conditions for licensing the Companies and the Insurance-Related Professionals;
- Minimum capital for the Companies and the Insurance-Related Professionals;
- Rules and controls necessary to protect clients of the Companies and Insurance-Related Professionals and provide them the appropriate Insurance Coverage;
- Conditions, rule and controls for approving Auditors of the Companies and the Insurance-Related Professionals and their obligations;
- Setting out and determining the Emiratization targets in the insurance sector, monitoring the compliance with such targets and imposing penalties and fines on the Companies and the Insurance-Related Professionals that do not comply with the same, and to that end, it may coordinate with the relevant authorities or may entrust them with any of such functions; provided that the Board shall set a mechanism for the retention and disposition of amounts of such fines, and the CBUAE shall submits an annual report to the Cabinet on the Emiratisation targets and the actions that have been taken to achieve such targets;
- Regulating Takaful Insurance business, including the provisions and procedures for appointing and approving the Sharia Supervisory Committee and the conditions required to be fulfilled by its members;
- The financial reporting system and the external audit of the Companies and the Insurance-Related Professionals;
- Regulations, rules, standards, directives and instructions related to inspection operations and procedures of the Companies and the Insurance-Related Professionals; and
- Regulations, rules and standards related to the competency of the Senior Employee.
Article (9) Functions of the Governor
- The Governor shall issue the policies, regulations, statutes, instructions and rules approved by the Board, and shall issue the resolutions and instructions necessary for implementing the same.
- The Governor shall be responsible for applying the provisions of this Decree-Law and the CBUAE's regulations and the Board's resolutions issued in pursuance thereof.
- The Governor may delegate his functions set forth herein to any of his deputies, assistants or other Senior Employees of the CBUAE; provided that the delegation is in writing and for a specific period.
Chapter Four Insurance Companies
Article (10) Engagement in Insurance Business
Any of the following Persons licensed the CBUAE may engage in insurance business in the State:
- An Insurance Company incorporated as a public joint-stock company in the State; and
- A branch of a foreign Insurance Company.
Article (11) Prohibition of Combination of Insurance Operations
1.
Insurance Companies may not combine persons and fund accumulation insurance operations and property and liability insurance operations.
2.
Existing companies licensed to carry out the two types of insurance before issuing Federal Decree-Law No. (6) of 2007, referred to hereinabove, shall remain in practice.
3.
The Companies referred to in Clause (2) above shall comply with the following controls:
a.
Complete separation between persons and funds accumulation insurance operations and property and liability insurance operations in terms of technical, financial, technological, administrative and legal procedures and the relevant technical, administrative and financial systems and staff, except for the Company's Director General; and
b.
Drawing up all financial reports and statements required by virtue of this Decree-Law and the Board's instructions and resolutions on a unified aggregate basis, and on the basis of the separation between persons and funds accumulation insurance operations and property and liability insurance operations.
4.
Notwithstanding the provisions of Clause (2) above, the Cabinet may, at the proposal of the Board, issue a resolution obligating Insurance Companies to adjust their affairs pursuant to the provisions of Clause (1) above, or may issue a resolution that such Companies remain carrying out the two types of insurance and while being prohibited from issuing new Insurance Policies combining the property and liability insurance and the persons and funds accumulation insurance operations, in accordance with the controls and requirements set by the Cabinet in this regard.
Article (12) Insurance with a Company Abroad
- Insurance brokerage for funds or property existing in the State or for the liabilities arising therefrom may only be carried out by an Insurance Company licensed under the provisions of this Decree-Law.
- The Company may reinsure any property inside and outside the State.
- No Person may conclude an Insurance Policy with an Insurance Company outside the State to cover any money or property in the State or liabilities arising therein. No legal person in the State may insure its personnel in the State with an Insurance Company outside the State.
- Notwithstanding the provisions of Clause (3) above, insurance may be made with an Insurance Company in the State in case the required Insurance Coverage is not available in the State, or Insurance Companies abstain from, or unable to provide such coverage, or for any other reasons decided the CBUAE, in accordance with the controls and conditions determined by the Board in this regard.
Article (13) Insurance Policy Language
- The Insurance Policy shall be drawn up in the State in Arabic, and an accurate translation into any other language may be attached therewith. In case of discrepancy in the translation of the policy, the Arabic text shall prevail.
- The policy's clauses exempting the Insurance Company from liability shall be written in bold with a different colour, and must be approved by the Insured beforehand.
- Insurance Policies may be electronically issued, in accordance with the terms and conditions established by virtue of a resolution by the Board.
- Notwithstanding the provision of Clause (1) above, the Governor may exclude certain Insurance Policies from the condition of being drawn up in Arabic if so requested the CBUAE.
Chapter Five Governance of the Companies
Article (14) General Framework of Governance
The CBUAE shall set the general framework for governance of the Companies, as well as the regulations and rules for organizing the work of their boards of directors. the CBUAE shall also set the conditions that must be fulfilled by board candidates and the conditions for appointing their Senior Employees; provided that the Companies whose securities are listed on financial markets of the State shall comply with the governance requirements issued by SCA.
Article (15) Conditions of Appointment of Board Member, Director General or Authorized Manager of the Company
A Person to be appointed as a board member, Director General or Authorized Manager of the Company must:
- Have never been convicted of a felony or misdemeanor involving moral turpitude and breach of trust or of insolvency, unless rehabilitated; and
- Have never been punished with any administrative sanction determined by a decision of the Board, on the grounds of committing a violation of any of the provisions of this Decree-Law or Federal Decree Law No. (32) of 2021, referred to hereinabove, in his capacity as a Director General or board member of a Company or beneficial owner thereof or controlling over its capital, including the liability for causing loss, bankruptcy or liquidation of the Company.
Article (16) Prohibitions
1.
The Company's chairman, board member, Director General and Authorized Manager or who acts on their behalf shall be prohibited from:
a.
Engaging in managing other competing Insurance Company or any company that carries out the same or similar Insurance activity;
b.
Competing the Company's business or carrying out any action or activity that conflicts with the Company's interest;
c.
Practicing as an Insurance Agent or Broker; or
d.
Receiving a commission for any insurance operation.
2.
Any Person who assumes the management of the Company or any employee thereof may not be a representative of any shareholder of the Company.
Article (17) Conditions for Appointment of Senior Employee
- In order for a Senior Employee to be appointed, he/she must fulfil the same conditions set forth in Article (15) above, in addition to the fulfillment of the qualifications, efficiency and expertise requirements necessary for carrying out insurance operations. The Company shall provide the CBUAE with a detailed statement containing the academic qualifications, practical experience and documents supporting the above.
- The Board shall issue a resolution defining the academic qualifications, the practical experience and the documents referred to in Clause (1) above.
Article (18) Vacant Position
The Company shall notify the CBUAE in case the position of the Company's board member, Director General, Senior Employee or Authorized Manager becomes vacant. The Company's board of directors or the Company, as the case may be, shall fill the vacant position within a period not exceeding (30) days from the date of being vacant, after obtaining the approval of the CBUAE.
Article (19) Providing the CBUAE with Meeting Minutes
The Company's board of directors shall provide the CBUAE with copies of the board's minutes of meetings and decisions related to the election of the Company's chairman, vice-chairman and members authorized to sign on behalf of the Company and their specimen signatures, within (7) seven days from date on which such decisions are issued.
Article (20) Resignation of Board Members
Should the chairman and board members submit their resignations or should the vacant positions reach one quarter of the Company's board members, the Governor shall:
- Form an interim committee comprising experienced and specialized individuals and appoint a chairman and vice-chairman thereto to assume the management of the Company;
- Call for a general meeting within a period not exceeding (3) three months following date of forming the committee, renewable for a similar period only once, in order to elect a new board of director of the Company. The Company shall bear the committee's remunerations, as decided by the Governor.
Article (21) Protection of the Company
1.
The CBUAE shall take whatever measures it deems appropriate for the proper functioning of the Company's business, in accordance with the controls determined by the Board. To that end, the CBUAE may:
a.
Request to hold a general meeting to discuss any subject the CBUAE deems critical;
b.
Request to include any item the CBUAE deems necessary to be included on the Company's general meeting agenda, even while the general meeting is being held; and
c.
Stay the execution of any decision issued by the Company's general meeting if it contradicts the laws or regulations in force.
2.
If the Company's general meeting is unable to take a decision on the appointment of its Auditor, or if the appointed auditor rejects the appointment for any reason whatsoever, the CBUAE may appoint an Auditor for a period of one fiscal year and determine their fees at the Company's expense.
3.
If the Company's general meeting is unable to appoint members of the Sharia Supervisory Committee, pertaining to Companies where such committee is required, or if this appointment is not possible for any reason, the CBUAE may appoint the members of the Committee and fix their remunerations at the expense of the Company.
Article (22) Publication of the Call to the General Meeting
- The Company may publish a call to hold the general meeting in newspapers only following the approval of the CBUAE of the publishing. The Company may only include any additional items on the general meeting's agenda subject to prior approval of the CBUAE.
- Subject to the provisions of Clause (1) above, a Company whose securities are listed on financial markets may publish an invitation to the general meeting in newspapers only following the approval of SCA.
Article (23) Technical Provisions and Reserves Required to be Maintained
The Company, in implementation of the instructions issued by the Board, shall maintain the following:
- Solvency margin and the Minimum Guarantee Fund, as per the type of insurance carried out by the Company;
- Technical Provisions estimated at the end of each fiscal year; and
- Reserves to be maintained in the State.
Article (24) Appointment of Actuary
The Company licensed to engage in insurance business shall appoint or approve a registered actuary, pursuant to the provisions of Article (65) hereunder, within one month from date of being granted the license, and shall so notify the CBUAE within one month from the date of appointment or approval of the Actuary.
Article (25) Insurance Pool
Insurance Companies may together create one or more insurance pool(s) to provide an Insurance Coverage of any branch of insurance or any specific operation for the benefit of the pool, pursuant to the bylaw of each pool; provided that the CBUAE's prior approval is obtained.
Chapter Six Obligations of the Company
Article (26) Payment of Compensation
The Insurance Company shall pay the compensation set out in the Insurance Policy to the Insured or to the Beneficiary, as the case may be, as soon as the insured incident occurs or the insured risk is realized. Whereupon, the Insurance Company shall subrogate the Insured for the indemnity it paid for damage in claims of the Insured vis-à-vis the party causing the damage for which the Insurance Company's liability has arisen.
Article (27) Insurance of Vehicles
The Insurance Company shall conclude the Insurance Policy for all motor vehicles licensed in the State when so requested by stakeholders. The Board shall set the insurance rates as commensurate with the severity of risks.
Article (28) Provision of Data and Information
- The Companies and the Insurance-Related Professionals shall provide any data or information requested the CBUAE about them or about any Company possessively related or associated therewith in any manner whatsoever, within the time limit set the CBUAE.
- The Company's Board of directors shall invite the CBUAE to attend the general meeting before at least (15) fifteen days from date of its convention. the CBUAE may assign one of its employees to represent it for such purpose.
- the CBUAE may assign one or more of its employees to verify or audit any of the Company's transactions, records or documents, within the normal business hours of the Company. The Company shall put any of the aforesaid at the disposal of the so assigned employee and shall cooperate with him to enable him to fully perform his duties.
- CBUA may, based on the audit result, assign experts, consultants, Actuaries or Auditors to audit/check the Company's operations, evaluate its positions and submit a report thereon. The Company shall cooperate with them in a manner that enables them to fully perform their duties. The company shall bear their remunerations, as determined the CBUAE for any one of them.
- The expert, consultant, Actuary or Auditor may not disclose to any third party whatsoever any information concluded under Clause (4) above without obtaining the CBUAE's written approval, except for the disclosure that is based on a court order.
Article (29) Financial Reports
- The Company shall provide the CBUAE with a detailed annual report on its operations signed by the board chairman, the Authorized Manager or authorized signatories of the Company, including the annual financial statements, financial reports reflecting detailed profits and losses of the type of insurance carried out by the Company and each branch thereof and the Auditor's report, within a period not exceeding (3) three months from the end of the fiscal year. the CBUAE shall be delivered a copy of the report, at least (15) fifteen business days before inviting to the general meeting.
- The Company shall present the financial accounts and statements referred to in Clause (1) above only after obtaining the CBUAE's approval.
- The board chairman or Director General shall promptly notify the CBUAE if the Company is exposed to serious financial or administrative situations compromising rights of the Insured or Beneficiaries.
Article (30) Insurance Policy Forms
- The Company shall provide the CBUAE with forms of the Insurance Policies and their approved annexes, including the general and special terms and conditions, the technical grounds of such policies and the Premiums rates annexed thereto, and shall provide the CBUAE with schedules of the redemption values of life Insurance Policies and funds accumulation operations and the premiums rates annexed thereto.
- Where the public interest requires or in case of imperfection that may compromise the interests of Policyholders, the CBUAE may request the Company to introduce an amendment to the forms of Insurance Policies and their approved annexes, within the period determined the CBUAE for such purpose.
- The Company shall provide the Insured and the Beneficiaries with copies of the Insurance Policies and the annexes thereof after the amendment is introduced, within the time limit set the CBUAE.
Article (31) Disclosure and Transparency
The Companies shall comply with the principles of disclosure and transparency while dealing with the Insured and the Beneficiaries and in all policies, documents, leaflets, advertisements, publicity, articles and scientific materials issued by them, which are regulated by a resolution by the Board.
Article (32) Auditor
1.
The Company's Auditor shall submit a prompt report to the CBUAE, with a copy thereof to the Company's board chairman in any of the following cases:
a.
If they found out that the financial position of the Company does not enable it to fulfill its obligations vis-a-vis the Insured or Beneficiaries or hinders its capacity to fulfil the financial requirements set forth in this Decree-Law and the resolutions, regulations, statutes and instructions issued thereunder related to the financial position of the Company;
b.
If they found out that there is grief imperfection in the Company's performance of its financial procedures, including entering data in its accounting records, and the existence of material deficiencies in the internal controls that could pose a threat to its financial position and stability;
c.
If they refuse or have reservations in respect of any certificate or statement issued by the Company related to its income or financial statements;
d.
If they fail to express their opinion on the Company's financial statements due to material misrepresentations or fraud;
e.
If they find out that the Company does not comply with the laws, resolutions, regulations, statutes and instructions related to the Company's financial statements; and
f.
If they decide to resign or their reappointment to the Company is rejected.
2.
the CBUAE may request the Auditor to furnish it directly, within a specific period, with the information needed to monitor the Company's operations.
3.
When the Auditor recommends that the financial statements filed thereto by the board of directors be rejected, the Company's general meeting shall decide the following:
a.
To return the financial statements to the Company's board of directors and ask the latter to correct the statements according to the Auditor's observations and are deemed approved after the observations are corrected.
b.
To refer the subject to the CBUAE to appoint a committee of expert Auditors and fix their remunerations to be charged by the Company to adjudicate the subject matter of the dispute between the Company's board of directors and its Auditor. Having been presented again to, and approved by the general meeting, the Committee's decision shall be binding and the financial statements shall be adjusted as per the committee's decision.
Chapter Seven Measures, Sanctions and Grievance
Article (33) Measure and Sanctions
1.
the CBUAE may conduct regular inspection of the Companies to ensure the soundness of their financial positions and their compliance with the provisions of this Decree-Law and the technical bases of carrying out insurance and reinsurance operations. To that end, the CBUAE may verify that the Company complies with the following:
a.
Its fulfillment of its obligations and that the CBUAE shall not be held liable for its failure to do so or its inability to continue in business;
b.
The Company does not commit any violation of the provisions of this Decree-Law or the resolutions, regulations, statutes or instructions issued in pursuance thereof;
c.
The adequacy of measures taken by the Company on the reinsurance of risks assumed by the same;
d.
Compliance with the license conditions necessary to engage in insurance business;
e.
The Company's total losses shall not exceed (50%) fifty percent of its paid-up capital; and
f.
It shall not cease to conduct its business without legitimate justification.
2.
Where the Company fails to comply with any provisions of Clause (1) above, the CBUAE may impose whatever measures or sanctions it deems appropriate, and it may impose one or more of the following actions:
a.
Serving a notice describing the nature of violation, procedures for remedying it and a mechanism for regularization.
b.
Requesting the Company or the headquarters of a foreign insurance company, as the case may be, to take the necessary measures to regularize the administrative situations therein, including deposing the Company's Director General, Authorized Manager or any Senior Employee thereof.
c.
Deposing the Company's chairman and any board member proved to be responsible for the current status of the Company.
d.
Forming a neutral committee of experts to replace the Company's board of directors for a period not exceeding (6) six months, renewable for similar period(s), if necessary, and in all cases the total periods may not exceed (24) twenty four months, defining its functions and appointing its members, chairman and vice-chairman. The Company shall bear the committee's fees, as determined the CBUAE. The procedures for electing and forming a new board of directors shall be proceeded pursuant to the provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, at least (30) thirty days before the expiry of the committee's work.
e.
Taking the necessary actions to merge the Company into another Company, subject to the approval of the Company into which it will be merged.
f.
Preventing the Company from concluding new Insurance Contracts or preventing it from carrying out one or more type of insurance.
g.
Setting out a threshold limit for the total amounts of Premiums that the Company receives from the Insurance Policies issued by the same.
h.
Maintaining assets in the State equivalent in value to all net obligations arising from its business in the State, or a certain percentage of its value determined the CBUAE.
i.
Restricting the Company's engagement in any of its investment activities related to the Solvency Margin ratio, or obliging it to liquidate its investments in any of such activities for such purpose, unless the same would cause harm to the Company, as determined by the specialized expert.
j.
Appointing an independent supervisory member from outside the CBUAE to attend the Company's board meetings and participate in discussions, without having a vote, during decision-making, and the Board shall determine his functions and fees.
k.
Suspension of the Company's license.
l.
Revocation of the Company's license.
m.
Restructuring of the Company.
n.
Liquidation of the Company.
o.
Imposing a fine on the Company not exceeding (AED 100,000,000) one hundred million dirhams.
3.
The provisions of Clauses (1) and (2) above shall apply to the Insurance-Related Professionals, as commensurate with the nature of their professions.
4.
The measures set out in Clause (2) above shall be imposed by virtue of a resolution of the Governor, other than the measures referred to in Paragraphs (e), (l), (m) and (n), which shall be imposed by a resolution of the Board.
Article (34) List of Violations and Fines
The Board shall issue a list of violations committed by the Companies and the Insurance- Related Professionals, pursuant to the provisions of this Decree-Law and the fines imposed thereon.
Article (35) Filing Grievances Against CBUAE's Decisions
- A grievance committee shall be established by the CBUAE to consider grievances filed against decisions, measures and administrative sanctions issued pursuant to the provisions of this Decree-Law. The Board shall issue the necessary decisions on the formation of the committee, rules of procedure, remunerations of its members, experts to be engaged and all matters related thereto.
- Save as regulatory and supervisory policies, resolutions, regulations, directives and instructions. The committee referred to in Clause (1) above shall decide on grievances against the CBUAE's decisions, pursuant to the provisions of this Decree-Law and the resolutions issued in pursuance thereof.
- A grievance against a the CBUAE's decision shall be made within (20) twenty business days from the date of notification of the decision in accordance with the mechanism determined by the Board. The committee shall not accept grievances submitted after this time limit.
- Decisions falling within the competence of the Committee, pursuant to the provisions of this Article, may not be challenged before courts before a grievance against them is filed and decided.
- No grievance may be filed before the committee set out in Clause (1) above against decisions issued the CBUAE, pursuant to the provisions of Clause (2) of Article (41) hereunder.
Article (36) Inspection
- the CBUAE may assign any of its employees or any other licensed or authorized Person to inspect the Company or any other Company owned by such Company or is affiliated thereto, in order to ensure the soundness of its financial position and its compliance with the provisions of this Decree-Law and the resolutions, regulations, statutes and instructions issued in pursuance thereof, as well as other laws and regulations in force in the State.
- the CBUAE shall coordinate with the relevant regulatory authority in case of the inspection of Companies owned by the Insurance and Reinsurance Companies, Insurance-Related Professionals or associated Companies, which are governed by the regulatory authorities.
- the CBUAE may, in coordination with the relevant authorities in the State, inspect premises of any Person suspected to engage in any insurance and reinsurance business or the Insurance-Related Professions. To that end, the CBUAE may obligate the suspected Person to provide all information, documents and records related thereto and to seize them.
- The Companies and the Insurance-Related Professionals and companies owned by and affiliated to the same shall provide the inspector with whatever data, information, records, books, accounts and documents related to the subject of the inspection on the dates specified by him.
- The inspector may collect the necessary information and clarifications from any Person with whom the Company or the owner of the Insurance-Related Profession has a relationship with regard to the subject of the inspection.
- The inspector may summon any Person at the time and place specified by them to provide information, data, documents or records related to the inspection.
- the CBUAE may assign one of its employees or a specialized expert to guide the Company and the Insurance-Related Profession or supervise some operations within a specific period determined the CBUAE. If the expert is from outside the CBUAE, the Company and the Insurance-Related Profession shall pay his fees determined as determined the CBUAE.
- The Company and the Insurance-Related Profession shall bear all expenses of inspection and investigation that another person is assigned to carry out, pursuant to the provisions of Clause (1) above, if it is proved that it violates the provisions of this Decree-Law and the statutes and resolutions issued in pursuance thereof.
Article (37) Facilitation of Inspection
The Companies and Insurance-Related Professionals or any of their managers or employees may not:
- Prevent, obstruct, or hinder any employee or any other Person assigned the CBUAE from carrying out inspection or audit under the provisions of this Decree-Law;
- Conceal any data, records or books requested the CBUAE or whoever is assigned to carry out inspection or audit; and
- Issue any statements or give any inaccurate or misleading data, records or books.
Chapter Eight Funds of Insurance Companies
Article (38) Bank Deposit Amount
Every Insurance Company shall make a cash deposit in a bank operating in the State, as a security for implementing its obligations set forth in this Decree-Law, the amount of which shall be determined as follows:
- (AED 4,000,000) four million dirhams for person and fund accumulation insurance referred to in Clause (1) of Article (4) above.
- (AED 6,000,000) six million dirhams for property and liability insurance referred to in Clause (2) of Article (4) above.
- By virtue of a resolution of the Board, the amount of the deposit referred to in Clauses (1) and (2) above may be increased. The deposit shall be made to the order of the Governor.
Article (39) Disposition of the Bank Deposit
The deposit may only be disposed of for the payment of debts arising from insurance operations carried out by the Company; provided that a prior written authorization of the Governor or his representative is obtained.
If the value of the deposit diminishes below the prescribed limit if it is disposed of, the Company shall replenish the deposit amount within a period not exceeding (30) thirty days from the date of the CBUAE's request to replenish the deposit amount.
Article (40) Mathematical Reserve of the Company
The Company that carries out the type of insurance referred to in Clause (1) of Article (4) above must keep in the State funds whose value is at least equivalent to the full amount of the mathematical reserve of contracts concluded in the State or implemented therein. The Board may reduce the percentage of reserve the Company is required to keep.
Such funds must be completely separated from the funds of other insurance operations. When calculating the aforementioned reserve, the deposit referred to in Clause (1) of Article (38) above shall be taken into account, so that whichever value is greater shall be applicable.
Chapter Nine License
Article (41) Approval and License
- No Company may be incorporated in the State, and no branch of a foreign Insurance Company may be opened and no new branch may be added without the approval of the CBUAE.
- No Person may engage in insurance business without having the relevant license issued the CBUAE, which may, as it deems appropriate for the need of the national economy, approve or reject the issuance of the license, and in case of rejection, the CBUAE shall be reasoned.
- The Board shall revoke the license if it has been issued based on false information.
- No unlicensed Company may issue the Insurance Policy. Any Insurance Policy concluded by an unlicensed Company shall be null and void, and a bona fide affected party may claim compensation.
- The Board shall set the controls and requirements necessary for implementing the provisions of Clauses (1) and (2) above.
Article (42) Reinsurance Controls
The Company may not reinsure with another Company unless the other Company is licensed to carry out the insurance type entrusted to reinsure it according to the regulations issued by the Board.
Article (43) Fiscal Year
The fiscal year of the Company shall commence on 1st January and end on 31st December every year. However, the first fiscal year shall commence from the date of its registration in the Commercial Register and end on 31st December of the following year.
Chapter Ten Suspension and Revocation of the Company's License
Article (44) Cases of the Company's Suspension
The Governor may suspend the Company from carrying out one or more types of insurance for a period not exceeding one year, while informing both the Company and the relevant authority of the suspension decision, in any of the following cases:
- In case the Company violates the provisions of this Decree-Law or the resolutions, regulations, statutes or instructions issued thereunder;
- In case the Company lacks of any of the conditions required to be fulfilled in the license under the provisions of this Decree-Law;
- In case the Company fails to engage in business by carrying out any type of insurance covered by the license, or ceases to engage in such business for of one year;
- In case the Company is unable to fulfill its financial obligations; and
- In case the Company refrains from implementing a final court judgement related to the Insurance Policy;
The Company that has been suspended from carrying out one or more types of insurance shall implement its obligations that had been arisen before the suspension decision is issued.
Article (45) Removal of Suspension or License Revocation Reason
- If the Company removes, within a period not exceeding one year from the date on which the suspension decision is issued, the suspension reason, the Governor shall issue a decision approving it to continue in insurance business, and the CBUAE shall inform the relevant authority and the Company of the decision.
- In the event that the time limit referred to in Clause (1) above expires and the Company fails to remove the suspension reason, the Board shall delicense the type of insurance subject of the suspension, and the CBUAE shall so inform the company and the relevant authorities.
Article (46) Impacts of Suspension or Revocation of the License
1.
The procedures related to the suspension of business or revocation of the license for one or more types of insurances under the decisions issued by the Board in this regard.
2.
The issuance of a decision to suspend the business or revoke the license for one or more types of insurance shall:
a.
Prohibit the conclusion of Insurance Policies for one or more types of insurance subject of suspension or Revocation; and
b.
Consider all rights and obligations arising from Insurance Policies concluded before the suspension of business or revocation of the license effective and the Company shall be liable for the same.
Article (47) Relicensing the Company
If the license revocation reason is removed, the Company may, within a period not exceeding one year from the date on which the revocation decision is issued, submit an application to the CBUAE for licensing, accompanied by the documents proving the removal of the license revocation reason. The Board may issue its decision on approval or rejection, provided that the decision is reasoned, and the CBUAE shall inform the Company and the relevant authorities of the decision.
Article (48) Rejection of Relicensing Application
- Where the Board rejects the relicensing application for all types of insurance, or if the Company fails to submit a relicensing application, within the time limit referred to in Article (47) above, the Company shall go into liquidation within a period not exceeding one month from the date of expiry of such period or from the date of being notified of the rejection decision. If the Company fails to go into liquidation, it shall be liquidated in accordance with the provisions of this Decree-Law.
- The Company shall be delicensed if a liquidation decision is issued against pursuant to the provisions of this Decree-Law, a final court judgement of its liquidation is rendered or is declared bankrupt under the legislation in force in this regard.
Chapter Eleven Foreign Insurance Companies and Representation Offices of Foreign Insurance Companies
Article (49) Branch of Foreign Insurance Company
1.
A foreign Insurance Company's branch shall appoint a manager to manage the branch, who is authorized by a document attested by the relevant authorities to exercise all the powers necessary to manage such branch, including:
a.
Issuing Insurance Policies and annexes thereof and paying the compensations arising therefrom;
b.
Representing the Company's branch before the CBUAE, competent court and other relevant authorities; and
c.
Receiving communications, notices and all correspondence served to the Company.
2.
Before the engagement in Insurance Business, a foreign Insurance Company's branch shall submit an application to the CBUAE for licensing the branch; provided that the manager's appointment decision and the document referred to in Clause (1) above shall be attached to the application.
3.
The foreign Insurance Company's branch shall notify the CBUAE of the Authorized Manager's name within one month from his appointment date, and shall appoint a substitute within one month from the date on which position becomes vacant.
Article (50) Bank Guarantee
The foreign Insurance Company's branch shall submit an irrevocable letter of bank guarantee in favor of the CBUAE, in an amount not less than (AED 100,000,000) one hundred million dirhams in case of engagement in insurance activity, and an amount not less than (AED 250,000,000) two hundred fifty million dirhams in case of engagement in reinsurance activity, in accordance with the instructions issued by the Board in this regard.
Article (51) Final Account
The Foreign Insurance Company's branch shall provide the CBUAE with the total final account, and shall publish it in two local daily newspapers, one of which is published in Arabic.
Article (52) Representation Offices of Foreign Insurance Companies
- Representation offices of foreign Insurance Companies may not carry out their activities related to insurance in the State before obtaining the relevant license from the CBUAE.
- the CBUAE shall issue a resolution regulating the functions of such offices.
- The license shall be either accepted or rejected by virtue of a resolution of the Board, and the CBUAE shall so notify the relevant authorities.
Chapter Twelve Insurance Companies of Persons and Fund Accumulation Operations
Article (53) Policies Issued by Insurance Companies
The Companies engaged in insurance business for persons and fund accumulation operations may not distinguish between the policies issued of the same type; in terms of insurance rates, the amount of profits distributed to policyholders or other requirements, unless such distinguishment is generated from a difference in life chances for policies where the lifetime has an effect, except for:
- Reinsurance policies;
- Insurance Policies of amounts that enjoy certain discounts according to the price lists communicated to the CBUAE; and
- Insurance Policies that include special conditions on the life of members of a single family or a group of individuals related by a single profession/job or any other social bond.
Article (54) Insurance Policy Rate Discount
Based on the Company's request, the CBUAE may agree to issue policies at discounts less the normal prices if there are reasons that justify the same.
Article (55) Assessment of Value of Liabilities
The Companies that engage in the insurance of persons and fund accumulation operations shall examine the financial position of this type and assess the value of its obligations at least once every (3) three years by an Actuary, as of the date of its engagement in business.
This assessment shall cover all insurance operations concluded by the Company inside and outside the State separately. If the activity is carried out by a branch of a foreign Company, the assessment shall be limited to the operations whose contracts were concluded in the State or carried out therein.
Article (56) Examination of Financial Position
The assessment referred to in Article (55) above shall be made whenever the Company is desirous to examine its financial position to determine the percentages of profits to be distributed to shareholders or policyholders, or whenever it is desirous to announce this position.
the CBUAE may request that this assessment be made at any time before (3) three years; provided that a period of not less than one year has elapsed from the date of the last examination.
Article (57) Data of the Actuary's Report
The financial instructions of Insurance Companies issued by the Board, pursuant to this Decree-Law, shall set the data required to be included in the Actuary's report on the result of the assessment and examination referred to in Articles (55) and (56) above.
Article (58 ) Attachments of the Actuary's Report
The Company shall send to the CBUAE a copy of the Actuary's report on the result of the examination and assessment referred to in Articles (55) and (56) above, within six months from the expiry of the period for which the examination was conducted, accompanied by the following:
- A statement of effective Insurance Policies concluded by the Company inside or outside the State on the date of conducting the examination. If the activity is carried out by a branch of a foreign Company, the statement shall be limited to the policies concluded or carried out in the State.
- An acknowledgment by persons in charge of the Company's management that all data and information necessary to draw up a correct report have been placed at the disposal of the Actuary.
Following the expiry of the six-month period, as referred to in this Article, an additional period may be given to the Company to submit this report; provided that this period does not exceed three months.
Article (59) Reexamination of Financial Position
If it becomes clear to the CBUAE that the Actuary's report does not reflect the true financial position of the Company, the CBUAE may request a reexamination at the Company's expense by an Actuary selected the CBUAE for this purpose.
Article (60) Distributable Funds
- Companies that engage in the insurance of persons and fund accumulation may not deduct, whether directly or indirectly, any part of their funds corresponding to their obligations arising from the Insurance Policies to distribute it as a profit to shareholders or Policyholders, or to pay any amount beyond their obligations under the Insurance Policies issued by the same. The distribution of profits shall be limited to the amount of money in excess, as determined by the Actuary in their report, after conducting the examination referred to in Article (57) above.
- For the purpose of applying the provisions of this Article, the Company's funds in the State and abroad may be considered as one unit, without prejudice to the provisions of Article (23) above.
Article (61) Savings Bonds
The Companies that engage in the insurance of Persons and fund accumulation may not issue savings bonds for a period exceeding (30) years. If the duration of a bond is (25) years or more, the value of its redemption after year (25) twenty fifth may not be less than the amount of the full mathematical reserve. The Premiums to which savings bond holders are committed must be of equal or eroded value.
Article (62) Data of Savings Bonds
Savings bonds shall provide for the termination conditions that the Company invokes vis-avis a bondholder due to their delay in paying the Premiums.
However, the contract may be terminated before (3) three months from the due date of the Premium and the bondholder failed to pay the premium if the bond is nominal, such period shall apply from the date of notifying the bondholder under a registered letter.
Such bonds shall provide for the devolution of right thereto to the Beneficiaries due to the bondholder's death, without imposing additional amounts or new requirements.
the CBUAE shall determine other data that must be included in the savings bonds.
Article (63) Assessment of Insurance Policy Value
In the event of the bankruptcy or liquidation of the Company engaged in the insurance of person or fund accumulation, the amounts due to each holder of a policy not yet expired shall be assessed as equal to its mathematical reserve on the day on which the liquidation decision is issued or the bankruptcy declaration is ruled, calculated on the basis of the technical rules for defining Premiums at the time of concluding the policy.
Article (64) Insurance Companies Operating in Financial Free Zones
Insurance Companies licensed to operate in the Financial Free Zones may not carry out any activity, other than the reinsurance, outside such zones in the State,
Article (65) Insurance-Related Professions
No Person may practice as an Insurance Agent, Insurance Broker, Surveyor and Loss Adjuster, Insurance Consultant, Actuary, health insurance claims manager or any other professions related to insurance without having the license or permit to practice the profession and being registered in the register designated for such purpose, and in accordance with the conditions determined by the Board, which include determining the liability of Insurance-Related Professionals and organizing their business and the conditions of their registration in the register.
Chapter Thirteen Transfer of Insurance Policies and Cessation of Operations
Article (66) Transfer of Insurance Policies from Company to Company
The Company may transfer the Insurance Policies it has concluded in the State, including the rights and obligations related to any type of insurance carried out by the Company, to another Company or Companies that carries out the same type of insurance.
Article (67) Insurance Transfer Application
The transfer application shall be submitted to the CBUAE, accompanied by the documents related to the transfer agreement, and the transfer application shall be published in two local daily newspapers, one of which is published in Arabic, at the expense of the transfer applicant, or as per the mechanism determined the CBUAE;
provided that the announcement shall refer to the right of policyholders, the Beneficiaries or any interested party to file any objection to the CBUAE to such transfer, within (10) business days from the date of the announcement; provided that the subject of their objection and the grounds thereof are determined.
- the CBUAE shall issue its approval of the transfer if no interested party objects thereto within the period referred to in Clause (1) above. The decision shall be published in the Official Gazette within one month from the date of its issuance, and it may be invoked vis-a-vis the Insured, the Beneficiaries and the Company's creditors, and the funds shall be transferred to the Company to which the policies have been transferred, subject to the provisions relating to the transfer of ownership and assignment of funds; provided that the transferred funds are exempted from the registration fees under the provisions relating to the transfer of ownership and assignment of funds.
- If an objection is submitted within the period referred to in Clause (1) above, the TIPS application shall be decided on only after an agreement is reached between the interested parties or a final judgement is rendered on such objection. However, the CBUAE may issue a decision approving the transfer; provided that a guarantee is submitted by the Company to the CBUAE equivalent to its obligations vis-a-vis the objector, including the expenses that may be incurred for retaining any of the Company's assets.
Article (68) Cessation of Insurance Operations
The provisions of Articles (66) and (67) above shall be applicable if any Company is desirous to cease the engagement in one or more types of insurance, or is desirous to free up its funds required to be exist in the State for such type or types, after the Company provides a proof that it has fulfilled its obligations for all policies concluded within the State or carried out therein, pertaining to such type or types regarding which it decided to cease its operations.
Chapter Fourteen Takaful Insurance Company
Article (69) Takaful Insurance Business
- The provisions of this Decree-Law and the resolutions, regulations, statutes and instructions issued thereunder shall apply to Takaful Insurance Companies, in so far as they do not contradict the nature of its business, and they may not engage in insurance business in such a manner that violates the provisions and principles of the Islamic Sharia, which must be reflected in its memorandum of association and articles of association.
- The Board shall issue a regulation setting out aspects of activities and the rules and standards of the Takaful Insurance Company's business in a manner that is appropriate with the nature of the license granted thereto.
Article (70) Takaful Insurance Fund
Takaful Insurance Company shall establish a fund that has an independent legal personality, in accordance with the controls and procedures identified under a resolution by the Board, which shall report to the CBUAE, in which contribution amounts and their investment returns are deposited, in addition to the Takaful reinsurance contributions or the equivalent thereof and their revenues. The fund shall bear all expenses and costs of insurance operations, and shall be liable for the compensation under the provisions of Takaful Insurance Policies.
Article (71) Higher Sharia Board
- The Supreme Sharia Board shall set the Sharia rules, standards and principles for Takaful Insurance Companies business, and shall control and supervise of internal Sharia supervisory committees referred to in Article (72) hereunder.
- Takaful Insurance Companies shall bear the expenses of the Higher Sharia Authority, including the allocations, remunerations and expenses of its members, pursuant to the articles of association of the Supreme Sharia Board.
- Takaful Insurance Companies and the internal Sharia supervisory committees shall comply with fatwas and opinions issued by the Higher Sharia Authority.
Article (72) Internal Sharia Supervisory Committee
- An independent internal Sharia supervisory committee shall be formed in every Takaful Insurance Company called "the Internal Sharia Supervisory Committee", comprising experts and specialists in Islamic financial transactions jurisprudence. Such committee shall supervise and approve all business, activities, products, services, contracts, documents, and charters of the Company's business, and shall set the necessary Sharia controls for the same under rules, principles and standards set by the Supreme Sharia Authority, in order to ensure their compliance with the provisions of the Islamic Sharia. Fatwas or opinions issued by the committee shall be binding on the Company.
The general meeting of the Takaful Insurance Company shall be authorized to appoint members of the internal Sharia Supervisory Committee, pursuant to provisions of Decree Law No. (32) of 2021, referred to hereinabove, and the names of the members of the Internal Sharia Supervisory Committee shall be presented to the Supreme Sharia
Board to approve the same before being presented to the general meeting and a decision is issued approving the appointment.
- Members of the Internal Sharia Supervisory Committee may not occupy any executive position in a Takaful Insurance Company, provide it services beyond the scope of the Committee's work, act as shareholders in it or have or their relatives up to the second degree have any interests related thereto.
- Should a dispute is raised over a Sharia opinion between members of the Internal Sharia Supervisory Committee, or there is a disagreement regarding a Sharia matter between the Internal Sharia Supervisory Committee and the Company's board of directors in question, the matter shall be referred to the Supreme Sharia Board, whose opinion shall be final in this regard.
- An internal department shall be established in every Takaful Insurance Company for the internal Sharia supervision and to monitor the Company's compliance with fatwas and opinions of the Internal Sharia Supervisory Committee. This department shall report directly to the Company's Board of Directors, and its employees shall have no powers or executive responsibilities vis-a-vis the business, activities and contracts reviewed or supervised by them from a Sharia viewpoint.
Article (73) Report of Internal Sharia Supervisory Committee
- The Internal Sharia Supervisory Committee shall draw up an annual report, as per the form determined by the Supreme Sharia Authority, showing whether Takaful Insurance Company's management complies with the application of the provisions of Islamic Sharia in the business and activities it engages in, products provided and contracts concluded by it, and documents used by it.
- The Internal Sharia Supervisory Committee's report shall be submitted to the Supreme Sharia Authority for approval before being presented to the general meeting.
Chapter Fifteen Provisions of Control, Ownership and Merger of the Company
Article (74) Controlling Stakes
1.
No Person may, whether solely or jointly with related parties, own a controlling stake or increase the controlling stake in the Company or exercise powers rendering him as the owner of a controlling stake, without obtaining the approval of the CBUAE.
2.
If it is established that a Person has violated the provision of Clause (1) above, the CBUAE may impose one or more of the following measures:
a.
Serving a violation notice and giving the violator a time limit for regularization, in accordance with the mechanism determined the CBUAE;
b.
Depriving the violator of profits or benefits, in so far the violation is committed;
c.
Preventing the violator from voting in the Company's general meeting or running for membership of the Company's board of directors until the regularization is made or the implementation of the procedure determined the CBUAE;
d.
Suspending or revoking the violator's membership if he is a member of the Company's board of directors;
e.
Preventing the violator from disposing of the percentage that exceeds the controlling stake without obtaining the prior written approval of the CBUAE; and
f.
Any other measures decided by the Board.
3.
The Board shall issue the regulations and instructions pertaining to determining parties related to ownership percentages in the Companies' capitals and restrictions to shares and cases of control, pursuant to the provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, or any other superseding law.
Article (75) Ownership of Insurance Company's Shares
An Insurance Company may, whether directly or jointly with associated Persons, own shares of another Insurance Company or bonds convertible to shares only in accordance with the controls and instructions issued by the Board in this regard.
Article (76) Controls of Merger and Acquisition
- A Company may merge with, or acquire any other Company, regardless of its activity, and may transfer any part of its obligations to another Person only after obtaining the prior approval of the CBUAE.
- Subject to the legislation in force in the State on merger and acquisition, the Board may issue the regulations, statutes, instructions and rules related to merger and acquisition.
Chapter Sixteen Unbalanced Financial Position
Article (77) Restructuring
- The Board shall set a framework for restructuring and liquidating the Companies, including the controls, conditions and rules in this regard to reduce the impacts that may be caused from the imbalance in its financial position.
- the CBUAE may request the relevant authorities in the State to temporarily impound the Company that suffers from an imbalance in its financial position and seize on its assets, property and rights of its shareholders, issue a decision requesting the competent court to liquidate or dissolve the Company in question and develop a plan to liquidate or transfer its assets, liabilities, settlements and clearances, as the CBUAE deems appropriate, and implement or supervise the implementation of the liquidation plan, take a decision on the restructuring or submit a request for a bankruptcy declaration to the competent court, pursuant to the legislation in force in this regard.
- the CBUAE may coordinate with the relevant authorities of the State before the Board issues any decisions in accordance with the provisions of this Article, whenever it deems necessary. the CBUAE may request the competent judicial authorities to take precautionary and expeditious measures and procedures and any other measures that would protect policyholders, creditors, shareholders and their interests, or as dictated by the public interest.
Article (78) Restructuring Committee
- For the purposes of restructuring the Company pursuant to the provisions of Paragraph (m), Clause (2) of Article (33) above, the Board may issue a decision dissolving the Company's board of directors and forming a neutral committee to restructure the company in accordance with Paragraph (d), Clause (2) of Article (33) above. The committee shall submit a monthly report, or whenever so requested, to the CBUAE on the progress of the restructuring procedures.
- For such purpose, the restructuring includes managing the Company and organizing its distressed financial affairs by negotiating with all its creditors for determining the Company's debts and how to be repaid by adopting a plan for the restructuring.
- The committee referred to in Clause (1) above shall publish an announcement in The Official Gazette for (3) three consecutive business days in two local daily newspapers, one of them is published in Arabic, at the expense of the Company, which shall include an invitation to all creditors to submit statements of the amount of their debts, supported by documents, within a period not exceeding (30) thirty days from the date of publishing the last announcement. No statements submitted by any creditor may be accepted following the lapse of such period.
Article (79) Cases of Suspending Attachment or Enforcement Against the Company's Property
1.
Subject to the provisions set forth in any other legislation, the enforcement of any attachment on the Company's property or assets, whether precautionary or enforcement attachment, or any disposition of, or enforcement created against such property or assets shall be suspended from the date of issuance of the restructuring decision until any of the following cases are realized:
a.
Expiry of the work period of the committee referred to in Clause (1) of Article (78) above;
b.
Issuance of a decision by the Board, pursuant to the provisions of the Decree-Law, rejecting the restructuring plan;
c.
Creditors' rejection of the restructuring plan, pursuant to provisions of this Decree-Law; and
d.
Issuance of a decision by the Board to discontinue the restructuring procedures, pursuant to the provisions of this Decree-Law.
2.
The calculation of the dates for dismissal of a case for the lapse of time shall cease, as regard to the procedure referred to in Clause (1) above.
Article (80) Report of the Committee
- The committee referred to in Clause (1) of Article (78) above shall draw up its report on the restructuring plan within a period not exceeding (15) fifteen days from the date of consolidation of debts and invite creditors to approve the plan under an announcement to be published in two local daily newspapers, one of which is published in Arabic, provided that the plan is approved by creditors representing at least three-fourths of non-preferred debts and unsecured by a pledge.
- In the event that the creditors approve the plan, in accordance with the provisions of Article (a) of this Article, the committee shall submit this plan to the CBUAE and then be submitted to the CBUAE and then to the Board for approval.
- In the event that creditors reject the plan prepared in accordance with the provisions of Clause (1) above, the Committee shall submit a report on the same to the CBUAE, which shall submit it along with its recommendations to the Board.
- The Board may take the appropriate decision on the plan submitted in accordance with the provisions of Clause (1) above. In the event that the Board approves the plan, the restructuring procedures shall be proceeded with, and in case of rejection, the Board decides to take the appropriate action, pursuant to the provisions of Clause (2) of Article (33) of this Decree-Law.
- After completing the restructuring, a new Board of Directors of the company will be elected, pursuant to the provisions of the legislation in force in the State.
Article (81) Discontinuance of Restructuring Procedures
If the Board finds out that the Company's positions are distressed, despite the application of the restructuring plan or the futility of this plan, it may decide to discontinue the progress of the restructuring procedures and take the appropriate action, in accordance with the provisions of Clause (2) of Article (33) above.
Article (82) Appointment of Liquidator
- Notwithstanding the provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, the provisions contained in this Decree-Law and the regulations and resolutions issued thereunder shall apply to the Company's liquidation. The liquidation shall be carried out by one or more liquidators appointed by the general meeting under a special decision. If the liquidation is based on a court judgment, the court shall indicate the method of liquidation and appointment the liquidator. The liquidator's appointment decision shall specify his fees and powers, along with obliging him to provide a guarantee if necessary. If the liquidator's fees are not determined in the appointment decision, they shall be determined by the competent court.
- The decision of appointing the liquidator shall be announced by registration in the Commercial Register, and such announcement shall be published in two local daily newspapers, one of which is published in Arabic, within a period not exceeding seven (7) days from the date of the announcement. Such appointment may be invoked vis-a-vis third parties only from the announcement date.
- The authority of the Company's board of directors shall end when the Company goes into liquidation. In the course of liquidation, the Company shall retain the legal personality to the extent necessary for the liquidation proceedings. The powers of the Company's organizational units and affiliates shall be limited to the liquidation proceedings that do not fall within the powers of liquidators.
Article (83) Challenging the Liquidator Appointment Decision
- Any stakeholder may challenge the decision issued by the Company's general meeting on the liquidator's appointment before the competent court, within (40) forty days from the date announcing the appointment decision.
- The challenge referred to in Clause (1) above may not discontinue the liquidation proceedings, unless otherwise decided by the court.
Article (84) Removal of Liquidator
The liquidator shall be removed based on the appointment method, and any decision or judgment on the liquidator's appointment shall include the appointment of a replacement. The liquidator's removal shall be published in two local daily newspapers, one of which is published in Arabic. Such removal may be invoked vis-a-vis third parties only from the announcement date.
Article (85) Implications of Liquidation Decision
The issuance of the liquidation decision shall give rise to the following:
- The liquidator adds the phrase "under liquidation" next to the name of the Company in all its documents and correspondence;
- Discontinuation of any authorization or signatory power issued by any entity, and the liquidator shall be exclusively competent to grant any authorization or signatory power required by the liquidation proceedings;
- Discontinuation of the calculation of the lapse of time that leads to the dismissal of the case with regard to any rights or claims due or existing in favor of the Company for a period of one year from the date of issuance of the liquidation decision;
- Discontinuation of cases and proceedings brought by or against the for a period of six (6) months, unless the court decides to proceed with such cases before the expiry of the same, subject to the provisions of Clause (5) of this Article; and
- Discontinuation of any procedural or executive transactions against the Company, unless such transactions are based on the request of a pledgee and related to the pledged property, in such case, such transactions shall be discontinued or their acceptance shall be prevented for a period of (6) six months from the date on which the liquidation decision is issued.
Article (86) Decisions and Procedures Necessary for Liquidation
The liquidator may issue whatever decisions he deems appropriate and take whatever actions he deems necessary to complete the liquidation, including:
- Managing the Company's business to the extent required by the liquidation;
- Making a record of all the Company's assets, in agreement with the Company's board of directors, which is bound to deliver to the liquidator the Company's property, books and documents;
- Appointing any experts and specialists to help him to complete the liquidation procedures, or appointing special committees and delegating them any of the tasks and powers vested in him; and
- Appointing one or more lawyers to represent the Company under liquidation in any cases or proceedings related thereto.
Article (87) Protecting the Company's Rights
1.
The liquidator may take all actions that he deems necessary to protect the rights of the Company, including:
a.
Revoking any disposition or terminating any contract concluded by the Company, or recovering any amount it has paid during the three months preceding the issuance of the liquidation decision if its involves giving preference to a certain person over the Company's debt. The period shall be one year if the company has an ownership or association relationship with that person. The preference shall be realized if the action or procedure is unpaid or partially paid, or if it involves valuing property or rights less than its real value or contrary to its value prevailing in the market.
b.
Revoking any disposition or terminating any contract concluded by the Company with any Person who has an ownership or association relationship with it, or recover any amount paid by the Company to either one, within the (3) months prior to the issuance of the liquidation decision.
c.
Agreeing with any of the Company's debtors on how to pay or pay in installments any amounts or obligations incurred by them.
d.
Terminating the employment of any of the Company's employees and paying their dues.
e.
Terminating any contract concluded by the Company with any Person before the expiry thereof.
2.
The liquidator shall take any of the procedures referred to in Clause (1) above by notifying the Person under a written notice. However, this procedure may be challenged before the competent court, within whose jurisdiction the Company's head office is located, within (30) days as of the date of notifying such Person.
Article (88) Nullity of Pledges and Collaterals
- All pledges, mortgages and collaterals created over any property or rights of the Company during the (3) three months preceding the date of the issuance of the liquidation decision shall be null and void. Such a period shall be one year if the pledges or collaterals are in favor of a Person who has an ownership with, or is related the Company.
- Any decision of attachment at any property or right of the Company before the issuance of the liquidation decision shall be null, unless this decision is issued based on a pledgee's request and is related to the pledged property.
Article (89) Person Related to the Company
For the purposes of Articles (87) and (88) above, a person is deemed related to the Company in any of the following cases:
- If the Person is a member of the Company's board of directors, a manager at the Company or has a joint business interest with either one; or
- If he/she is a spouse of a member of the Company's board of directors or a manager thereat or has a joint business interest with either one.
Article (90) Acts of the Liquidator
Subject to the provisions of the legislation in force in the State, the liquidator may repay the Company's debts and may sell their property, whether movable or real property, at public auction or by any other means, unless it stipulated in his appointment document that the sale must be carried out in a specific way. However, the liquidator may sell the Company's assets as a whole only by a special decision of the general meeting.
Article (91) Notification of Creditors
- Subject to the provisions relating to the Insured and the Beneficiaries of the Insurance Policies, the liquidator shall, within (30) days from the date of the issuance of the liquidation decision, publish a prominent announcement at a prominent place in two local daily newspapers, one of which is published in Arabic, to notify creditors to submit their claims against the company, whether payable or unpayable claims, within two months if they are residents in the State and three (3) months if they reside abroad.
- The announcement shall be republished in the same manner promptly after the expiration of a period of (14) fourteen days from the date of publication of the first announcement. The statute of limitations for claims shall be calculated from the date of publication of the first announcement.
- If the liquidator or the competent court is satisfied that there is a legitimate excuse for a creditor for his failure to submit his claim within the period referred to in Clause (1) above, such period may be extended for further (3) three months maximum.
- The period from the issuance of the liquidation decision to the publication of the announcement referred to in Clause (1) above shall not be calculated within the period prescribed for case dismissal on any rights or claims of creditors against the Company under liquidation.
Article (92) Notices Issued by the Liquidator
1.
Subject to the provisions of Clause (2) below, the liquidator shall, within three (3) months from the date of issuance of the liquidation decision, issue the below notices, unless he finds justifiable reasons to exceed such period; provided that the total period does not exceed six (6) months:
a.
A notice with acknowledgment of receipt to each Insured or Beneficiary of the Insurance Policy of the amount of their rights and obligations.
b.
A notice of claim with acknowledgment of receipt to each debtor of the amount of his debts and obligations vis-a-vis the Company.
2.
An objection to the notice referred to in Clause (1) above may be filed to the liquidator within (30) days from the date of notification. If no objection is made during such period, the Insured, Beneficiary debtor shall be considered to have acknowledged the content of the notice.
3.
The time limit prescribed for hearing a case shall be interrupted under the provisions of Clause (2) above.
4.
If the claim notice issued by the liquidator to a debtor, pursuant to the provisions of Paragraph (b) of Clause (1), becomes final, the liquidator may make a settlement with the debtor or execute the notice against him under the provisions of the legislation in force in this regard.
Article (93) Decisions Issued by Liquidator
- The liquidator shall issue his decisions on the claims and objections submitted to him, pursuant to the provisions of Article (92) above, within a period not exceeding (6) six months from the date of submission.
- If the liquidator fails to issue his decision within the period referred to in Clause (1) above, the claims and objections shall be deemed to be rejected de jure.
- Any stakeholder may challenge the liquidator's decision issued pursuant to the provisions of Clauses (1) and (2) above before the competent court within whose jurisdiction the Company's head office is located, within a period of (30) thirty days from the date of being notified of the decision or from the date of the expiry of the period referred to in Clause (1) above, whichever is shorter.
Article (94) Precautionary Attachment
Notwithstanding the provisions of any other legislation, the liquidator may file a motion to the competent court to impose a precautionary attachment at any property belonging to the Company's debtors, may or take any precautionary or expeditious measures against them, pursuant to the provisions of the legislation in force, taking into account the following:
- The liquidator shall be exempted from depositing a security such motion; and
- The liquidator shall have issued a notice of claim to the debtor upon filing the aforementioned motion, or shall issue it within (8) eight days subsequent to the issuance of the decision. This notice shall be an alternative to the substantive action required to be filed pursuant to the provisions of the Federal Civil Procedure Law.
Article (95) Instituting a Case Against the Company
- After the liquidation decision is issued, a creditor, debtor, Insured or Beneficiary may institute a case against a Company under liquidation only in accordance with the grounds and procedures referred to in this Decree-Law.
- Subject to the provisions of Clause (1) of this Article, a Person affected by the liquidator's actions or procedures may challenge the same before the competent court within whose jurisdiction the Company's head office is located, pursuant to the provisions of the legislation in force in this regard. The court may confirm, nullify or amend such actions and procedures, and may order the liquidator to take actions he is required to take.
Article (96) Repayment of Debts
Debts owed by the Company under liquidation shall be paid according to the following order:
- Rights of employees and workers payable for the last (4) four months;
- Liquidator's fees, expenses incurred and the loans he obtained for the purposes of completing the liquidation;
- Rights of the Insured and the Beneficiaries of the Insurance Policies, and the liquidator shall allocate the Company's assets, which represent the technical provisions required to be retained under the provisions of this Decree-Law, to pay such obligations, and any amount collected by the Company under the reinsurance arrangements shall constitute part of the technical provisions;
- Rights of other creditors, as per the order of priority under the provisions of the legislation in force in this regard; and
- Shareholders' rights.
Article (97) Submitting a Provisional Account for Liquidation Proceedings
- The liquidator shall submit to the general meeting, every (6) six months, a provisional account for the liquidation proceedings, and shall provide the information or data requested by partners on the liquidation status, and shall complete his mission within the period specified for the liquidation in his appointment decision. If no period is specified, each partner may refer the matter to the competent court to designate the liquidation period.
- The liquidation period may be extended only by a decision of the general meeting after reviewing a report by the liquidator stating the reasons why he failed to complete the liquidation on time. If the period of liquidation is specified by the court, it may be extended only with its permission.
Article (98) Final Account of Liquidation Proceedings
- Upon the completion of liquidation, the liquidator shall submit to the general meeting a final account on the liquidation proceedings, and such proceedings shall complete upon the ratification of the final account.
- The liquidator shall announce the completion of the liquidation by registering the same in the Commercial Register and publishing it in two local daily newspapers, one of which is issued in Arabic, and the same may be invoked vis-a-vis third parties only from the date of this announcement. Upon the completion of the liquidation, the liquidator shall submit a request for striking the Company off the Commercial Register.
Article (99) Communication of Notifications and Reports
- Any notification or decision issued by the liquidator under the provisions of this Decree-Law shall be communicated to the relevant Person in person or his legal representative, or may be sent by registered mail with acknowledgment of receipt to his last address kept with the Company under liquidation.
- Any notification sent pursuant to this Article shall be deemed to have been duly delivered to the recipient should such Person refuses to receive it.
- If the communication is not possible, pursuant to the provisions of Clause (1) above, the liquidator shall carry out the communication through publication in two local daily newspapers, one of them is published in Arabic, for at least two times, and the relevant Person shall bear the publication expenses, and this publication shall be considered notification to him.
Chapter Seventeen General Provisions
Article (100) Emirates Insurance Union
- Pursuant to the provisions of this Decree-Law, a professional union shall be established called (Emirates Insurance Union), which shall have the legal personality and legal capacity necessary to carry out all actions and acts that enable it to achieve its objectives.
- All Companies and Insurance-Related Professionals shall become a member of the Emirates Insurance Union, in accordance with the controls and procedures determined under a resolution by the Board. The Union shall establish committees for various insurance activities practiced by members.
- the CBUAE shall supervise the business of the Emirates Insurance Union and approve its articles of association, which define its functions, responsibilities and relationship with the CBUAE, and shall establish its committees related to various insurance activities, and the provisions relating to its general meeting, formation of its board of directors and meetings of each one, fees of membership, annual subscription, rules for practicing the profession, disciplinary procedures against its members, and other provisions regulating its affairs, the Emirates Insurance Federation shall replace all the Emirates Insurance.
- The Emirates Insurance Association, established under Federal Law No. (6) of 2007, referred to hereinabove, and all contracts, rights and obligations related to the Emirates Insurance Association shall be devolved to the Union.
- The Emirates Insurance Association's staff shall be transferred to the Emirates Insurance Union, without prejudice to their acquired rights.
- The legislation, policies, statutes and regulations applicable to the Emirates Insurance Association shall apply to the Emirates Insurance Union, without prejudice to the provisions of this Decree-Law, unless the superseding ones are issued.
Article (101) Claims and Settlement of Insurance Claims
1.
The Company shall process Insurance Claims in accordance with the provisions of the Insurance Policies and the legislation in force, by applying the following procedures:
a.
Issuing a decision on any Insurance Claim, in accordance with the provisions set out in the instructions for the rules of professional practice and ethics.
b.
In the event that any Insurance Claim is rejected, in whole or in part, the Company shall clarify the reasons for its decision in writing.
2.
If a dispute arises out over an Insurance Claim or if the stakeholder objects to the clarifications provided by the Company, the stakeholder may file a complaint to the Banking and Insurance Dispute Settlement Unit, established pursuant to Article (121) of Federal Decree-Law No. (14) of 2018, referred to hereinabove.
3.
A complaint shall be filed according to the procedures approved by the Banking and Insurance Disputes Settlement Unit.
4.
One or more committees shall be established in the Banking and Insurance Disputes Settlement Unit to settle disputes arising from insurance contracts, insurance business and services. The Board shall issue the necessary decisions determining its competences, powers, rules of procedure, remunerations of its members and fee collected by it, in addition to the decisions related to its formation. The committee shall be chaired by a judge with one or more judges selected the CBUAE as members.
5.
The Company may not challenge the decisions of the committee referred to in Clause (4) above on disputes whose value does not exceed (AED 50,000) fifty thousand dirhams. Such decisions shall be final and enforceable immediately upon their issuance. If dispute value exceeds (AED 50,000) fifty thousand dirhams, the Company may challenge the committee's decisions before the Court of Appeal within (30) days, from the date of its issuance or coming knowledge, otherwise, the challenge shall be inadmissible.
6.
Without prejudice to the provisions of Clause (5) above, a stakeholder may challenge the decisions of the committee referred to in Clause (4) above before the Court of Appeal, within (30) days from the date of issuance of the decision or coming to knowledge; otherwise, the challenge shall be inadmissible.
7.
Cases arising from insurance contracts, business and services shall be inadmissible if they are not presented to the committees formed in accordance with the provisions of Clause (4) above.
8.
The committee's decisions shall have the force of a writ of execution, and a challenge shall stay the execution of a decision on disputes whose value exceeds (AED 50,000) fifty thousand dirhams.
Article (102) Confidentiality of Data and Information
1.
All data and information related to insurance business and transactions related thereto shall be of a confidential nature. Insurance Company's employees and Insurance-Related Professionals and their employees are prohibited from giving and disclosing data and information of the Insured or Beneficiaries or enable others to access thereto in cases other than the ones authorized by law. Such prohibition shall remain in place even after the termination of the relationship between the Company and the Insured or Beneficiaries for any reason whatsoever.
2.
The prohibition referred to in Clause (1) above shall apply to all entities, Persons and any Person who ex officio accesses directly or indirectly to data and information.
3.
the CBUAE shall set the rules and conditions regulating the exchange of data and information being the competent regulatory authority in the State.
4.
The provisions of Clauses from (1) to (3) shall not violate the following:
a.
Competences legally conferred on security and judicial authorities and the CBUAE and its employees;
b.
Duties entrusted to auditors of the relevant establishments;
c.
The right of the entities mentioned in this Clause to disclose all or some data of transactions of their clients necessary under the legislation in force in the State to prove their rights in a legal dispute that arose between it and its clients in this regard; and
d.
The provisions set forth in the applicable laws and the ratified international conventions, in addition to the special provisions regulating money laundering and combating the financing of terrorism and illegal organizations.
Article (103) Retention of Data and Information
- Notwithstanding the provisions of any other legislation, electronic data shall be probative if it complies with the legislative controls related thereto.
- The Companies shall keep, for the legally prescribed period, a soft copy of the original books, records, statements, documents, correspondence, telegrams, notices, and other papers related to its business, and such electronic copy shall have the probative force of the original, pursuant to the legislation governing the same.
Article (104) Intervention in Proceedings and Notification of Investigations
- Subject to the provisions of the Federal Civil Procedure Law, the CBUAE may request to intervene in any case filed before judicial authorities to which one of its parties is a Company or Insurance-Related Profession.
- All entities in charge of implementing the provisions of this Decree-Law and other entities shall notify the CBUAE of any investigations or measures taken against any Company or Insurance-Related Profession. the CBUAE may provide to such authorities any clarifications, data or information that it may deem appropriate in this regard.
Article (105) Penalty of Engagement in Insurance Business without License
Without prejudice to any severer penalty set forth in any other law, any Person that breaches the prohibition set forth in Clauses (1), (2) and (4) of Article (41) or the provisions of Article (65) above, shall be penalized by imprisonment and/or a fine not less than (AED 1,000,000) one million dirhams.
Article (106) Submission of Data and Information by Government Authorities
All government agencies and Companies to which such agencies contribute and which benefit from insurance business shall submit any data or information related to insurance operations concluded by the same, as required the CBUAE within the period specified for the same.
Article (107) Cooperation with Local and International Authorities
the CBUAE may cooperate with regulatory authorities in other states to exercise its powers set forth in this Decree-Law over the Companies and the Insurance-Related Professionals abroad, in accordance with the following controls:
- Observing the principle of reciprocity;
- The subject of cooperation must not conflict with exigencies of the public interest and public order;
- It must coordinate with the relevant authorities in the State; and
- It must comply with the provisions of the legislation in force in the State.
Article (108) Publication of Decisions
the CBUAE shall publish the decisions related to the issuance and suspension of the license or relicense, or decisions related to the merger, ownership, restructuring, liquidation or termination of the Companies in the Official Gazette and in two local daily newspapers, one of which is published in Arabic, at the expense of the Company, and at the CBUAE's website.
Article (109) Publication of Draft Regulations and Rules
the CBUAE shall publish draft regulations and rules governing the business of the Companies and Insurance-Related Companies under a notice to be served to all relevant agencies to give an opinion thereon, within the period identified the CBUAE.
Article (110) Contribution and Ownership Percentages
- The Board shall set the terms and conditions for citizens' and foreigners' ownership of the Company's shares and the percentages of contribution to the capital thereof.
- The Board shall determine the terms and conditions for citizens' and foreigners' ownership and the percentages of contribution thereto.
Article (111) Capacity of Judicial Officer
the CBUAE's employees identified by a resolution of the Minister of Justice, in coordination with the Governor, shall have the capacity of judicial officer to detect acts committed in violation of the provisions of this Decree-Law.
Article (112) Adjustment of Affairs
Any Person that is governed by the provisions of this Decree-Law shall adjust their affairs in compliance with the provisions of this Decree-Law within a period not exceeding (6) six months from the effective date thereof, and may be extended for a similar period under a resolution of the Cabinet, at the proposal of the Board.
Article (113) Application of the Commercial Companies Law
The provisions of Federal Decree-Law No. (32) of 2021, referred to hereinabove, shall be applicable to insurance business, in so far as they do not contradict the provisions of this Decree-Law.
Article (114) Repeals
- Federal Law No. (6) of 2007, Regulating Insurance Business, referred to hereinabove, and any provisions repugnant to, or in conflict with the provisions of this Decree-Law shall hereby be repealed.
- The regulations, resolutions and circulars issued pursuant to the provisions of Federal Law No. (6) of 2007, referred to hereinabove, shall remain effective, in so far as they do not contradict the provisions of this Decree-Law, until the superseding regulations, resolutions and circulars are issued.
Article (115) Publication and Entry into Force of the Decree-Law
This Decree-Law shall be published in the Official Gazette, and shall enter into force after (30) thirty days from the publication date.
Mohammed bin Zayed Al Nahyan
President of the United Arab Emirates
Issued by Us at the Presidential Palace
Dated: 17 th Rabi' Al-Awwal 1445 AH,
Corresponding to: 2 nd October 2023 AD
Federal Law No. 6 of 2007 on the Organization of Insurance Operations
FED LAW 6/2007 Effective from 15/2/2007This law has been amended by The Federal Law No. (05) of 2012, Federal law No. (3) of 2018, Federal Law No. (24) of 2020 and Federal Law No. (25) of 2020 respectively. You are viewing the latest version. Please find the PDFs of previous versions on the table below.version 2 (consolidated as of 02/01/2021)
version 1 (effective from 15/02/2007)
1. The word (Authority “IA”) shall be replaced by the phrase “The Central Bank”, wherever mentioned in Federal Law No. (6) of 2007 referred to herein.
2. The word (Minister) shall replaced by the word “Chairmen”, wherever mentioned in Federal Law No. (6) of 2007 referred to herein and in the bylaws, regulations and resolutions issued in implementation thereof.
3. The phrase (The Director General) shall be replaced by the phrase (The Governor of the Central Bank) wherever mentioned in Federal Law No. (6) of 2007 referred to herein and in the bylaws, regulations and resolutions issued in implementation thereof.Preliminary Chapter
Article (1)
Definitions
The following words and phrases shall bear the meanings indicated beside each of them unless the context provides otherwise:
State: The United Arab Emirates.
Board: The Insurance Authority's Board of Directors.
Chairman: The Chairman of the Board.
Company: The insurance company incorporated in the State and the foreign insurance company licensed to carry out insurance activities in the State either through a branch, or through an insurance agent.
Insurer: Any insurance company incorporated in the State or foreign company licensed to carry out insurance operations in the State according to the provisions of the Law herein.
Insured: The person who has concluded an insurance contract with the company.
Insurance Agent: The person approved and authorized by the company to carry out insurance operations on its behalf or on behalf of any branch thereof.
Insurance Policy (Insurance Contract): The insurance document (policy) concluded by the insurer and insured containing the terms and conditions of the contract between the two parties, their obligations, and rights or the rights of beneficiary of the insurance and any endorsements therein.
Re-insurer: Any re-insurance company incorporated in the State or foreign re-insurance company licensed to carry out insurance operations inside the State or a foreign re-insurance company outside the State.
Insurance Broker: The person who independently intermediates in insurance and reinsurance operations between the insurance or re-insurance Proposer on one side and any insurance or reinsurance company on the other side and receives for his efforts commission from the insurance company or the re-insurance company with which the insurance or re¬insurance has been concluded.
Surveyor & Loss Adjuster: The person who examines the damages occurred to the subject matter of the insurance, and assesses them.
Insurance Consultant: The person, who studies the insurance requirements for his clients, gives advice in respect of the suitable insurance coverage, assists in preparing insurance requisites and receives for his efforts remuneration from his clients.
Actuary: The person who estimates values of the insurance contracts, policies and the related accounts.
Insurance-related Professions: Any person licensed by the Authority to practice any of the activities of Insurance Agent, Actuary, Insurance Broker, Surveyor & Loss Adjuster, Insurance Consultant or any other insurance-related profession that the Board decides to regulate.
Register: The register of insurance companies or insurance agents.
Data: All data and information (both paper and electronic) relating to any insurance activity, including data related to individuals who can be identified, directly or indirectly.
Branch: The branch of the company that carry out insurance operations in its name.
Authorized Manager: The person appointed by the foreign insurance company to manage its branch in the State.
Beneficiary: The person who acquired the rights of the insurance contract at inception or these rights has been legally transferred thereto.
Technical Provisions: The provisions which the insurer must deduct and maintain to meet the insured's accrued financial obligations pursuant to the provisions of the law herein.
Solvency Margin: The surplus in the value of the company's real assets over its liabilities that enables it to fulfil its obligations in full and to pay the required indemnities right away when they befall due without impeding the company operations or weakening its financial position.
Minimum Guarantee Fund: The amount that equates one third of the required solvency margin or the amount determined by the Board whichever is the greater.
Auditor: The accounts' auditor licensed to practice work in the State.
Person: Any natural or legal person.
This article has been amended by Federal Law No. (03) of 2018 and Federal Law No. (24) of 2020 respectively. You are on the latest version. To view previous versions, click the version boxes below.Version 2(effective from 26/04/2018 to 02/01/2021)The following words and phrases shall bear the meanings indicated beside each of them unless the context provides otherwise:
State: The United Arab Emirates.
Ministry: The Ministry of Economy.
Minister: The Minister of Economy.
Authority: The Insurance Authority established by virtue of the provisions of the law herein.
Board: The Insurance Authority's Board of Directors.
Chairman: The Chairman of the Board.
Director General: The Director General of the Insurance Authority.
Company: The insurance company incorporated in the State and the foreign insurance company licensed to carry out insurance activities in the State either through a branch, or through an insurance agent.
Insurer: Any insurance company incorporated in the State or foreign company licensed to carry out insurance operations in the State according to the provisions of the Law herein.
Insured: The person who has concluded an insurance contract with the company.
Insurance Agent: The person approved and authorized by the company to carry out insurance operations on its behalf or on behalf of any branch thereof.
Insurance Policy (Insurance Contract): The insurance document (policy) concluded by the insurer and insured containing the terms and conditions of the contract between the two parties, their obligations, and rights or the rights of beneficiary of the insurance and any endorsements therein.
Re-insurer: Any re-insurance company incorporated in the State or foreign re-insurance company licensed to carry out insurance operations inside the State or a foreign re-insurance company outside the State.
Insurance Broker: The person who independently intermediates in insurance and reinsurance operations between the insurance or re-insurance Proposer on one side and any insurance or reinsurance company on the other side and receives for his efforts commission from the insurance company or the re-insurance company with which the insurance or re¬insurance has been concluded.
Surveyor & Loss Adjuster: The person who examines the damages occurred to the subject matter of the insurance, and assesses them.
Insurance Consultant: The person, who studies the insurance requirements for his clients, gives advice in respect of the suitable insurance coverage, assists in preparing insurance requisites and receives for his efforts remuneration from his clients.
Actuary: The person who estimates values of the insurance contracts, policies and the related accounts.
Insurance-related Professions: Any person licensed by the Authority to practice any of the activities of Insurance Agent, Actuary, Insurance Broker, Surveyor & Loss Adjuster, Insurance Consultant or any other insurance-related profession that the Board decides to regulate.
Register: The register of insurance companies or insurance agents.
Data: All data and information (both paper and electronic) relating to any insurance activity, including data related to individuals who can be identified, directly or indirectly.
Branch: The branch of the company that carry out insurance operations in its name.
Authorized Manager: The person appointed by the foreign insurance company to manage its branch in the State.
Beneficiary: The person who acquired the rights of the insurance contract at inception or these rights has been legally transferred thereto.
Technical Provisions: The provisions which the insurer must deduct and maintain to meet the insured's accrued financial obligations pursuant to the provisions of the law herein.
Solvency Margin: The surplus in the value of the company's real assets over its liabilities that enables it to fulfil its obligations in full and to pay the required indemnities right away when they befall due without impeding the company operations or weakening its financial position.
Minimum Guarantee Fund: The amount that equates one third of the required solvency margin or the amount determined by the Board whichever is the greater.
Auditor: The accounts' auditor licensed to practice work in the State.
Person: Any natural or legal person.
Version 1(effective from 15/02/2007 to 26/04/2018)The following words and expressions shall bear the meanings indicated beside each of them unless the context provides otherwise:
State: The United Arab Emirates Ministry: The Ministry of Economy Minister: The Minister of Economy Authority: The Insurance Authority established by virtue of the provisions of the law herein. Board: The Insurance Authority's Board of directors Chairman: The Chairman of the Board Director General: The Director General of the Insurance Authority Company: The insurance company incorporated in the State and the foreign insurance company licensed to carry out insurance activities in the State either through a branch, or through an insurance agent. Insurer: Any insurance company incorporated in the State or foreign company licensed to carry out insurance operations in the State according to the provisions of the Law herein. Insured: The person who has concluded an insurance contract with the company. Insurance Agent: The person approved and authorized by the company to carry out insurance operations on its behalf or on behalf of any branch thereof. Insurance Policy (Insurance Contract): The insurance document (policy) concluded by the insurer and insured containing the terms and conditions of the contract between the two parties, their obligations, and rights or the rights of beneficiary of the insurance or any endorsements therein. Re-insurer: Any re-insurance company incorporated in the State or foreign re-insurance company licensed to carry out insurance operations inside the State or a foreign re-insurance company outside the State. Insurance Broker: The person who independently intermediates in insurance and re-insurance operations between the insurance or re-insurance seeker on one side and any insurance or re-insurance company on the other side and receives for his efforts commission from the insurance company or the re-insurance company with which the insurance or re-insurance has been accomplished. Loss & Damage Adjuster: The person who examines the damages occurred to the subject matter of the insurance, and assesses them. Insurance Consultant: The person, who studies the insurance requirements for his clients, gives advice in respect of the suitable insurance coverage, assists in preparing insurance requisites and receives for his efforts remuneration from his clients. Actuary: The person who estimates values of the insurance contracts, documents and the related accounts. Register: The register of the insurance companies or the insurance agents. Branch: The branch of the company that carry out insurance operations in its name. Authorized Manager: The person appointed by the foreign insurance company to manage its branch in the State. Beneficiary: The person who acquired the rights of the insurance contract at the start or these rights has been legally transferred thereto. Technical provisions: The provisions which the insurer must deduct and maintain to meet the insured's accrued financial obligations pursuant to the provisions of the law herein. Solvency margin: The surplus in the value of the company's real assets over its liabilities that enables it to fulfill its obligations in full and to pay the required indemnities right away when they befall due without impeding the company operations or weakening its financial status. Minimum Guarantee Fund: The amount that equates one third of the required solvency margin or the amount determined by the Board whichever is the greater. Accounts' Auditor: The accounts' auditor licensed to perform in the State. Article (2)
- The provisions of the law herein shall apply to the insurance companies incorporated in the State and the foreign companies licensed to perform the activity in the State including the companies engaged in the operations of cooperative insurance and takaful insurance or the operations of reinsurance provided for in the law herein and the insurance professions related thereto.
- The provisions of the law herein shall not apply to the companies operating in the free zones in the State unless specifically provided for in the law herein.
- The provisions of the law herein shall apply to the insurance companies incorporated in the State and the foreign companies licensed to perform the activity in the State including the companies engaged in the operations of cooperative insurance and takaful insurance or the operations of reinsurance provided for in the law herein and the insurance professions related thereto.
Article (3)
- An insurance is a contract pursuant thereto the insurer shall be obliged to pay the insured or the beneficiary whose in his favor the insurance has been concluded a sum of money, regular proceeds or other monetary indemnity in case the insured accident or risk occurred, in return of installments or any other monetary sums paid by the insured thereto.
- The insurer shall pay the indemnity provided for in the insurance contract to the insured or the beneficiary, as the case might be, as soon as the insured accident or risk occurred and thereupon the insurer shall legally subrogate the insured or the beneficiary in respect of the rights or obligations of each one of them.
- The company shall be obligated to conclude insurance contracts for all the vehicles licensed to get going in the State when so required by the pertinent authorities. The executive regulation of the law herein shall determine the insurance's premium tariffs while magnitude of the risks should be taken into consideration.
- An insurance is a contract pursuant thereto the insurer shall be obliged to pay the insured or the beneficiary whose in his favor the insurance has been concluded a sum of money, regular proceeds or other monetary indemnity in case the insured accident or risk occurred, in return of installments or any other monetary sums paid by the insured thereto.
Chapter One Insurance Operations and Its Types
Article (4)
In implementing the provisions of the law herein the direct insurance operations shall be divided into three types:
- Life assurance and funds accumulation operations
- Properties insurance
- Life liability insurance
The executive regulation of the law herein shall determine others may be enlisted under each of the three types.
Article (5)
Insurance operations shall include the relevant activities of the types provided for in Article (4) of the law herein and as well shall include re-insurance, insurance agents, and actuaries, insurance brokers, loss and damage adjusters and insurance consultants' activities.
Chapter Two Insurance Authority
Article (6)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)1. An authority to be called The Insurance Authority, entertaining the status of a legal person with financial and administrative independence shall be established, and shall have an independent budget subjoined to the State's budget. In such capacity, the Authority shall perform all operations and actions enabling it to achieve the objectives and duties assigned thereto pursuant to the provisions of the law and shall be an annexed to the Minister.
2. The main premises of The Authority shall be located in Abu Dhabi City and by decision of the Board branches thereto may be established within the State as the public interests may require.
.
Article (7)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The Authority aims at organizing and overseeing the insurance sector in a way that would ensure suitable environment to develop it and enhance the role of the insurance industry to secure lives, properties, and liabilities against risks in order to protect the national economy; collect, develop, and invest the national savings to sustain the economic development of the State; encourage fair and effective competition; provide the best insurance services in competitive premiums and coverage, and Emiratize the insurance markets jobs and for the cause the Authority shall carry out the following duties:
- Protecting the rights of the insured and the beneficiaries of the insurance operations and monitoring solvency of the companies to avail satisfactory insurance coverage in order to protect these rights.
- Enhancing performance and efficiency of the insurance companies and binding them to observe the profession's code and rule of conduct to enhance their capabilities to render the beneficiaries of the insurance the best services and attain constructive competition.
- Providing efficient and qualified human resources to carry out insurance operations including establishment of an institute for the purpose in cooperation and collaboration with Emirates Insurance Association (EIA) according to the prevailing legislations.
- Proposing programs and plans to develop the insurance sector in all aspects and enhancing insurance awareness, preparing studies and researches relevant to the insurance operations and disseminating the same.
- Consolidating cooperation and integration ties with the authorities organizing insurance sector at both the Arab world and International levels.
- Receiving applications to establish, open branches and representative offices for insurance and re-insurance companies, insurance brokers and the professions related thereto and issuing them the necessary licenses.
- Identifying the risks which shall be compulsorily insured.
- Determining unified tariffs of certain types of insurances and of those one enlisted there under in cases the public interest would require.
- Any other assignment relevant to organizing the insurance sector as resolved by the Board.
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- Protecting the rights of the insured and the beneficiaries of the insurance operations and monitoring solvency of the companies to avail satisfactory insurance coverage in order to protect these rights.
Article (8)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/12/2007 to 02/01/2021)The Insurance Authority shall be composed of the following:
- The Board
- The Director General
- The Executive Body
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Article (9)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see previous versions, click on the version boxes below.Version 2(effective from 10/10/2012 to 02/01/2021)The Authority shall have a board of directors composed of a chairman and a number of directors to be appointed under a Cabinet resolution. The nominees for the Board membership must not have any type of conflict of interest in their membership, throughout the membership term. The resolution to form the Board shall determine the number, remuneration and term of office of the directors.
In its first meeting, the Board shall elect from its members a Vice Chairman to substitute the Chairman in the event of his absence or if the Chairman is incapacitated
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Version 1(effective from 15/02/2007 to 10/10/2012)The Authority shall have a board of directors composed under the chairmanship of the Minister of ten members of the experienced and specialized individuals designated on basis of a presentation by the Minister as follows:
- Two members from the Ministry to be nominated by the Minister
- One member from the Ministry of Finance & Industry to be nominated by the Minister of Finance & Industry
- One member from UAE Central Bank to be nominated by the Governor.
- One member from the Federation of the Chambers of Commerce & Industry to be nominated by the President of the Federation.
- Five members to be nominated by the Minister out of the specialist in the sectors of finance, economy and insurance, provided they include among them one member from Emirates Insurance Association (EIA).
The Cabinet shall issue a resolution to form the Board, determine remunerations of its members, and indicate duration of membership. The Chairman shall select a deputy therefor out of the Board's members
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Article (10)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The executive regulation of the law herein shall lay down the terms and conditions of the Board's membership.
Article (11)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)1. Membership of any of the Board's members shall end in any of the following cases:
- Resignation or replacement by the nominating body.
- Should he remained absent for three consecutive cessions or four non-consecutive cessions during one year without an acceptable excuse.
- Should he become devoid of any of the terms and conditions provided for in the executive regulation of the law herein.
2. The Cabinet on recommendation of the pertinent body and within a period not exceeding sixty days as from date of vacating a seat of the board shall appoint another in his place to complete the tenure of the member who his membership came to an end.
Article (12)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The Board shall assume the duties and authorities provided for in the law herein and the regulations, rules, directives, and decisions issued pursuant thereto including:
- Laying down the general policy of the Authority and approving the necessary implementation plans and programs.
- Approving draft laws relevant to insurance operations and report them to the Cabinet.
- Issuing the necessary directives to implement the provisions of the law herein, and the regulations, and rules, issued pursuant thereto.
- Approving the draft of the annual budget of the Authority and refer it to the Cabinet for sanction.
- Approving the annual report and the final accounts of the Authority and refer them to the Cabinet.
- Appointing an account auditor for the Authority and determining his remuneration.
- Acknowledging aids, donations, grants, and bequests seen in line with the objectives of the Authority.
- Settling the objections raised by the company in respect of amending the insurance's forms, policies and endorsements.
- Executing any other duties related to the Authority's affairs and objectives.
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- Laying down the general policy of the Authority and approving the necessary implementation plans and programs.
Article (13)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The Board shall meet once every three months at least and may be invited to hold an extraordinary meeting upon request of the Chairman or three members at least.
The quorum for holding the meeting of the Board shall be the attendance of the majority of the members, provided the chairman or his deputy shall be among them. Resolutions shall be issued by absolute majority of the votes cast and in case of a tie the side of the chairman of the meeting shall have casting vote. Minutes of the Board's sessions shall be written down and approved by the chairman of the session. The resolutions shall be issued duly signed by the chairman.
The Board may invite whoever seen fit of those experienced and qualified experts and consultants to render assistance to attend its sessions without having voting rights in decisions making.Article (14)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)By virtue of a Federal Decree based on a recommendation by the chairman a director general of the Authority shall be appointed in the same scale of an undersecretary of a ministry.
Article (15)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The director general shall carry out the operations of the Authority and representing the Authority in its relations with the others and before the judiciary and in particular he shall:
- Implement policies, plans and programs approved by the Board.
- Suggest the organizational structure of the authority and superintend the same in a way that secures good performance of the operations.
- Prepare programs and plans to develop the insurance sector and upgrade its services for submission to the Board.
- Prepare draft laws, regulations, rules, directives and decisions issued in conformity with the provisions of the law herein related to insurance operations and refer the same to the Board.
- Prepare the draft of annual budget the Authority and refer the same to the Board.
- Consider complaints lodged pertaining to the insurance services and take the appropriate decisions in this respect unless seen necessary to refer them to the Board.
- Issue the necessary decisions as may be authorized pursuant to the provisions of the law herein.
- Carry out any other assignments entrusted to him by the Board
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- Implement policies, plans and programs approved by the Board.
Article (16)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The Director General may delegate some of his assignments to the senior managerial employees of the Authority as provided for in the law herein, provided such delegation shall be specific and in writing..
Article (17)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/12/2007 to 02/01/2021)The executive body of the Authority shall be composed of the employees appointed or contracted according to the regulations issued pursuant to the provisions of the law herein.
Article (18)
The Authority shall charge annul fees against the supervision and monitoring and any other fees proposed by the Board, provided a resolution therefor shall be issued by the Cabinet.
Article (19)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The revenues of the authority shall be comprised of the following resources:
- Any monies allotted for the Authority by the Government,
- The fees charged by the Authority,
- The surpluses of earlier years' budgets,
- The bequests, grants, donations, and aids accepted by the Board that in line with the Authority's objectives,
- Any other resources approved by the Board.
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Article (20)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The fiscal year of the Authority shall commence on the first day January and end on thirty first day of December each year. However, the first fiscal year shall commence as from date of enforcing the provisions of the law herein and end by the end of December of the following year
Article (21)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)- The Authority's funds shall be deemed public properties.
- The Authority shall entertain the exemptions and facilities as entertained by the Government Ministries and Directorates.
- Auditing of the Authority's accounts shall be taken over by one of those certified accounts auditors enlisted in the register of the operating accounts auditors.
Article (22)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The Authority shall maintain reserves equal in amount to twice the total expenditures of its annual budget and the surpluses thereof shall be transferred to the State's public treasury.
Article (23)
The Board shall issue on a recommendation by the Director General the bylaws, regulations, instructions and decisions pertinent to the insurance operations including:
- The Solvency Margin and the Minimum Guarantee Fund, provided the same shall not be less than one third of the Solvency Margin taking the international standards into consideration,
- The basis of calculating the Technical Provisions,
- The Re-insurance criteria,
- The basics of investing the Company’s assets,
- Determining the company's assets that meet the accrued insuring obligations.
- The accounting policies to be adopted by the company and the requirired forms to prepare reports, financial statements and presentation thereof.
- The principles of organizing accounting books and records of each of the companies, Agents, and Brokers and determining the data to be contained in these books and records.
- The records which the company shall be obliged to organize and maintain as well as the data and documents shall be made available to the Authority.
- The rules of professional practice and code of ethics
- Anti-Money laundering and combating terrorism financing in the insurance activities in collaboration with the pertinent bodies.
- The rules governing ownership in insurance companies’ capitals, pursuant to the provisions of the Federal Law pertinent to Commercial Companies.
Article (23) bis (1)
The Authority may compel those practicing insurance activities of certain types and classes, but not others, and determine the terms, conditions and applicable tariff rates, as well as regulating the rights and obligations of the related parties.
Article (23) bis (2):
The Authority may establish funds that have independent legal personality for the purpose of protecting and compensating persons. The Board shall issue a decision to determine how to establish these funds, their objectives, funding, as well as risks covered under these funds, and benefits in case those risks have occurred
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)The Board shall issue on a recommendation by the director general the instructions pertinent to the insurance operations including:
- The solvency margin and the minimum guarantee fund, provided the same shall not be less than one third of the solvency margin taking the international standards into consideration,
- The basis of calculating the technical provisions,
- The standards of re-insurance,
- The basics of investing the rights of the policyholders,
- Determining the company's assets that meet the accrued insuring obligations.
- The accounting policies to be adopted by the company and the necessary forms needed to prepare reports and financial statements and presentation thereof.
- The principles of organizing accounting books and records of each of the companies, agents, and brokers and determine data to be inserted in these books and records.
- The records which the company shall be obliged to organize and maintain as well as the data and documents shall be made available to the Authority.
- The profession's rules and code of conduct.
- Anti-money laundering and terrorism financing in the insurance activities in collaboration with the pertinent bodies.
Chapter Three Insurance Companies Section One The Insurer
Article (24)
- Insurance and re-insurance operations in the State may be carried out by any of the following entities which are licensed and registered with the Authority:
- A public stock company established in the State.
- A branch of a foreign insurance company
- An insurance agent
- A. The prior approval of the Board shall be obtained before incorporating any insurance company in the State or opening a branch of a foreign insurance company or carrying out the operations of an insurance agent.
B. The fiscal year of the company shall commence on the first day of January and end on the thirty first day of December each year and as for the first fiscal year it shall commence as from date of incorporation and end on the thirty first day of December of the following year. - Any insurance contract concluded by a company not duly registered according to the provisions of the law herein shall be deemed invalid and the affected party may claim compensation by reason of so invalidation.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)- Insurance and re-insurance operations in the State may be carried out by any of the following entities which are licensed and registered with the Authority:
- A public stock company established in the State.
- A branch of a foreign insurance company
- An insurance agent
- A. The prior approval of the Board shall be obtained before incorporating any insurance company in the State or opening a branch of a foreign insurance company or carrying out the operations of an insurance agent.
B. The fiscal year of the company shall commence on the first day of January and end on the thirty first day of December each year and as for the first fiscal year it shall commence as from date of incorporation and end on the thirty first day of December of the following year.
- The capital of an insurance company shall not be less than the minimum limit as determined by the executive regulation of the law herein.
- Any insurance contract concluded by a company not duly registered according to the provisions of the law herein shall be deemed invalid and the affected party may claim compensation by reason of so invalidation.
- Insurance and re-insurance operations in the State may be carried out by any of the following entities which are licensed and registered with the Authority:
Article (25)
1. The company may not combine both Persons and Funds Accumulation Insurance Operations and Property and Liability Insurance Operations.
2. Exception to what is stipulated in paragraph (1) of the article herein, an existing company licensed to practice the two types of insurance prior to the promulgation of this Law may combine Persons and Funds Accumulation Insurance Operations and Property and Liability Insurance Operations, provided that it will comply to do the following:
(a) Complete separation between Persons and Funds Accumulation Insurance Operations and Property and Liability Insurance Operations in terms of technical, financial, technological, administrative and legal procedures and the relevant requirements in terms of technical, administrative and financial staff, with the exception of the Director-General of the company.
(b) Preparation of all reports and financial statements required by the Law herein, the instructions and decisions of the Board on a consolidated total basis, and on the basis of the separation between Persons and Funds Accumulation Insurance Operations and Property and Liability Insurance Operations.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)1. The company shall not carry out life assurance and funds accumulation operations together with the operations of properties and life liability insurances.
2. The existing companies engaged in the two types of insurance as provided for in Para (1) of the Article herein shall adjust their situations within five years as from date of enforcing the law herein. However, the said period may be extended by resolution of the Cabinet.
3. The existing companies engaged in the two types of insurance as provided for in Para (1) of the law herein upon enforcing the provisions of the law herein shall abide by the directives issued by the Board organizing the operations of each of these two types of insurances.
Article (26)
1. Properties or possessions in existence inside the State or liabilities resultant thereof shall not be insured with insurance companies outside the State and as well no mediation in insuring these properties, possessions or liabilities except with a company duly registered according to the provisions of the law herein.
2. The insurer may re-insure inside and outside the State.
Article (27)
Taking the provisions of the law herein into consideration, the company may open branches therefor in the State.
Article (28)
- Insurance policies concluded in the State shall be written in Arabic and a faithful translation into another language may be attached therewith, and in case of differences over the interpretation of the policy the Arabic text shall prevail.
- The policy's articles exempting the company from the liability shall be written in bold letters and different colour and must be acknowledged by the insured.
- Insurance policies may be issued electronically, in accordance with the circumstances and conditions established by a decision by the Board.
- Exception to paragraph (1) of the article herein, the Director-General may exclude certain insurance policies from the condition of writing them in the Arabic language.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)Insurance policies concluded in the State shall be written in Arabic and a faithful translation into another language may be attached therewith and in case of differences over the interpretation of the policy the Arabic text shall prevail.
The policy's articles releasing the company from the liability shall be written in bold letters, different color and endorsed by the insured.
Article (29)
The company shall be maintain the number of UAE nationals working therewith as resolved by the Cabinet.
Article (30)
No one shall be a member of the company's Board of Directors, a general manager or an authorized manager therein should he ever been:
1. Convicted of a crime or a felony of dishonor, distrust or public moral or pronounced bankrupt and never been rehabilitated.
2. Liable according to the Board's discretion for grief violations of any of the provisions of the law herein or of the companies' law in his capacity as general manager or board member of one of the companies including the liability of causing the company to go for compulsory liquidation.
Article (31)
1. The chairman and the members of the board of directors of the company, its general manager and the authorized manager or whosoever acting on his behalf or any of the company's managers or a senior officer shall not:
- Participate in managing other competing insurance company or a similar company thereto,
- Compete the company's operations or do any actions or an activity that conflicts with the company's interest,
- Carry out the operations of an insurance agent or a broker,
- Receive a commission for any of the insurance operations.
2. Whosoever be in charge of the management of the company or any employee therewith shall not represent any of the shareholders of this company.
Article (32)
Efficiency and experience in insurance operations shall be prerequisites have to be fulfilled by any general manger or authorized manager and the senior officers of the company. The company shall provide the Authority with detailed description thereof implying qualifications and experience of each one as specified in the executive regulations of the law herein.
Article (33)
1. The company shall advise the authority of the names of the members of its board of directors, general manager or the authorized manager or any of the senior staff and whether the position of any one of them vacated. The company shall fill the vacancy within sixty days as from date of vacating the same and notify the Director General of the Authority as so.
2. The company's Board of Directors shall provide the Authority with copies of the minutes of the Board's meetings and its decisions related to the elections of the company's chairman, his deputy, and the board's members authorized to sign on behalf of the company and their specimen signatures within seven days as from date of issuing these decisions.
3. Should the chairman and the members of the board of directors lodged their resignations or the Board lost its quorum the board of directors shall form a provisional committee of experienced and specialized individuals, appoint a chairman thereto, a deputy therefor out of its members to take charge of the company's management, invite the general assembly to convene within a period not exceeding three months as from date of the formation of the committee which shall be subject to renewal for a similar period once only by decision of the Board - in order to elect the company's new board of directors. The company shall bear remunerations of the committee as decided by the Board.
Article (34)
The company in implementation of the instructions issued by the Board shall maintain the following:
- Solvency margin and the minimum guarantee fund associated with the type of insurance engaged therein.
- Technical provisions as estimated at the end of each fiscal year.
- The reserves need be maintained inside the State.
Article (35)
The company licensed to carry out insurance operations after the implementation of the provisions of the Law herein shall appoint or approve a registered actuary within a month as from date of granting the license thereto, provided reporting the same to the Director General within a month as from date of appointing or approving the actuary. The companies licensed prior to implementing the provisions of the law herein shall adjust their situation in accordance with the provisions of the Article herein within three months as from date of implementing the provisions of the law herein.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)The company licensed to carry out life assurance and fund accumulation operations shall appoint or approve a registered actuary within a month as from date of granting the license thereto, provided reporting the same to the Director General within a month as from date of appointing or approving the actuary. The companies licensed prior to implementing the provisions of the law herein shall adjust their situation to make it consistence with the provisions of the Article herein within six months as from date of implementing the provisions of the law herein.
Article (36)
1. The company shall provide any data or information requested by the Director General on the company per se or on any company possessively related or associated therewith during the period as determined by the Director General, in addition to any data or information submitted by the company to any other monitoring body and any data or information received by the company from these bodies on time of occurrence.
2. The company's Board of directors shall invite the Director General to attend the general assembly meetings before at least fifteen days as from date of its convention. The Director General may depute whosoever represents him out of the Authority's employees in this respect.
3. The Director General may assign one or more of the employees of the Authority to ascertain or verify at suitable times any of the company's transactions, records, or documents. The company shall put any of the aforesaid at the disposal of the so assigned employee and cooperate with him to enable him to fully perform his duties.
4. The Director General on basis of the verification performed pursuant to the provisions of Para (3) of the Article herein shall appoint experts, consultants, actuaries or accounts auditors to check the company operations, evaluate the situations and file a report thereon. The company shall cooperate with them in a manner that enables them to fully perform their duties. The company shall bear their remunerations as determined by the Director General for each one of them.
5. The expert, consultants, actuary or the accounts auditor shall not disclose to any body whatsoever any information on the results arrived at according to Para (4) of the Article herein only after obtaining the written approval of the Board.
Article (37)
1. The company shall be obligated to provide the Authority with a detailed report on its operations signed by the chairman of its board of directors, the authorized manager or those authorized to sign on behalf of the company containing company's final annual accounts and all the related detailed information annexed thereto including the annual budget, detailed profit and loss accounts of the two types of insurance in which the company is engaged and of each branch thereform plus the accounts auditor's report within a period not to exceed four months as from the end of the fiscal year. The report shall reach the Authority within at least thirty days period prior to inviting the company's general assembly to convene.
2. Should the accounts and data provided for in Para (1) of the Article herein proved to be not in agreement with the provisions of the law, and the regulations, rule, directives and decisions issued pursuant thereof the director general shall request the company's board of directors make them corrections in order to obtain the approval thereto before presenting them to the general assembly. The company's board of directors shall not present the same before obtaining such an approval.
3. Should the company faces unfavorable financial or administrative situations or inflicted grief losses affecting the rights of the insured or the beneficiaries, the company chairman of the board of directors or its general manager shall forthwith inform the director general of the Authority as so.
Article (38)
- A.The company shall provide the authority with the insurance policies' forms and endorsements they have approved for its operations including the general and special terms and conditions and the technical basis of these policies and the premiums rates annexed thereto and as well shall provide the director general with schedules of the redemption values of the life assurance policies and funds accumulation operations and the premiums rates annexed thereto.
B. The director general should the public interest require or in case of existence of a genuine imperfection may demand insertion of amendments into these forms within the period he determines for the purpose. The company may oppose the amendment and in case no agreement reached the matter shall be referred to the Board to settle it.
- The company shall provide the insured and the beneficiaries with copies of the insurance policies and the related details.
- A.The company shall provide the authority with the insurance policies' forms and endorsements they have approved for its operations including the general and special terms and conditions and the technical basis of these policies and the premiums rates annexed thereto and as well shall provide the director general with schedules of the redemption values of the life assurance policies and funds accumulation operations and the premiums rates annexed thereto.
Article (39)
The insurance and re-insurance companies registered with the Authority shall observe the doctrine of disclosure and transparency in their dealing with their patrons and in respect of all the documents, papers, bulletins, advertisements, propaganda and articles and scientific materials of their issue. The Board shall issue a resolution in respect of the matters must be observed in implementation the renderings of the Article herein.
Article (40)
The accounts auditor shall forthwith file a report to the Authority with copy thereof to the company's chairman of the board of directors in any of the following cases:
A. Should he became evident that the financial situation of the company does not enable it to fulfill its obligations towards the insured or hinders its capacity to meet the financial requirements provided for in the law herein and the regulations, rules, directives and decisions issued pursuant thereto relevant to the financial situation of the company.
B. Should he became evident that there is grief imperfection in the company's performance of its financial procedures including the process of entering the statements into its accounting records.
C. Should he refused or have reservations in respect of any certificate issued by the company related to its income or its financial statements.
D. Should he decided to resign or refused to be reappointment with the company for unusual reasons.
2. The Director General may ask the accounts auditor to furnish him directly within a specific period with the information needed to monitor the company's operations.
3. The general assembly of the company, in case the accounts auditor recommended that the financial statements filed thereto by the board of directors not to be approved, may resolve either to:
- return the financial statements to the board of directors and demand the budget and profit and loss account be corrected according to the auditor's remarks and deem them approved following the correction, or
- refer the matter to the director general to appoint an expertise committee of account auditors, determine their remunerations to be borne by the company, to settle the subject matter of the dispute between the company's board of directors and its accounts auditors. The decision of the committee shall be binding after presenting the same once more to the general assembly for approval. The budget and the profit and loss account shall be amended as decided by the committee.
- return the financial statements to the board of directors and demand the budget and profit and loss account be corrected according to the auditor's remarks and deem them approved following the correction, or
Article (41)
The Authority shall conduct periodical inspection on the insurance and re¬insurance companies to ensure the soundness of their financial situations, and their compliance with the provisions of the law and the technical basis of carrying out the insurance and re-insurance operations. Should the Director General come to know through such inspection or vide sufficient information that one of the following incidents took place, then he shall ensure soundness of such information:
- (a) The company did not fulfil its obligations, or it's likely to fall short in doing so or the company is unable to continue its operations.
- (b) The company violated the provisions of the law herein, bylaws, regulations, instructions or the decisions issued pursuant thereto.
- (c) The company's procedures needed to reinsure the risks accepted by it are inadequate or the company didn't make these procedures, with the exception of the insurance-related professions.
- (d) The company has lost one of the required terms and conditions for licensing or registration to carry out the insurance activity.
- (e) The company's total losses exceeded (50%) of its paid-up capital.
- (f) The company ceased its operations for more than one year without justifiable cause or legitimate reason.
2. Should the Director General became evident that the said information is correct he shall ask the company to take certain procedures to rectify its position within the period he shall determine, and in case the company failed to do so, the Director General shall refer the matter to the Board to take the necessary actions to rectify these situations; including:
(a) Request from the company or the main office of the foreign insurance company, as appropriate, to take the necessary action to correct the administrative situations, including the disqualification of the Director-General, the Authorized Manager or any senior official.(b) Disqualification of the Chairman of the Board of Directors or any member of the Board that proves accountability for the current status of the Company.
(c) Dissolving the Company's Board of Directors and appointing a provisional neutral administrative committee of experienced individuals to take its place and appointing a chairman for the committee and a deputy thereof. The functions and competencies of the committee shall be determined for a period not exceeding six months, extendable for a period not exceeding one year in cases where this is required. The company shall be liable for the fees of the committee as determined by the Authority and upon accomplishment of the committee's mission a new Board of Directors shall be elected in accordance with the provisions of the Commercial Companies Law.
(d) Taking the necessary action to merge the company into another according to the provisions of the Commercial Companies Law.
(e) Ceasing or cancelling the company's license.
(f) Restructuring the company.
(g) Preventing the company from concluding any more insurance contracts or preventing it from practicing a particular type or types of insurance.
(h) Setting upper limit for the premiums total amounts received by the company for issuing insurance policies.
(i) Retaining assets in the State equal in value to the company's total net obligations accrued from its operations in the State or a certain percentage of their value as determined by the Board based on the recommendation of the Director General.
(j) Restricting the company's involvement in any of its investments activities associated with the solvency margin or compeling it to liquidate its investments in any of these activities to serve this purpose, unless such action would cause damage to the company as decided by the expert specialized in this field.
(k) Appointing an independent observer member from outside the Authority to attend meetings of the Board of Directors of the company and participate in the discussions without having a vote during taking the decision and the Board shall determine his competencies and fees.
(l) Liquidating the company.3. The provisions stipulated in paragraph (1) and (2) of the article herein shall apply to Insurance Related Professions to the extent appropriate to the nature of these professions.
Article (41) bis (1):
1. Subject to the provisions of the Law concerning Offences and Administrative Sanctions in the Federal Government, the Authority has the power to impose administrative fines on insurance companies, reinsurance companies and insurance-related professions.
2. The Cabinet shall issue a decision to determine the offences for which the fines referred to in paragraph (1) of the article herein shall be imposed.
Article (41) bis (2):
1. The Director-General shall designate any expert, consultant, actuary or auditor for the purpose of conducting an inspection or audit.
2. Inspectors and auditors appointed by the Director General shall be given all necessary authorities to enable them to carry out their duties, including:
(a) Accessing records, registers, statements and internal audit reports. As well as collecting information and requesting necessary clarifications from the insurance company, reinsurance company, insurance-related profession and the members in respect of the insurance operations they carry out. In addition to obtaining prints or copies of records, registers and statements.
(b) Collecting the necessary information and clarifications from the members of the group of insurance company or reinsurance company in relation to all records, operations and activities relating to the insurance company.
(c) Collecting the necessary information and clarifications from any third party that has a relation with the insurance company, reinsurance company or the insurance-related profession concerning the subject matter of auditing.
Article (41) bis (3):
Any insurance company, reinsurance company or insurance-related profession, or any of their managers or employees shall not:
1. Prevent, intercept or obstruct any person appointed by the Director General to carry out inspections or audits pursuant to the law herein.
2. Conceal any data, registers or books requested by the Director General or the person appointed by him to perform the inspection or auditing duties.
3. Issue any misleading statements or give any inaccurate data, registers or books.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)The Authority shall conduct periodical inspection of the insurance and re-insurance companies to ensure safety of the financial situations, observance of the provisions of the law and the technical basis of conducting the insurance and re-insurance operations. Should the Director General came to know through such inspection or vide sufficient information that one of the following incidents took place he shall ensure soundness of such information:
- That the company did not fulfill its obligations or it's likely to fall short in doing so or unable to go on with its operations.
- That the company violated the provisions of the law herein, or the regulations, rules, directives or the decision issued pursuant thereto.
- That the company's procedures needed to re-insure the risks of its tolerance are inadequate or the company didn't make these procedures.
- That the company became devoid of one of the required terms and conditions for licensing or registration to carry out the activity of insurance.
- That the company's total losses exceeded 50% of its paid-up capital.
- That the company ceased to carry out its operations for more than a year without justified or legitimate reason.
2. Should the director general became evident that the said information are correct he shall ask the company to take certain procedures to rectify its situations within the period he may determine and should the company failed to do as so, the director general shall refer the matter to the Board to take the necessary actions to rectify these situations; including:
- Preventing the company from concluding any more insurance contracts or transacting in certain type or types of insurance.
- Setting upper limit for the premiums total amounts received by the company against issuing insurance policies.
- Retaining assets in the State equal in value to the company's total net obligations accrued from its operations in the State or to a certain percentage of their value as determined by the Board following a recommendation by the Director General.
- Restricting the company's involvement in any of its investments activities associated with the solvency margin or obliging it to liquidate its investments in any of these activities to serve this purpose unless such action would inflect harms on the company as decided by the expert specialized in this respect.
- Asking the company or the main office of the foreign insurance company as the case might be to take the necessary actions to rectify the administrative situation therein including removing the Director General, the authorized manager or any of its senior officers away from office.
- Removing the Chairman of the company's board of directors or any Board member proved to be liable for the ensuing situation of the company.
- Dissolving the company's board of directors, appointing a provisional neutral administrative committee of experienced individuals to take its place and as well appointing a chairman for the committee and a deputy thereof, determining their responsibilities and powers for a period not to exceed six months subject to renewal for a period not more than a year in the cases requiring as so. The company shall bear the fees of the committee as determined by the Authority and upon accomplishment of the committee's mission a new board of directors shall be appointed according to the provisions of the Law of Commercial Companies.
- Taking the necessary action to merge the company into another according to the provisions of the Law of Commercial Companies.
- Ceasing or canceling the company's license.
- Restructuring the company.
- Liquidating the company.
Insurance Companies' Funds
Article (42)
Every insurance company shall deposit into one of the banks operating in the State a deposit to stand as guarantee for fulfilling its obligations amounting:
- Dirham four million for the two types of insurances of life assurance and fund accumulation operations provided for in Para (1) of Article (4) of the law herein.
- Dirham two million for each branch of insurance enlisted under the two types of insurances of properties and life liabilities provided for in Para (2) & (3) of Article (4) of the law herein, provided the total amount shall not exceed Dirham six million at most regardless of the number of the branches.
According to a resolution by the Cabinet the deposit as provided for in the preceding two paragraphs may be increased on basis of a recommendation by the Chairman.
The deposit shall be in the form of money or the equivalent of shares and bonds of companies incorporated in the State or a mortgage of a real-estate located therein, subject to the chairman's consent.
The deposit shall be deposited into one of the banks licensed in the State in the name of the company and to the order of the chairman in so capacity. As for the real-estate mortgage, an endorsement shall be entered into its registration with the Department assigned for mortgages' registration as an indication for that. The Authority shall be provided by an official certificate as so. The cash returns of the deposit (if any) shall be made for the company's interest. By consent of the Director General the whole deposit or part thereof shall be replaced by any other form of deposit provided for in the Article herein in condition that its value shall not be less than the legal limit of the deposit at the time of replacement.
- Dirham four million for the two types of insurances of life assurance and fund accumulation operations provided for in Para (1) of Article (4) of the law herein.
Article (43)
The deposit shall not be disposed off except by a written permission from the chairman or whosoever authorized by him. The court of jurisdiction or the committee may order seizure of the deposit against the debts accrued from the insurance operations of the company. However, no order shall be given to seize the deposit against other debts.
The Authority shall request the company to complete the deposit should it become less than the legally determined limit due to decrease in the values of the shares, bonds, or real-estates or impose seizure thereon or on part thereof according to the provisions of the preceding Para or for any other reason. The company shall complete the deposit within a thirty day period at most as from date of the call to complete the deposit.
Article (44)
The bank shall not dispose off the deposit by any form or another except pursuant to a final judicial verdict or by a written permission from the chairman. The pertinent real estate registration bodies as well shall not lift off the endorsement signifying mortgaging of the real-estate kept as a deposit except by a written permission from the chairman or whosoever he authorizes.
Article (45)
The companies engaged in any of the two insurances types provided for in Para (1) of Article (4) shall maintain funds therewith in the State equivalent in their value at least to the total amount of the special mathematical reserve of the contracts concluded inside the State or of those executed therein. The Cabinet on basis of a presentation by the Chairman may decrease percentage of the reserve to be maintained by the company to no less than 50%.
These funds shall be fully maintained separate from the monies of other insurance operations. However, in calculating the said reserve the deposit provided for in Para (1) of Article (42) of the law herein shall be taken into consideration in such a manner whichever the larger shall weigh up.
Article (46)
The insurance companies operating at the time of implementing the law herein shall be given one year grace period as from date of enforcing the law herein to adjust their situations according to the provisions of Para (1) and (2) of Article (42) of the law herein. The Cabinet on recommendation of the chairman may extend the period for another year.
Licensing
Article (47)
1. Incorporation of any insurance company in the State or opening a branch of a foreign insurance company therein shall not be only after obtaining a license from the Authority which shall have the right either to grant it or refuse as may seen fit to the national economy needs provided that the purpose of the company shall be carrying out insurance operations. The executive regulations of the law herein shall determine the documents need be submitted along with the licensing application.
2. Should licensing be granted on basis of inaccurate information the license shall be cancelled by decision of the director general.
Chapter Two Registration of Insurance Companies & Agents
Article (48)
1. Any of the companies provided for in Para (1) of article (24) of the law herein shall not carry out insurance operations only following its inscription in the register according to the provisions of the law herein and the requisites determined by the executive regulation of the law herein.
2. Should the registration been granted on basis of inaccurate information the registration shall be cancelled by decision of the director general.
Article (49)
The company shall not re-insure with another company unless that other company is duly licensed to carry out the type of insurance assigned thereto for re-insurance.
Article (50)
The Board on basis of the director general's presentation may cease the company to carry out certain type or types of the insurances of its practice for a period not exceeding a year and shall notify the company and the pertinent body given the cessation decision in any of the following cases:
- Should the company is in violation of the provisions of the law herein and the regulations, rules and directives issued pursuant thereto.
- Should the company became devoid of any of the terms needed for the registration according to the provisions of the law herein.
- Should the company did not carry out its operations in any of the insurance types listed with those ones requiring registration or ceased operating in such a type to carry out for period of one year.
- Should the company failed to fulfill its accrued financial obligations.
- Should the company refrained to execute a final judicial verdict related to an insurance contract.
- Should the company is in violation of the provisions of the law herein and the regulations, rules and directives issued pursuant thereto.
Article (51)
1. Should the company within a period not more than one year as from date of the cessation eliminated the reason led to cease its operations due to any of the cases provided for in Article (50) of the law herein, the Board shall issue on basis of a presentation by the director general a decision approving the company to continue carrying out insurance operations. The decision shall be transmitted to the pertinent body and the company.
2. Should the company failed to eliminate the reason led to cease its operations within a period of one year at most as from date of the cessation, its license for that type or types of insurances shall be cancelled by decision of the Board. The decision shall be transmitted to the pertinent body and the company.
Article (52)
1. The procedures related to cessation of operations or cancellation of one or more of the insurance types and the powers bestowed upon the director general in this respect shall be determined by virtue of the decisions issued by the Board for the purpose.
2. The following shall result from the decision of ceasing the operations or canceling the license for one or more of the insurance types:
- The company shall be prohibited from concluding insurance contracts of any of those insurance types subject to the penalties provided for in the law herein.
- All rights and obligations accrued from the contracts concluded prior to the cessation of the operations or the cancellation of the license for that or those types of insurance shall be deemed proper and valid and the company shall remain liable therefor.
- The company shall be prohibited from concluding insurance contracts of any of those insurance types subject to the penalties provided for in the law herein.
Article (53)
The company which its registration for one or more types of insurances has been cancelled may file an application to the director general to re-register it within a period not exceeding one year as from date of issuing the cancellation decision attached therewith the documents establishing elimination of the reasons of that the cancellation. The Board shall issue its decision pertaining thereto on basis of a presentation by the director general within a period of two months at most as from date of referring the matter to the Board.006
Article (54)
1. Should the company which its registration for all types of insurance had been cancelled did not file an application for re-registration within the period provided for in Article (53) of the law herein or the Board rejected the application for re-registration, the company shall start procedures of voluntarily liquidation within a month as from the expiry date of such period or from date of notifying the company of the Board's decision and should the company did not conduct these procedures the company shall be liquidated according to the provisions of the law herein.
2. The registration of the company shall be deemed canceled should a non-compulsory liquidation decision been issued or a final judiciary verdict of compulsory liquidation been pronounced thereon or been declared bankrupt.
Chapter Three Branches of Foreign Insurance Companies
Article (55)
1. Branches of foreign insurance companies shall be obliged before getting registered to appoint an authorized manager for the branch to carry out insurance operations on their behalf and they shall be responsible for his actions provided attaching along with the appointment decision an official documents and an attested copy thereof in order to be deposited with the Authority authorizing him to exercise all necessary powers to manage the branch including the acts of:
- Issuing insurance policies, making endorsements and paying the accrued indemnities.
- Representing the company before the Authority, the courts of jurisdictions, and all official and non-official bodies in connection with the branch's operations and management.
- Receiving of warnings and all notices and correspondences intended to the company.
2. The branches of the foreign insurance companies shall be obliged to notify the director general of the name of the so authorized manager within a month as form date of his appointment and shall appoint a replacement thereto within a month as from date of vacating his position.
3. The branches of the foreign insurance companies shall publish the company's consolidated final accounts in two widely circulated local daily newspapers issued in Arabic and in one local daily newspaper issued in English.
Representative Offices of Foreign Insurance Companies
Article (56)
1. Representative offices of the foreign insurance companies shall not carry on their tasks in the State before obtaining a license for the purpose from the Authority.
2. The Authority shall issue a decision to organize the tasks of these offices.
3. The licensing applications may be approved or rejected by decision of the Board and the decision shall be notified to the relevant bodies.
Chapter Four Special Provisions related to the Companies of Life assurance and Funds Accumulation Operations
Article (57)
Companies engaged in any of the two types of insurances provided for in Para (1) of Article (4) of the law herein shall not discriminate between a policy and another of the same type in respect of insurance premiums or profit amounts allocated to the shareholders or the like of other stipulations unless such discrimination is a result of life expectancy variations in those policies which life span has an effect therein, with exception of:
- Re-insurance policies.
- Insurance policies in amounts with certain discounts according to the premium rates' schedules communicated to the Authority.
- Insurance policies with special terms covering the life of the members of one-family or group of people professionally or occupationally related or having any other social relation.
- Re-insurance policies.
Article (58)
The director general may license the company upon its own request to issue policies at premiums discounted than the usual should there are justifiable reasons.
Article (59)
Companies engaged in either of the two types of the insurances provided for in Para (1) of Article (4) of the law herein shall examine the financial status of the related type and assess the outstanding obligations related thereto at least once every three years by an actuary.
Such assessment shall include all insurance operations concluded by the company inside and outside the State one-by-one and should the activity been conducted by a branch, the assessment shall be confined to the operations which their contracts been concluded inside the State or executable therein.
Article (60)
The assessment mentioned in Article (59) of the law herein shall be conducted whenever the company intended to examine its financial status in order to determine percentage of profits to be allocated to the shareholders or policyholders or whenever it intended to make such status public.
The Authority may demand such assessment be conducted at any time before the lapse of three years provided the lapse of one year at least as from date of conducting the latest assessment.
Article (61)
The executive regulation of the law herein shall determine statements should be incorporated in the expert's report in respect to the findings of the examination and the assessment referred to in Articles (59) & (60) of the law herein.
Article (62)
The company shall send the Authority a copy of the expert's report on the findings of the examination and the assessment referred to in Articles (59) & (60) of the law herein within six months as from the expiry of the period for which the examination was conducted accompanied with the following:
- A statement of the insurance policies still in effect concluded by the company inside or outside the State on the date of conducting the examination and should such an activity been carried out by a branch of a foreign company the statement shall include only those policies concluded inside the State or those ones executable therein.
- A declaration by those responsible for managing the company in witness that all statements and information required to get an exact report have been put under the disposal of the expert.
By decision of the director general following the lapse of the six months provided for in the Article herein an extension of time may be given to the company to file the said report provided such period shall not exceed three months.
- A statement of the insurance policies still in effect concluded by the company inside or outside the State on the date of conducting the examination and should such an activity been carried out by a branch of a foreign company the statement shall include only those policies concluded inside the State or those ones executable therein.
Article (63)
Should the Authority became evident that the expert's report did not reflect the reality of the financial status of the company the Authority may order a re-examination thereof on the company's own expenses by an actuary to be elected by the Authority for the purpose.
Article (64)
The companies engaged in life assurance and funds accumulation operations shall not deduct whether directly or indirectly any part of the funds intended to meet their obligations accrued from the insurance policies in order to allocate as profits for the shareholders or the policyholders or to pay any amount other than their obligations according to the insurance policies they have issued. Allocation of profits shall be restricted to the surplus funds as determined by the expert in his report after conducting the examination referred to in Article (59) of the law herein.
In implementing the provisions of the Article herein the company's funds inside and outside the State shall be deemed without prejudice to the provisions of Article (34) of the law herein as one unit.
Article (65)
The companies engaged in life assurance and funds accumulation operations shall not issue saving bonds for a period exceeding thirty years and should the bond of a duration of twenty five years or more the surrender value after the twenty fifth year shall not be less than the full amount of the mathematical reserve and the premiums undertaken by the bearer of the saving bonds shall be of equal amounts or receding.
Article (66)
The saving bonds shall include therein invalidation articles to be used by the company as an argument in face of the bearer to invalidate the bond for delaying payment of the premium.
The contract, however, shall not be invalidated before lapse of three months as from the due date of the premium and should the bond being nominal such period shall not become effective only as from date of serving a notice on the bearer of the bond by a registered letter.
Also, it shall be specified in these bonds that the right therein shall pass to the beneficiaries by reason of the death of the bearer of the bond without paying any additional monies or imposing any further provisos.
By decision of the Board based on a recommendation of the director general other statements need be included in the saving bond may be specified.
Article (67)
In case the company engaged in life assurance and funds accumulation operations gone bankrupt or in case of liquidation the due amounts of each holder of a policy with unexpired durtion shall be estimated to equate the mathematical reserve thereto in the day of announcing the bankruptcy verdict or the liquidation decision calculated according to the technical basis of the premiums' tariff at the time of concluding the policy.
Chapter Five Insurance & Re-Insurance Companies Operating in the Free Zones in the State
Article (68)
Insurance companies licensed to operate in the free zones shall not carry on any activity outside these zones other than the activity of re-insurance.
Chapter Six Insurance Agent
Article (69)
1. The provisions relevant to the regulation of the insurance agent's operations and the accrued liabilities thereupon shall be determined pursuant to decisions or directives to be issued by the Board for the purpose.
2. No body shall carry out the operations of an insurance agent only after providing the director general with the agreement he concluded with the company stated therein him being authorized as agent therefor. However, the agent shall not act as an agent for more than one company. He shall fulfill the terms and conditions provided for in Article (30) of the law herein.
Chapter Seven Insurance Brokers, Appraisal & Loss Adjusters, Insurance Consultants & Actuaries
Article (70)
No body shall carry out operations of an insurance broker, a re-insurance broker, an appraisal and loss adjuster, an insurance consultant, or an actuary only after entering his registration in the register prescribed for the purpose according to the terms and conditions as determined by the Board pursuant to the rules issued for the purpose provided including therein the provisions determining his responsibility, organizing his operations and requisites of his registration. However, he shall fulfill the provisos provided for in Article (30) of the law herein.
Chapter Eight Reassignment of Insurance Policies & Cessation of Operations
Article (71)
The company may reassign the insurance policies it concluded inside the State, including the rights and obligations associated with any type of the insurances engaged therein, to another company or other companies engaged in the same type of insurance.
Article (72)
1. The reassignment application shall be placed to the director general attached therewith the instruments and documents establishing the agreement on the reassignment. The director general shall give directions to publish a notice about the reassignment in the Gazette just once, in two widely circulated local daily newspapers issued in Arabic and in one local daily newspaper issued in English for two consecutive times, on the applicant own expenses provided that the notice shall include reference to the right of the policyholders and the beneficiaries thereof or whosoever interested therein to raise to the director general an objection to the reassignment within forty five days as from date of the latest notice specified therein the subject matter of the objection and the sustaining reasons.
2. The director general shall issue a decision approving the reassignment should those concerned parties raised no objection within the period referred to in Para (1) of the Article herein. The decision shall be published in the Gazette within a month as from date of its issue and shall be used as an argument in face of the insured, the beneficiaries and the company's debtors. The funds of the company shall be relocated to the company which the policies have been reassigned, taking into accounts the provisions related to conveyance and reassignment of funds. The reassigned funds shall be exempted from registration and safekeeping fees imposed according to laws of conveyance and reassignment of funds.
However, should any objection been raised during the said period, the reassignment application shall not be finalized only after the concerned parties reached an agreement or a final verdict been pronounced in the subject matter of the objection.
Nonetheless, the director general may issue a decision approving the reassignment provided the company paying an amount equivalent to its obligations towards the objector including the expenditures may be needed to maintain any of the company's assets.
Article (73)
The provisions of Articles (71) & (72) of the law herein shall be applied should any company ceased operating in certain type or types of the insurances or intended to release its monies need be maintained inside the State for such type or these types of insurances following the company submission of an evidence establishing fulfillment of its obligations towards all policies concluded inside the State or towards those executable therein of the type or types which the company decided to cease operating therein or reassigned these policies to another company in the manner as stated in Article (71) & (72) of the law herein.
Chapter Nine Merger, Acquisition, Restructuring and Liquidation of Companies
Article (74)
1. The special provisions on merger stated in the commercial companies' law shall be applied to mergers of insurance companies.
2. No merger of an insurance company except into another insurance company operating in the same type of insurance and no procedures for merger shall be initiated except after filing an application for merger to the director general attached therewith the necessary reports and statements and obtaining the approval of the Board.
Article (75)
1. The director general shall form an assessment committee participating therein one representative of each company, the accounts auditors thereof, as well as experts and specialist. The director general shall appoint one of them as chairman of the committee.
2. The committee provided for in Para (1) of the Article herein shall assume assessment of all assets, rights and obligations of the companies intending merger in order to indicate the shareholders' net rights on the date set for the merger. The committee shall file its report to the director general along with the company's statement of accounts produced as a result of the merger within a period not to exceed ninety days as from date of referring the matter thereto. The Board on recommendation of the director general may extend such period for a similar period in case of necessity, provided the companies intending merger shall equally bear remunerations of the assessment committee and in case of difference thereat these remunerations shall be determined by decision of the director general. However, director general's decision in this respect shall be final.
3. The director general shall file the committee's report to the Board along with his recommendations and should the Board approve the committee's report, the Board shall form an executive committee composed of the chairmen and Board members of the companies intending the merger and the companies' auditors to handle the excutionary procedures of merger according to the provisions of the commercial companies' law.
Article (76)
1. The companies, the parties of the merger, shall let the insured review the agreement on which the merger has been accomplished in order to verify its articles. The agreement shall be displayed at the main office of each one of these companies for fifteen days as from date of publishing the decision of merger in the Gazette.
2. Any interested party shall have the right to raise an objection before the Board within thirty days as from date of publishing the decision of merger, provided the objector shall indicate the subject matter of his objection, the sustaining reasons thereto and specifically state the damages alleged to be inflicted due to merger. Should the Board failed to settle the objection for any reason within thirty days as from date of referring the same thereto the objector shall have the right to recourse to the court of jurisdiction. However, these objections or claims filed with the court shall not cease the decision of merger unless the court orders otherwise.
3. The Board shall issue the instructions relevant to the procedures of merger and settlement of objections raised thereto in this respect and all the matters related thereto.
Article (77)
- A. For the purposes of restructuring the company according to Para (2.J.) of Article (41) of the law herein the Board on basis of a presentation by the director general may dissolve the company's board of directors and form a neutral committee to restructure the company composed of experienced and specialized individuals and appoint a chairman for the committee and a deputy thereto for a period not to exceed a year as from date of issuing a decision thereto. The fees of the committee as determined by the Board shall be borne by the company. The committee shall file a monthly report to the director general on the progress of the restructuring procedures or whenever so requested.
B. The process of restructuring shall include for the purpose, managing the company and organizing the staggering financial affairs through negotiations with all its debtors in order to determine means to settle debts of the company by approving a restructuring plan.
2. The committee provided for in Para (1.A.) of the Article herein shall publish a notice once in the Gazette and for three consecutive working days in two widely circulated local daily newspapers issued in Arabic and in a local daily newspaper issued in English; all at the company's own expenses. The notice shall include calling all the creditors to file statements of their debts supported with confirmatory documents within a period not exceeding thirty days as from date of publishing the latest notice. However, any statements filed by any creditor upon lapse of such period shall not be considered.
- A. For the purposes of restructuring the company according to Para (2.J.) of Article (41) of the law herein the Board on basis of a presentation by the director general may dissolve the company's board of directors and form a neutral committee to restructure the company composed of experienced and specialized individuals and appoint a chairman for the committee and a deputy thereto for a period not to exceed a year as from date of issuing a decision thereto. The fees of the committee as determined by the Board shall be borne by the company. The committee shall file a monthly report to the director general on the progress of the restructuring procedures or whenever so requested.
Article (78)
1. Irrespective of the provisions stated in any other legislation, the execution of any levy whether precautionary or executionary on the company's funds or assets or any action or execution on these funds or assets shall stay as from date of issuing the decision of the restructuring pending occurrence of any of the following cases:
- The period provided for in Para 1.A. of Article (77) of the law herein lapsed in case the restructuring plan has been approved.
- The Board issued a decision according to the provisions of the law herein rejecting the restructuring plan.
- The creditors rejected the restructuring plan according to the provisions of the law herein.
- The Board issued a decision bringing the restructuring procedures to halt according to the provisions of the law herein.
2. Computing of the time limit to deny hearing of legal proceedings by reason of time-lapse shall cease in connection with the procedures provided for in Para (1) of the Article herein.
Article (79)
1. The committee shall prepare its report on the restructuring plan within a period not exceeding fifteen days as from date of substantiating the debts therewith and call the creditors to approve the plan by publishing a notice in two widely circulated local daily newspapers issued in Arabic and in a local daily newspaper issued in English, provided the same be approved by creditors representing no less than three quarters of the non-preferred and non-mortgage warranted debts.
2. A. in case the creditors approved the plan according to the provisions of Para (1) of the Article herein, the committee shall present the plan to the general manger whose in turn shall refer it to the Board along with his recommendations.
B. In case the creditors rejected the plan prepared according to the provisions of Para (1) of the Article herein, the committee shall file a report thereon to the director general who shall refer it along with his recommendations to the Board to take the necessary action according to the provisions of Para (2) of Article (41) of the law herein.
3. The Board may approve or disapprove the plan presented according to Para (1) of the Article herein; in case of approval the procedures of restructuring shall proceed and in case of disapproval the Board shall decide about the suitable procedure to be taken according to the provisions of Para (2) of Article (41) of the law herein.
4. Following the accomplishment of the restructuring a new board of directors shall be elected according to the provisions of the commercial companies' law.
Article (80)
1. Should the Board became evident that the situations of the company are staggering still despite applying the restructuring plan or the restructuring is ineffective, the Board may decide to cease the restructuring procedures and take the suitable procedures according to the provisions of Para (2) of Article (41) of the law herein.
2. The Board on basis of a presentation by the director general may issue the necessary directives to repeat the restructuring and all the matters related thereto according to the provisions of the law herein.
Chapter Ten Liquidation of the Company
Article (81)
1. The provisions stated in the law herein, the rules and decisions issued pursuant thereto shall apply in case of liquidating the company. The liquidation shall be conducted by one liquidator or more to be appointed by the general assembly by the ordinary majority whereby the company's decisions are being issued.
Should the liquidation been on basis of a verdict, the Court shall specify method of liquidation and appoint the liquidator.
The decision of appointing the liquidator shall be determined therein his fees and powers coupled with commitment him to submit a guarantee should the matter necessitated. Should the liquidator's fees are not determined in the appointing decision the fees shall be determined by the court of jurisdiction.
2. The decision of appointing the liquidator shall be announced by insertion in the trade register and publishing in two widely circulated local daily newspapers issued in Arabic and a local daily newspaper issued in English within a week period at most as from date of the announcement. However, such an appointment shall not be used as an argument in face of the others except as from date of the announcement.
3. The powers of the board of directors shall end when the company starts the liquidation phase. However, the entities of the company shall remain in existence during the period of liquidation, provided their powers shall be confined to the liquidation operations that fall within the domain of the liquidators.
Article (82)
1. Any interested party shall have the right to appeal against the decision issued by the company's general assembly appointing the liquidator before the court of jurisdiction within forty days as from date of entering the decision in the trade register.
2. The appeal made according to Para (1) of the Article herein shall not cease the liquidation procedures unless the court decides otherwise.
Article (83)
The liquidator shall be dismissed in the same manner of his appointment. Any decision or verdict to dismiss the liquidator shall include appointing whosoever will take his replace. The dismissal of the liquidator shall be announced by entrance in the trade register and publishing in two widely circulated local daily newspapers issued in Arabic and a local daily newspaper issued in English. Such dismissal shall not be used as an argument in face of the others except as from date of the announcement.
Article (84)
The following shall result from the decision of liquidation:
- The liquidator will add the expression "under liquidation" to the name of the company on all its papers and correspondences.
- Cessation of any signing authorization or powers issued by any body in the company. The liquidator shall solely be qualified to grant any signing authorization or powers required for the procedures of liquidation.
- Cessation of computing the time-lapse barring hearing of claims of any rights or claims whether exiting or due to the company for a period of one year as from date of issuing the decision of liquidation.
- Cessation of the legal proceeding and procedures filed by or against the company for a period of six months unless the court decides to proceed therein before the end of such a period; taking the provisions of Para (5) of the Article herein into consideration.
- Cessation of the proceeding of any procedural or excutionary processes against the company except should it be upon request of a mortgagee and related to the mortgaged fund per se, then all these processes shall cease or denied acceptance for a period of six months as from date of issuing the decision of liquidation.
- The liquidator will add the expression "under liquidation" to the name of the company on all its papers and correspondences.
Article (85)
The liquidator may take all the necessary decisions and procedures he may see necessary to accomplish the procedures of liquidation including:
- Managing the company's operations to the extent required for the liquidation procedures.
- Taking inventory of all assets and chattels of the company in collaboration with the board of directors which shall undertake to deliver the company's funds, books and documents to the liquidator.
- Appointing any of the experts and individuals to assist him to accomplish the procedures of liquidation or appointing a special committee and delegate thereto any of the tasks and powers entrusted to him and issuing the necessary decisions to accomplish the procedures of liquidation.
- Hiring one lawyer or more to represent the company under liquidation in any of the legal claims or procedures related thereto.
- Managing the company's operations to the extent required for the liquidation procedures.
Article (86)
Irrespective of any agreement otherwise, the liquidator may take all the necessary procedures he may see necessary to protect the company's rights including:
- Canceling any action, rescinding any agreement concluded by the company or retrieving any amount paid by the company during the three months prior to issuing the decision of liquidation should that constitute preferring certain body over the creditors of the company. The period shall be one year should the company happened to be in possessive relation or associated with that body. The preferentiality shall be deemed realized should the action or the procedure done without indemnity or with partial indemnity or involved assessment of a fund or right in a value other than the real or in a value other than the regular in the market.
- Canceling any action or rescinding any agreement concluded by the company with any body possessively related or associated therewith or retrieving any amount paid by the company to either of them during the three months prior to issuing the decision of liquidation.
- Concluding an agreement with any of the creditors of the company on the method of paying or installing any amounts or debts accrued therefrom.
- Terminating the service of any of the company's employee and paying his dues.
- Terminating any contract concluded by the company with any body before it expires.
2. The liquidator shall take any of the procedures referred to in Para (1) of the Article herein by a written notice to be served on the relevant person. These procedures may be appealed against before the court of first instance where under its jurisdiction the company's main office falls during thirty days as from date of notifying the person.
Article (87)
1. All mortgages and warrantees in connection with any of the funds or rights of the company made before three months as from date of issuing the decision of liquidation shall be deemed null and void. The said period shall be one year should the mortgages and warrantees were in favor of somebody possessively related to the company or associated thereto.
2. Every decision imposing a levy on any fund or right of the company prior to the issue of the decision of liquidation shall be deemed cancelled unless the decision was issued upon request of mortgagee or related to mortgaged fund.
Article (88)
For the purposes of the Article (86) & (87) of the law herein an individual shall be deemed associated with the company in any of the two cases:
- Should the individual being an administrator in the company or having joint business interest with an administrator therein.
- Should the individual being a spouse of an administrator in the company or a relative up to the third degree of that administrator or spouse thereof or having joint business interest with any one of them.
- Should the individual being an administrator in the company or having joint business interest with an administrator therein.
Article (89)
Taking the provisions of the legislations prevailing in the State into consideration, the liquidator may fulfill the company due debts and sell its properties whether in form of chattels or real-estate in public auction or by any other mean unless specified in his appointment letter that sales to be conducted in particular manner. However, the liquidator shall not sell the company's possessions in one lot except by permission of the general assembly.
Article (90)
1. Taking into consideration the provisions relevant to the insured and the beneficiaries of the insurance policies, the liquidator shall publish within thirty days as from date of issuing the decision of liquidation a notice in a clearly visible space in two widely circulated daily local newspapers issued in Arabic and in a daily local newspaper issued in English advising the creditors of the necessity of presenting their claims against the company whether being due or not within two months should they are residing inside the State and three months should they are residing outside it.
2. The notice shall be republished in the same manner immediately after lapse of fourteen days as from date of publishing the first notice. The time-lapse period of the claims shall be computed as from date of publishing the first notice.
3. Should the liquidator or the court of jurisdiction became convinced that there is a legitimate excuse for the creditor failure to present his claim during the period specified in Para (1) of the Article herein such period shall be extended for another three month at most.
4. The period as from date of issuing the decision of liquidation up to date of publishing the first notice mentioned in Para (1) of the Article herein shall not be computed within the period determined to bar hearing of the creditors' claims of any rights or claims towards the company under liquidation.
Article (91)
1. Taking Para (2) of the Article herein into consideration, the liquidator shall issue, within three months as from date of issuing the decision of liquidation, the notices indicated here below unless there are justifying reasons to go beyond this period, provided the whole period shall not exceed six months:
- Notice with an acknowledgment receipt to each of the insured or the beneficiary of the insurance policy indicating extent of his rights and obligations.
- Claim notice with an acknowledgment receipt to each debtor indicating amount of debts and obligations owed to the company.
2. An objection against the notice mentioned in Para (1) of the Article herein may be placed to the liquidator within thirty days as from date of serving the notice on the intended party and should no objection been placed during the period, the insured or the beneficiary shall be deemed to have recognized the contents of the notice.
3. The period determined to hear the claim filed pursuant to the provisions of Para (2) of the Article herein shall cease.
4. Should the claim's notice issued by the liquidator to the debtor according to the provisions of Para (1.B.) of the Article herein became final and decisive the liquidator may make settlement with the debtor or use the notice against him by virtue of the provisions of the prevailing laws.
Article (92)
1. A. The liquidator shall issue his decisions in respect of the claims and objections submitted to him according to the provisions of Articles (91) & (92) of the law herein within a period not to exceed six months as from date of submission.
B. should the liquidator didn't issue his decision within the period specified in Sec. (A) of the Para herein the claims and objections shall be deemed legally rejected.2. Any interested party may file an objection before the court of first instance where under its jurisdiction the company's main office falls against the decision issued by the liquidator according to the provisions of Para (1) of the Article herein within thirty days as from date of notifying the intended party of the decision or within thirty days as from lapse of the six months period referred to in Sec. (1.A) of the Article herein whichever is shorter.
Article (93)
Irrespective of any other legislation the liquidator may file a petition to the competent court of first instance to impose a precautionary levy on any funds belonging to the company's debtors or take any precautionary or urgent measures against them according to the provisions of the prevailing legislations taking the following into account:
- The liquidator shall be exempted from attaching a guarantee with his petition.
- The liquidator has served a claim notice on the debtor when he filed the petition referred to herein or will serve the same within the eight days following the issue of the decision. Such notice shall stand in place of the subjective claim need be filed according to the provisions of the Civil Procedures Law.
- The liquidator shall be exempted from attaching a guarantee with his petition.
Article (94)
1. No creditor, debtor, insured, or beneficiary shall be entitled to file a claim against the company under liquidation after issuing the decision of liquidation except according to the principles and procedures provided for in the law herein.
2. Taking the provisions of Para (1) of the Article herein into consideration anybody inflicted harms due the liquidator actions or procedures may file according to the prevailing laws an objection before the court of first instance where under its jurisdiction the company's main office falls. The court may uphold, nullify, or amend these actions and procedures.
Article (95)
Exception to the legislation in force in the State, the due debts and obligations of the company subject to liquidation shall be paid according to the following order:
1. The due entitlements of the staff and employees for the last four months.
2. The liquidator’s fees, costs, expenditures and the loans he obtained.
3. The rights of insured and beneficiaries of insurance policies. The liquidator shall be obliged to allot the company's assets that represent the technical provisions required to be retained in accordance with the provisions of the law herein to pay these liabilities and any amounts acquired by the company according to any arrangements of reinsurance shall be deemed part of the technical provisions.
4. The rights of the other debtors by order of preferences according to the laws in force.
5. The rights of the shareholders.This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)Irrespective of the provisions of any other legislation the company's due debts and obligations shall be paid according to the following order:
- The due entitlements of the staff and employees for the last four months.
- The costs and expenditures borne by the liquidator and the loans he obtained.
- The rights of the insured and beneficiaries of the insurance policies. The liquidator shall be obligated to allot the company's assets that represent the technical provisions required to be maintained according to the provisions of the law herein to pay these obligations and any monies acquired by the company according to any arrangements of re-insurance shall be deemed part of the technical provisions.
- The rights of the other debtors by order of preferences according to the prevailing laws.
- The rights of the shareholders.
- The due entitlements of the staff and employees for the last four months.
Article (96)
1. The liquidator shall submit to the general assembly every six months a provisional account of the liquidation course of action and disclose any information or details required by the partners about the liquidation's state of affairs. He shall accomplish his mission within the period specified in his appointment letter and should no period been specified any partner may file the matter to the court of jurisdiction to determine a period for the liquidation.
2. The liquidation's period shall not be extended except by decision of the general assembly after considering the report of the liquidator indicated therein the reasons that hindered accomplishing the liquidation on time. Should the period of liquidation been determined by the court the same shall not be extended save by its permission.
Article (97)
1. The liquidator shall submit upon accomplishing the liquidation a final account to the general assembly about the processes of liquidation. The liquidation processes shall end upon approving the final account.
2. The liquidator shall declare the liquidation accomplished in the trade register and publish an announcement in two widely circulated local daily newspapers issued in Arabic and in one local daily newspaper issued in English and that shall not be used as an argument in face of the others only as from date of such an announcement. The liquidator following the accomplishment of the liquidation shall file an application to write the company off the register.
Article (98)
1. A. Serving any notice or decision issued by the liquidator according to the law herein to the intended person shall be made by handing the same to him personally or to whosoever legally represent him or by posting it with an acknowledgement receipt to his last address as maintained by the company under liquidation.
B. Each notice sent pursuant to the Article herein shall be deemed duly handed to the consignee should that person refused to receive it.2. Should it became difficult to serve the notice according to the provisions of Para (1) of the Article herein the liquidator shall serve the notice by publishing it in two of widely circulated local daily newspapers issued in Arabic and in one local daily newspaper issued in English at least twice. The publishing fees shall be on the intended person own expenses and such publishing shall be deemed legal notice in all aspects.
Chapter Eleven Emirate Insurance Society
Article (99)
1. The insurance companies, reinsurance companies and insurance-related professions subject to the provisions of the law herein shall establish a professional association to be called "Emirates Insurance Association" that shall have a legal personality and all the insurance companies operating in the State shall be members of the Association. The Association shall form independent committees for the different insurance activities carried out by the members.
2. The Association shall prepare Articles of Association issued by the Chairman after the Board’s approval under which it shall determine the Association's functions, duties, its relation with the Authority, formation of its committees for different insurance activities, provisions and procedures of its general assembly, formation of its Board of Directors, meetings of each one of them, affiliation fees, annual subscription fees, code of conduct, disciplinary procedures against the members and other related affairs.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)1. The insurance and re-insurance companies subject to the provisions of the law herein may establish a trade union to be called "Emirate Insurance Association" entertaining the status of a legal person and all the insurance companies operating in the State shall be members of the Association.
2. The Association shall look after the interests of the holders of the insurance policies and the beneficiaries thereof as well as the interests of its members and shall implement the rules of professional conduct and represent the insurance companies before any entity or individual in connection with the insurance operations.
3. The Association upon getting the Authority's approval shall issue a special regulation to determine pursuant thereto the Association's duties, responsibilities, its relation with the Authority, the rules and procedures of its general assembly, formation of the board of directors, meetings of each one of them, affiliation fees, annual subscription fees, rules of professional conduct, the disciplinary procedures of the members and other related affairs.
Chapter Four Penalties
Article (100)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than two hundred and fifty thousand Dirhams and no more than one million Dirhams shall be imposed on anybody who violated the provisions of Paras (1) and Sec. (2.A.) of Article (24), Article (25) and Article (49) and the Sec. A of Para(2) of Article (52) and Para (1) of Article (56), Article (68) and Para (2) of Article (69) and Article (70), and Para (1) of Article (72) of the law herein.
Article (101)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than fifty thousand Dirhams and no more than two hundred fifty Dirhams shall be imposed on anybody who violated the provisions of Paras (1), (2), (3), (4), (5), (6), (9) and (10) of Article (23), Article (34) and Paras (1) and (5) of Article (36), and Article (37), and Article (40) and Article (116) of the law herein.
The same penalty shall be imposed on the liquidator who violated any of the obligations ordained on him according to the provisions of the law herein, and the regulations, rules, and directives issued pursuant thereto. The fine shall be doubled in case of repeating the violation.
Article (102)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than a hundred thousand Dirhams and no more than two hundred Dirhams shall be imposed on anybody who violated the provisions of Article (30), Article (35), Article (59), Article (64), Article (66), Article (73), and Para (2) of Article (74), Para (1) of Article (76), and Para (2) of Article (117), of the law herein.
The same fine as well shall be imposed on anybody who refused to provide the Authority with the documents, information, and statements need be submitted according to the provisions of the law herein, the regulations, rules, and directives issued pursuant thereto or obstructed or hindered the Director General or whosoever he authorized to execute his duties and powers stated in the provisions of the law herein, the regulations, rules, and directives issued pursuant thereto or interfered to prohibit them to obtain the information needed to execute their duties or abstained from providing them with these information or fallen short to provide them therewith within the limited period. The fine shall be doubled in case of repeating the violation.
Article (103)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than twenty five thousand Dirhams and no more than fifty thousand Dirhams shall be imposed on anybody who violated the provisions of Article (31), Article (60), Article (62), and Article (65) of the law herein.
Article (104)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than five thousand Dirhams and no more than fifty thousand Dirhams shall be imposed on anybody who violated the provisions of Para (7) & Para (8) of Article (23), Article (33), Article (39), and Article (55) of the law herein.
Article (105)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than five thousand Dirhams and no more than fifty thousand Dirhams shall be imposed on anybody who violated the provisions of Para (7) & Para (8) of Article (23), Article (33), Article (39), and Article (55) of the law herein.
Article (106)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)A fine of no less than five thousand Dirhams and no more than ten thousand Dirhams shall be imposed on anybody who violated any other provisions of the law herein.
Article (107)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)The penalties stated in the law herein shall be doubled in case of recurrence and as well the court in such case may write off the company.
Article (108)
This article has been cancelled pursuant to the Federal Law No. (03) of 2018.This article has been cancelled pursuant to the Federal Law No. (03) of 2018. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 26/04/2018)The crimes stated in the law herein shall be punishable by the penalties indicated therein without prejudice to any other harder penalties provided for in any other law.
Article (109)
The Minister of Justice in collaboration with the Minister shall issue a decision to assign the Authority's employees who shall have the capacity of law enforcement officers in the field of implementing the provisions of the law herein.
Chapter Five General Provisions
Article (110)
1. The insurance company shall manage insurance claims in accordance with the legislation in force and the provisions of the insurance policies, pursuant to the following procedures:
(a) Issuing a decision concerning any insurance claim in accordance with the instructions of professionals rules and code of conduct and ethics.
(b) In case any insurance claim is fully or partially denied, the Company must clarify the reasons for its decision in writing.
(c) In case of a dispute in relation to a claim, the concerned person may submit a written complaint to the Authority, which in turn may request clarification from the Company.
(d) In case the complainant has objection on the clarifications provided by the company, he may request that the dispute be referred to the Committee established pursuant to article No. (110).
2. One or more committees that will be concerned with resolving the disputes arising out of insurance contracts, operations and services shall be formed. The committee (s) shall have the competency to request any official papers or documents and to counsel experts, as well as hearing of witnesses and any other alternatives that need to be used to resolve the disputes before them.
3. Cases resulting from the disputes arising out of insurance contracts, operations and services shall not be accepted, if such disputes are not brought before the committees established in accordance with the provisions of paragraph No. (2) of the article herein.
4.The concerned party shall have the right to appeal against the decisions of the committees before the competent first instance court within thirty days of the day following their notification of the decision, otherwise the decision shall be deemed final and enforceable.
5. The Board shall issue the necessary decisions concerning the composition of the committees established in accordance with the provisions of paragraph No. (2) of the article herein, their competencies, powers, their work system, fees of its members and hired experts, types and classes of insurance for which insurance disputes are resolved before these committees, and other related matters.
This article has been amended by Federal Law No. (03) of 2018. You are on the latest version. To view the previous version, click the version box below.Version 1(effective from 15/02/2007 to 26/04/2018)The company shall make clarifications about the complaints received by the authority from the policyholders, the beneficiaries thereof and others pertaining to the insurance operations conducted by the company inside the State.
Article (111)
The companies in existence upon enforcing the provisions of the law herein shall be obliged to adjust their situations according to the provisions thereof and the regulations and directives issued pursuant thereto within the period determined by the Board, provided such period shall not exceed two years as from date of implementing the provisions of the law herein.
Article (112)
Should the company failed to adjust its situations according to the provisions of article (111) of the law herein its registration shall be cancelled by decision of the Board.
Article (113)
Any natural person carrying out operations of insurance agent, insurance broker, loss and damage adjuster, insurance consultant or actuary shall be obligated upon enforcing the provisions of the law herein to adjust his situation according to the provisions thereof and according to the regulations and rules pursuant thereto within the period determined by the Board, provided such period shall not exceed a year as from date of implementing the provisions of the law herein, otherwise his registration or license as might be the case shall be deemed lawfully cancelled and shall be prohibited from carrying out the operations of insurance subject to punishment according to law.
Article (114)
1. Irrespective of what has been mentioned in any other legislation electronic data or printouts of the computers, correspondences generated by telex, fax, and e-mail shall be deemed suitable as proof of evidence should the legislative regulations relevant thereto been adhered to.
2. The companies may keep for the period determined by law microcopies (microfilm or other device of modern technology) instead of the original books, records, lists, documents, correspondences, telegrams, notices and other papers related to its financial operations. These microcopies copies shall have similar supremacy as proof of evidence according to the legislative regulations which a decision issued therefor.
3. The companies which are using in organizing its financial operations computers or other modern technological devices shall be exempted from organizing the commercial books needed according to the Commercial Transactions Law. Statements extracted from these devices or from other modern technological devices shall be deemed same as those statements extracted from the commercial books, provided compliance of the insurance companies with the established legislative regulations in this respect.
Article (115)
All ministries, government directorates, public enterprises, and companies therein the government is having stakes which benefit from the insurance operations shall be required to present any statements or information related to the insurance operations they concluded as may be requested by the Director General within the period he determined.
Article (116)
The insurance agent, broker, re-insurance broker, the actuary, the loss and damage adjusters, and the insurance consultant subject to the provisions of the law herein shall be obligated to present any statements or information as may requested by the Director General within the period he determined.
Article (117)
1. The Director General shall notify the concerned bodies or the pertinent authorities as might be the case of the decisions related thereto issued by the Board or by him personally.
2. The Director General shall publish the decisions related to the registration's suspension, cancellation, or restoration or the decisions related to companies' merger, acquisition, restructuring, liquidation, or termination in the Gazette, in two widely circulated local daily newspapers issued in Arabic and in one newspaper issued in English on the company's own expenses.
Article (118)
The provisions of the Law of Commercial Companies shall not apply to the insurance operations only to the extent the provisions thereto do not contradict the provisions of the law herein, and the regulations, rules, directives, and decisions issued pursuant thereto.
Article (119)
This article has been cancelled pursuant to the Decretal Federal Law No. (25) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)1. The Cabinet shall issue the following regulations needed to implement the provisions of the law herein:
- Fees charged pursuant thereto.
- Minimum amount of the company's capital.
- The Authority's human resources regulations.
2. The Board shall issue regulations, rules and directives necessary to implement the provisions of the law herein.
Article (120)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The employees whom the Minister decided to transfer from the Ministry shall be transferred to the Authority in the same scale, with all their rights and entitlements, provided their statues shall be adjusted according to the provisions of the regulations of the Authority's human resources' affairs without prejudice to the salaries and allowances they are receiving.
Article (121)
This article has been cancelled pursuant to the Decretal Federal Law No. (24) of 2020. To see the previous version, click on the version box belowVersion 1(effective from 15/02/2007 to 02/01/2021)The employees of the Authority shall be subjected to the laws and regulations of the Civil Service as applied in the Federal Government pending the issue of the regulations of human resources designated for the Authority.
Article (122)
The Federal Law No. 9 of 1984 on insurance companies and brokers referred to herein shall be cancelled and while no contradiction with the provisions of the law herein the executive regulation and the decisions issued thereby shall remain valid pending the issue of the executive regulation necessary to implement the provisions of the law herein.
Article (123)
Any provision in conflict or contradiction with the provisions of the law herein shall be cancelled.
Article (124)
The law herein shall be published in the Gazette and be effective after six months as from date of publication.
Executive Regulation
The Executive Regulation of The Federal Law No.6 of 2007 on Establishment of the Insurance Authority and Organization of the Insurance Operations
IA-BOD-RES 2/2009 Effective from 31/1/2010(Published in the Official Gazette No. (504) on 31/1/2010 )
Insurance Authority The Board of Directors' Resolution N0.2 of 2009 on Issuance of the Executive Regulation of The Federal Law N0.6 of 2007 on Establishment of the Insurance Authority and Organization of the Insurance Operations
The Minister of Economy, Chairman of the Board of Directors of the Insurance Authority,
Having considered the Federal Law No.1 of 1972 on the Ministries' responsibilities and the Ministers' authorities and the amending laws,
The Federal Law No.6 of 2007 on Establishment of the Insurance Authority and Organization of the Insurance Operations,
The Ministerial Decree N0.32 of 1984 on the Executive Regulation of the Federal Law N0.9 of 1984 on the Insurance Companies and Agents,
And on basis of the Director General's presentation and the Board of Directors' approval,
Resolved to issue the following executive regulation:
Chapter One
Article (1) Definitions
The following words and expressions wherever they are stated in the executive Regulation herein shall bear the meanings beside each of them unless the context provides otherwise:
State:
The United Arab Emirates.
Law:
The Federal Law No. 6 of 2007 on Establishment of the Insurance Authority and Organization of the Insurance Operations.
Ministry:
The Ministry of Economy.
Minister:
The Minister of Economy.
Authority:
The Insurance Authority established by virtue of the provisions of the Law.
Board:
The Insurance Authority's Board of Directors.
Chairman:
The Chairman of the Board.
Director General:
The Director General of the Insurance Authority.
Company:
The insurance company incorporated in the State and the foreign insurance company licensed to carry out insurance activities in the State either through a branch or an insurance agent.
Insurance Agent:
The person approved and authorized by the company to carry out insurance operations on behalf of the company or any of its branches.
Insurance Broker:
The person who independently intermediates in insurance and re-insurance operations between the applicant of the insurance or re-insurance on one side and any insurance or re-insurance company on the other side and receives for his efforts commission from the insurance company or the re-insurance company with which the insurance or the re-insurance has been accomplished.
Actuary:
The person who estimates values of the insurance contracts, documents and the related accounts.
Register:
The register of the insurance companies.
Authorized Manager:
The person appointed by the foreign insurance company to manage its branch in the State.
Senior Official of the Company:
The person who occupies the post of executive president or general manager, authorized manager or deputy general manager, assistant general manager, chief executive of operations, chief executive of finance, or managing director.
Article (2) Scope of Applicability
- The provisions of the Regulation herein shall apply to all the insurance companies incorporated in the State and the foreign insurance companies licensed to perform their activities in the State including those companies engaged in the operations of cooperative insurance and Takaful insurance or operations of reinsurance and the professions associated with the insurance.
- The provisions of the Regulation herein shall not apply to the companies operating in the free zones in the State unless specifically provided for in the Law.
- The provisions of the Regulation herein shall apply to all the insurance companies incorporated in the State and the foreign insurance companies licensed to perform their activities in the State including those companies engaged in the operations of cooperative insurance and Takaful insurance or operations of reinsurance and the professions associated with the insurance.
Chapter Two Classes and Types of Insurance
Article (3) Classes of Insurance
- Direct insurance operations as provided for in the Law shall be divided into three:
- Insurance of persons and funds accumulation operations
- Properly insurance
- Liability insurance
- Insurance operations shall include the relevant activities of the categories provided for in paragraph (1) of the Article herein and shall include as well reinsurance operations and all the professions associated with the insurance which in their respect the Board had issued regulations, directives or special resolutions.
- Direct insurance operations as provided for in the Law shall be divided into three:
Article (4) Types of Insurance of Persons and Funds Accumulation Operations
Insurance of persons and funds accumulation operations shall include the following:
- Life assurance of all types including among others all insurance operations designed to pay certain amounts of money in case of death, disability, reaching certain age or life assurance associated with investment vehicles.
- Health insurance of all types.
- Personal accident insurance associated with life assurance (all insurance operations against personal accidents done by the company in favor of the individuals holding life assurance policies of the same company).
- Funds accumulation operations (all operations the purpose of which formation of a capital to be paid in a specified date against a premium or periodic premiums without linking the same to life or death probabilities).
- Life assurance of all types including among others all insurance operations designed to pay certain amounts of money in case of death, disability, reaching certain age or life assurance associated with investment vehicles.
Article (5) Types of Property & Liability Insurance
Property insurance and Liability insurance and the activities associated therewith shall include the following:
- Fire insurance and the allied perils.
- Land transport, marine and air cargo insurance and the related liabilities.
- Marine hull, machinery, and equipment insurance and the related liabilities.
- Aviation hull insurance and the like and their machineries and equipment and the related liabilities.
- Satellites, balloons and spaceships insurance, and their machineries and equipment and the related liabilities.
- Railway locomotives and coaches insurance and the related liabilities.
- Land vehicles insurance and the related liabilities.
- Engineering insurance and the related liabilities and insurances normally associated thereto.
- Oil insurance including the insurances which are normally considered oil insurance.
- Health insurance of all types.
- Miscellaneous accident insurance including the following types:
- Personal accident insurance.
- Guarantee insurance and fidelity guarantee.
- Money, coins, securities, bonds and the like insurances whether during transport or in safe.
- Robbery and theft insurance.
- Glass insurance.
- Professional indemnity insurance including liabilties of those professionals in the fields of health, engineering, finance, accountancy, law and the other professions.
- Workman's compensation and employer liability insurance.
- Agriculture and livestock insurance and insurance of other animals.
- Other insurances normally falling under miscellaneous accident insurance.
- Personal accident insurance.
- Fire insurance and the allied perils.
Article (6) Other Types of Insurance
- The Authority at any time may determine other types of insurance to be enlisted under any of the insurance categories stated in Article (3) of the Regulation herein and may determine risks to be compulsorily insured. The Authority may determine unified tariffs of each one of these types of insurance as the public interest might necessitate.
- The Authority may take the necessary legal procedures to attain the above mentioned objectives including proposing and preparing draft laws should the matter necessitate and issuing the necessary, regulations, rules, directives, and resolutions.
- The Authority at any time may determine other types of insurance to be enlisted under any of the insurance categories stated in Article (3) of the Regulation herein and may determine risks to be compulsorily insured. The Authority may determine unified tariffs of each one of these types of insurance as the public interest might necessitate.
Chapter Three Insurance Premium Rates
Article (7) Motor Vehicles' Insurance Tariffs
- The prevailing tariffs of motor vehicle Insurance already circulated to the insurance companies via circular No.28/7/ EC/1055 dated 24.6.1996 shall remain valid till amended or replaced by the Board.
- When premium rates of motor vehicle insurance are determined it has to be observed that they shall be according to the technical principles of pricing operations of such type.
- The prevailing tariffs of motor vehicle Insurance already circulated to the insurance companies via circular No.28/7/ EC/1055 dated 24.6.1996 shall remain valid till amended or replaced by the Board.
Article (8) Other Tariffs and the Related Supervision
- The Authority may determine and amend the unified tariffs of certain types of insurance as the case might require.
- The Authority may supervise the premium rates applied by the company and verify extent of commensurability with the risks insured by the company and may require detailed information on the basis and rules which the company relied upon to determine these rates.
- The Authority may determine and amend the unified tariffs of certain types of insurance as the case might require.
Article (9) Cancellation of a Compulsory Motor Vehicle Insurance Contract
- Neither the company nor the insured has the right to cancel a compulsory motor vehicle insurance contract during validity of the contract as long as his licenses remained valid unless replaced by other insurance contract.
A compulsory motor vehicle insurance contract shall be deemed cancelled pursuant to the Law should the motor vehicle happened to be total loss and its registration been cancelled by the pertinent licensing authority.
In this case, the insured shall have the right to be reimbursed by the company a sum of the premium prorate for the remaining period of the insurance contract unless the insured had caused an accident that created total loss and that without prejudices to the established rights of the others prior to cancelation of the insurance contract.
- Neither the company nor the insured has the right to cancel a compulsory motor vehicle insurance contract during validity of the contract as long as his licenses remained valid unless replaced by other insurance contract.
Chapter Four The Authority's Board of Directors
Article (10) Membership Requisites
It's conditional on whosoever been appointed as member of the board to satisfy the following requisites:
- He should be a UAE national.
- He should be no less than 21 calendar years old and of legal capacity.
- He should be one of those who acquired experience or specialized in any of the insurance operations or in one of the related fields. Any of the following persons shall be deemed people of experience and specialization:
- The insurance experts approved by the Authority.
- The members of the board of any similar establishment.
- The university professors of insurance or any of the related sciences.
- Those persons experienced in economic, commercial, financial, or legal fields.
- The insurance experts approved by the Authority.
- He should be of good conduct, never been convicted for breach of honor, trust or public moral or declared bankrupt by Court and not yet rehabilitated.
- He should never been dismissed as member of any of the boards on disciplinary counts.
- He shouldn't be liable according to the Board's discretion for grief violations of any of the provisions of the Law or the Companies' Law in his capacity as general manager or board member of one of the companies including the liability of causing compulsory liquidation of the company.
- He should be a UAE national.
Chapter Five Licensing of Insurance Companies Established in the State
Article (11) Submission of Licensing Applications
- An application to license the insurance companies established in the State shall be submitted to the Director General by the founders' committee of the insurance or reinsurance company on the form approved by the Board for the purpose.
- Licensing application shall be accompanied by the following statements and documents:
- The company's memorandum and articles of association indicating the founders' names, number of stakes allotted to them, and percentage of each one.
- An economic feasibility study and the company's plan of work.
- A certificate by an actuary, in case of insurance of persons and funds accumulation, to incorporate the following:
Firstly:
the actuary's approval of the basis of calculating the premiums.
Secondly:
adequacy of the technical provisions and prospects of the company's compliance with the margin of solvency and the minimum amount of guarantee.
- A declaration by the founders that no one of the company's founders ever been convicted for breach of honor or trust or declared bankrupt by the Court.
- A declaration by the founders that all statements and documents submitted to the Authority are accurate.
- Any other statements or documents specified in the regulations and rules issued according to the Law or decided by the Board deemed required for considering the application.
- The company's memorandum and articles of association indicating the founders' names, number of stakes allotted to them, and percentage of each one.
- After receiving the initial licensing approval, the company shall submit the following to the Authority:
- Name list of the individuals proposed to take up the post of the company's general manager and the senior officers of the company along with details of each one qualifications and experience and attach therewith the documents supporting these qualifications and experiences.
- Other approvals and licenses have to be obtained as required by the prevailing laws, regulations and rules.
- Name list of the individuals proposed to take up the post of the company's general manager and the senior officers of the company along with details of each one qualifications and experience and attach therewith the documents supporting these qualifications and experiences.
- An application to license the insurance companies established in the State shall be submitted to the Director General by the founders' committee of the insurance or reinsurance company on the form approved by the Board for the purpose.
Article (12) Licensing Applications Register and their Registration Procedures
- The Authority shall prepare a register to register therein the submitted licensing applications and inscribe these applications in serial numbers according to each one date of receipt and assign a file for each application to keep therein the submitted statements and documents and indicate all procedures being taken in this respect.
- After verifying accuracy and adequacy of the application and the attachments thereto and following payment of the prescribed fees, the pertinent Department of the Authority shall register the licensing application in the register according to the provisions of the Regulation herein and endorse the application with the number and date of submission and hand over the submitter a receipt showing the company's name, the application's subject, its registration number in the register and its date and statement of the accompanying documents.
- The Authority shall prepare a register to register therein the submitted licensing applications and inscribe these applications in serial numbers according to each one date of receipt and assign a file for each application to keep therein the submitted statements and documents and indicate all procedures being taken in this respect.
Article (13) Considering Applications and Completion of Attachments
The pertinent Department of the Authority shall consider the licensing application within (7) working days as from date of submission and should it been established that the application didn't satisfy any of the requisites or the required statements or documents it may ask those concerned, via a registered letter or through direct delivery, to satisfy them within (60) days at most as from date of notification.
Article (14) Acceptance / Rejection of Applications
- In case the period provided for in the preceding Article lapsed without the requisites, statements, or documents been satisfied by the organization which submitted the licensing application, the pertinent Department shall refer the matter to the Director General.
- The Director General shall consider the matter within seven days ' as from date of receiving the file and make his decision either by granting the organization which submitted the licensing application an additional period or rejecting the application.
- The license applicant shall have the right to submit a new application to satisfy the requisites after lapse of six months as from date of the Director General's decision rejecting the application.
- In case the new application satisfied the acceptable requisites of its submission, the pertinent Department shall refer the application to the Director General.
- The Director General shall refer the application to the Board to issue its resolution either to approve it or reject it within sixty days as from date of reference.
- The resolution approving the licensing shall be published in the Official Gazette and the pertinent authorities be informed to implement its substance.
- The pertinent Department shall prepare a draft of the licensing resolution and same shall be approved by the Director General.
- In case the period provided for in the preceding Article lapsed without the requisites, statements, or documents been satisfied by the organization which submitted the licensing application, the pertinent Department shall refer the matter to the Director General.
Article (15) The Board's Resolution Rejecting the Licensing Application
The Board's resolution rejecting the licensing application shall be deemed final.
Article (16) Contents of the License
The license issued to the company by the Authority shall contain the following:
- An approval by the Authority to finalize establishment of the company according to the conditions and requisites provided for in the legislations prevailing in the State including the Law and the Regulation herein, and the rules and directives issued pursuant thereto.
- Classes and types of insurance to be carried out by the company after accomplishing its establishment procedures and registration in the register.
- The period within which the establishment of the company has to be completed. However, the Director General in special cases may extend such period to a similar period.
- Any other requisites may be resolved by the Board according to the provision of the Regulation herein.
- An approval by the Authority to finalize establishment of the company according to the conditions and requisites provided for in the legislations prevailing in the State including the Law and the Regulation herein, and the rules and directives issued pursuant thereto.
Article (17) Requisites for Establishing a Company
Without prejudices to the provisions of Article (118) of the Law, establishment of a company shall be done according to the requisites and conditions which on their basis the license has been granted. However, these requisites and conditions shall not be amended except by prior approval of the Board. Nonetheless, the provisions of the legislations prevailing in the State should be observed.
Article (18) Carrying out Other Classes of Insurance
Should the company intend to carry out any other class of insurance or any type thereof not included in the license granted thereto or intend to change the services of it pursue in order to conform with the provisions of the Law, the company shall get the necessary approval from the Authority according to the procedures of granting the licenses as provided for in the Regulation herein.
Chapter Six Licensing Foreign Insurance Companies
Article (19) Licensing Requisites
- Requisites for licensing a foreign insurance company to carry out insurance activity in the State through a branch or an agent are as follows:
- The company should introduce new insurance products not availed by the existing insurance companies or offer coverage already existing but needed in the State's insurance market.
- The company should carry out nontraditional insurance activity and coverage in the State as main activity besides the other fields of insurance.
- The company should realize increment in the total retention.
- The company should attain a surplus in the effective demand available in the State's insurance market for the traditional types of insurance.
- The company should be evaluated and rated by any of the international bodies engaged in rating insurance companies which in their respect the Board issued a resolution specified therein the rating degree.
- The company should introduce new insurance products not availed by the existing insurance companies or offer coverage already existing but needed in the State's insurance market.
- Licensing application of a branch of a foreign company shall be accompanied with the following documents duly attested and translated into Arabic:
- Copy of the license to carry out insurance operations in the State which the mother company is holding its nationality issued by a regulatory and supervisory governmental body and duly authenticated and attested indicated therein classes and types of insurance the company is licensed to undertake.
- A resolution by the administrative authority of the mother company to open the branch.
- Copies of the company's statement of accounts for the last two years duly approved by a certified auditing office.
- Copy of the mother company's profile, organization, activities and markets of its operations.
- Statement showing nature of the company relation with the branch and powers endowed therewith.
- The company's plan of work for the first three years.
- A certificate by an actuary, in case of insurance of persons and funds accumulation, displaying:
Firstly:
the actuary's approval of the basis of calculating the premiums.
Secondly:
adequacy of the technical provisions and extent of compliance with solvency margin and the minimum amount of guarantee.
- Other approvals and licenses need be obtained according to the requirements of the prevailing laws, regulations, and rules.
- Copies of the specimens of the agreements which the company will conclude with the providers of the insurance services including the insurance and reinsurance agents and brokers.
- Any other statements or documents as determined by the regulations and rules according to the Law or decided by the Board deemed necessary to consider the application.
- Copy of the license to carry out insurance operations in the State which the mother company is holding its nationality issued by a regulatory and supervisory governmental body and duly authenticated and attested indicated therein classes and types of insurance the company is licensed to undertake.
- The provisions of Articles (12), (13), (14), (15) and (16) of the Regulation herein shall apply to licensing and registration of foreign insurance companies.
- Requisites for licensing a foreign insurance company to carry out insurance activity in the State through a branch or an agent are as follows:
Chapter Seven Registration
Article (20) Submission of Registration Applications
- Each insurance company established in the State or a branch of a licensed foreign insurance company shall submit an application to the Authority for registration in the register according to the form prescribed by the Authority for the purpose.
- The application for registration in the register shall be submitted in two copies signed by the legal representative of the company to the pertinent Department of the Authority within (30) days as from date of concluding the procedures of establishing and promulgating the company.
- Each insurance company established in the State or a branch of a licensed foreign insurance company shall submit an application to the Authority for registration in the register according to the form prescribed by the Authority for the purpose.
Article (21) Attachments to a Registration Application of a Company Established in the State
The registration application shall be accompanied by the documents verifying accuracy of the details included therein including the following:
- A true copy of company's memorandum and articles of association attested by the pertinent authorities.
- A true copy of the notice declaring establishment of the company.
- A certified document to confirm that the company's capital equals no less than the minimum amount stated in the Resolution issued by the Cabinet of Ministers for the purpose.
- A certificate from a bank operating in the State establishing deposit of the amount provided for in Article (42) of the Law according to the form prescribed by the Authority.
- A statement of the insurance classes and types required to be carried out by the company in the State coupled with a statement of the general terms and conditions of the insurance operations of these classes and types.
- A statement of the benefits, limitations, and terms incorporated in the insurance policy to be issued by the company.
- A statement of the technical principles of the insurance operations of the two classes of insurance; insurance of persons and funds accumulation operation, the company requiring to carry out coupled with details of the principles of pricing these operations and a certificate by an actuary that the principles, benefits, and limitations of the insurance operations of these classes are accurate and apt be implemented.
- A statement of surrender values or reductions (for insurance of persons and funds accumulation operations).
- A specimen of each type of the insurance contracts to be issued by the company.
- A list approved by the company's chairman showing names of the members of the board of directors, their nationalities and addresses.
- A certified document showing names of the company's managers and senior officers, their nationalities, addresses and spheres and limits of their powers and a communication that they are authorized to manage the company and sign insurance contracts.
- An official certificate establishing that none of the company's managers ever been convicted for a breach of honor or trust and a written declaration by each manager that he never at any time declared bankrupt.
- Information on the company's general manager, the authorized manager or the senior officers and a proof establishing that they acquired the necessary qualifications and experiences or any other documents deemed fit by the Board.
- Any other documents determined by the Authority.
- A true copy of company's memorandum and articles of association attested by the pertinent authorities.
Article (22) Attachments to a Registration Application of a Foreign Insurance Company
In addition to the documents stated in Article (21) of the Regulation herein a branch of a foreign insurance company shall attach the following documents:
- A duly certified document showing names of the branch's managers, their nationalities, addresses and spheres and limits of their powers including payment of the compensations and a communication that they are authorized to manage the branch, sign insurance contracts, and pay compensations when they are due.
- An approved certificate from the pertinent authorities in the company's country of registration indicating that the company is established and registered in that country according to the prevailing laws along with details of the activity which the company is licensed to carry out in that country, its legal status, the subscribed and paid up capital, and names of the representatives in charge of managing the branch of the company in the State, and spheres and limits of their powers.
- Any other documents determined by the Authority.
- A duly certified document showing names of the branch's managers, their nationalities, addresses and spheres and limits of their powers including payment of the compensations and a communication that they are authorized to manage the branch, sign insurance contracts, and pay compensations when they are due.
Article (23) Registration Application Decision
- The registration application shall be presented to the Director General attached therewith the opinion of the pertinent Department of the Authority within (30) days as from date of submission or of the date when the required statements and documents by the pertinent Department been satisfied as the case might necessitate.
- The Director General shall have the power to accept or reject the registration application and in case of rejection, the Director General shall specify the reasons led to so rejection. Accordingly, the pertinent Department of the Authority shall inform the applicant about the decision made by the Director General in this respect.
- The concerned party may place an appeal to the Board opposing the rejection decision within (30) days as from date of notification of the decision. The resolution of the Board in this respect shall be final.
- The registration application shall be presented to the Director General attached therewith the opinion of the pertinent Department of the Authority within (30) days as from date of submission or of the date when the required statements and documents by the pertinent Department been satisfied as the case might necessitate.
Article (24) Acceptance and Registration of Applications
In case of accepting the registration application, the pertinent Department of the Authority shall register the company in the register and hand over the applicant a certificate instituting such registration according to the form as prescribed by the Authority.
Article (25) Duration of Registration
Duration of a company registration in the register shall be one calendar year.
Article (26) Management of Insurance Companies
- It's conditional on whosoever been appointed as a general manager, an authorized manager or a senior officer in the company to satisfy at least the following conditions:
- He should be a university graduate completed an accredited training course in the field of insurance or in any other related fields.
- Abundantly competent and experienced in insurance operations; having no less than 5 year experience in insurance operations (for UAE nationals) and 10 years (for non-UAE nationals).
- He should have worked as manager of one of the insurance departments of any duly licensed insurance company.
- He shouldn't be liable according to discretion of the Board for a serious violation of any of the provisions of the Law or the Companies Law in his capacity as general manager or board member of any of the companies including the liability of causing compulsory liquidation of the company.
- He should be of good conduct; never been convicted for a breach of honor, trust or public moral or declared bankrupt by the Court and not yet rehabilitated.
- He shouldn't ever been dismissed from any of the businesses of the company or any other company on disciplinary counts throughout the last five years.
- Any other requisites deemed fit by the Authority and issued upon a decision made by the Director General.
- He should be a university graduate completed an accredited training course in the field of insurance or in any other related fields.
- The company's chairman and the board members, its general manager, the authorized manager or whosoever acting on his behalf or any other senior official shall be prohibited to:
- Take part in the management of any other competing insurance company or a similar one
- Compete the business of the company or do any works or activity in conflict with the interests of the company.
- Carry out the work of an insurance agent or broker.
- Receive any commission for any of the works of insurance or reinsurance.
- Take part in the management of any other competing insurance company or a similar one
- Those undertaking the management of a company or an employee therein as well shall be prohibited to represent any shareholder of the company he is working for.
- In implementing the provisions of the Article herein the competing or similar companies shall mean the companies are carrying out operations of same classes and types of insurance.
- It's conditional on whosoever been appointed as a general manager, an authorized manager or a senior officer in the company to satisfy at least the following conditions:
Article (27) Renewal of Registration
- A company registered in the register shall renew its registration annually by submitting an application to renew the registration to the pertinent Department of the Authority. The application shall be submitted on the form prescribed for the purpose by the Director General provided; submitting same being signed by the legal representative of the company along with the following documents:
- Reinsurance strategy for the next financial year.
- Any details or documents required from the company according to the provisions of the Law, or the regulations, directives or resolutions issued pursuant thereto which the company did not provide at some stage during the year
- Reinsurance strategy for the next financial year.
- The Authority shall renew the company's registration after ascertaining fulfillment of the requisites for renewing the registration and payment of the prescribed fees.
- A company registered in the register shall renew its registration annually by submitting an application to renew the registration to the pertinent Department of the Authority. The application shall be submitted on the form prescribed for the purpose by the Director General provided; submitting same being signed by the legal representative of the company along with the following documents:
Article (28) Alterations in the Registration
- The company shall notify the Authority about each and every alteration or amendment may occur in respect of the particulars of the registration application or the documents attached thereto whether by means of addendum, deletion or amendment.
- Such notification shall be made by submitting an application for endorsement, according to the form prescribed by the Authority for the purpose, signed by the legal representative of the company to the pertinent Department of the Authority within (15) days as from date of occurrence of the alteration or amendment along with the documents verifying accuracy of the details included therein certified by the pertinent authorities and in conformity with the provisions of the Regulation herein.
- Should the required alteration or amendment affected the operations' principles of both insurance of persons and funds accumulation or the benefits, limitations or the terms and conditions incorporated in the insurance policy related to these operations, the company shall submit along with the notification a certificate by an actuary that these principles, benefits, limitations or terms and conditions are accurate and apt be implemented.
- The company shall notify the Authority about each and every alteration or amendment may occur in respect of the particulars of the registration application or the documents attached thereto whether by means of addendum, deletion or amendment.
Article (29) Citing the Registration Number
Each company happened to accomplish its registration in the register shall put together its name, its registration number and date as in the register on all publications, contracts, correspondences, notices, certificates, and policies issued by the company.
Chapter Eight Rendering the Services
Article (30) Starting the Services
- The company shall start rendering its services to the public within (60) days as from date of its registration in the register.
- The Director General upon a request by the company in special and justifiable cases may extend such a period to a similar period.
- In case the company doesn't start its works within the approved period, the matter shall be referred to the Director General or to whomever he might authorize.
- The Director General shall send a written notice to the company advising necessity of starting rendering its services to the public within seven working days as from date of notifying the person who legally representing the company.
- In case the period stated in Paragraph four above lapsed without the company starting its works, the Director General shall issue a decision to suspend the registration of the company in the register for a period of six months at most.
- In case the six month lapsed without the company starting its works, its registration in the register shall be suspended.
- The company which its registration being suspended shall have the right to reverse the suspension decision by submitting an application to the Director General on the form prescribed by the Authority for the purpose coupled with the justifying reasons and a proof of paying the prescribed fees.
- The Director General shall make his decision on the application within seven working days.
- The company which its registration being suspended may submit an application for re-registration on the form prescribed for the same by the Authority.
- In case of re-registration, the procedures designated to register a company in the register whether stated in the Law or the Regulation herein shall be adopted.
- The company shall start rendering its services to the public within (60) days as from date of its registration in the register.
Chapter Nine Opening a Branch of Insurance Company Established in the State
Article (31) Branch Opening Application
Should an insurance company established in the State intend to open a branch therefor inside or outside the State, the company shall submit an application as so to the Authority on the form prescribed by the Authority for the purpose.
Article (32) Attachments to the Branch Opening Application
The following documents shall be attached to the application to open a branch for a company established in the State:
- The board of directors' resolution to open the branch.
- An economic feasibility study and work plan of the branch.
- The organizational structure of the branch and name list of the branch manager and the senior officers therein provided; including names of those persons authorized to sign on behalf of the branch.
- Emiratization percentage rate shouldn't be less than that as determined by the pertinent official authorities.
- An undertaking by the company to render specialized training courses in the field of insurance for UAE nationals working therewith.
- Any other documents as determined by the Authority.
- The board of directors' resolution to open the branch.
Article (33) Requisites for Considering an Application to Open an Outside Branch
In case an insurance company established in the State intended to open a branch therefor outside the State, the company's financial power and technical capacity to open a branch therefor outside the State, the experience of those in charge, the extent of its compliance with the provisions of the Law, regulations, rules and resolutions issued pursuant to any of them should be taken into consideration.
It's conditional that the solvency margin at the consolidated statement level of the company established in the State intending to open a branch therefor outside the State not to be less than that percentage as determined by that country provided; such percentage be maintained by the company throughout its branch working term outside the State.
Article (34) Starting Work at a Branch Inside the State
- The insurance company branch established in the State shall start its works in the State within a period not to exceed (60) days as from date of registration of the branch in the register maintained by the Authority. However, the Authority may extend such period for a similar period.
- The Authority's approval to open a branch inside the State for a company established in the State shall be deemed lawfully cancelled should the branch doesn't start its work within the period stated in paragraph (1) of the Article herein or within the extended period as the case might necessitate.
- The insurance company branch established in the State shall start its works in the State within a period not to exceed (60) days as from date of registration of the branch in the register maintained by the Authority. However, the Authority may extend such period for a similar period.
Article (35) Cessation of Operations of an Outside Branch
- The insurance company established in the State intending to cease operations of its branch outside the State or change its place shall advise the Director General of the consent of the branch's homeland to cease operations of the branch or to shift it from a place to another according to the legislations of that country in this respect, if any.
- Taking the legislations of the country of the branch into consideration, all the branch's rights and commitments following cessation of its operations shall be transferred to an insurance company established in the State.
- The insurance company established in the State intending to cease operations of its branch outside the State or change its place shall advise the Director General of the consent of the branch's homeland to cease operations of the branch or to shift it from a place to another according to the legislations of that country in this respect, if any.
Article (36) Cessation of Operations of a Local Branch
The insurance company established in the State intending to cease operations of one of its branches inside the State shall inform the Director General about the company plans to cease the operations of the branch and transfer the rights and liabilities originated from the insurance policies issued by the branch to the main office or to any of its branches operating in the State or to any other insurance company registered in the register according to the procedures specified in Article (72) of the Law.
Article (37) Shutting Down a Local Branch
- The Director General may make his decision to shut down the branch of an insurance company established in the State and strike off its registration in any of the following cases:
- Should the approval to open the branch happened to be made on basis of inaccurate information,
- Should the branch lack any of the principle requisites for granting the approval to open it.
- Should the branch violate the provisions of the Law, the executive regulation, the rules or directives issued by the Authority.
- Should the branch cease carrying out its works for a period of (12) month.
- Should the approval to open the branch happened to be made on basis of inaccurate information,
- In case a decision to shut down and strike off the branch is being made, the Director General shall inform the company as so according to the provisions of the Law and the registration of the branch shall be stricken off the special register prescribed for the purpose by the Authority.
- The company shall have the right to appeal the decision of the Director General before the Board within thirty days as from date of notification.
- The resolution of the Board rejecting the appeal shall be final.
- The Director General may make his decision to shut down the branch of an insurance company established in the State and strike off its registration in any of the following cases:
Chapter Ten Opening a Branch for a Foreign Insurance Company Licensed to Operate in the State
Article (38) Branch Opening Application
Should a licensed foreign insurance company intend to open a branch therefor in the State it shall submit an application as so to the Authority on the form prescribed by the Authority for the purpose.
Article (39) Attachments to the Application
- The following documents shall accompany the application to open a branch for a foreign insurance company licensed in the State:
- An economic feasibility study and work plan of the branch.
- A certificate duly attested attached therewith a certified translation into Arabic establishing that the mother company is being evaluated and rated by one of the international bodies engaged in rating the insurance companies which in its respect the Board had issued a resolution specified therein the rating degree.
- An undertaking that Emiratization percentage rate in the company will not be less than the rate as determined by the pertinent official authority.
- An undertaking by the company to provide specialized training courses in the field of insurance for UAE nationals working in the company.
- The organizational structure of the branch, a list of the names of the branch's manager and the senior officers of the branch and qualifications of each one of them and particulars of the persons authorized to sign on behalf of the branch.
- Any other documents as determined by the Authority.
- An economic feasibility study and work plan of the branch.
- The provisions of the Articles (34), (36) and (37) of the Regulation herein shall be applied to the application procedures of opening a branch for a foreign company licensed to operate in the State.
- The following documents shall accompany the application to open a branch for a foreign insurance company licensed in the State:
Chapter Eleven Examination of the Financial Status
Article (40) Examining the Financial Status and Assessing Liabilities of a Company Carrying out Insurance of Persons and Funds Accumulation Operations
- The company carrying out any type of insurance of persons and funds accumulation operations shall examine the financial status of such type and estimate its payable liabilities once every three years by an actuary.
- The assessment referred thereto in paragraph (1) of the Article herein shall include all the insurance operations concluded by the company inside and outside the State each one separately and should such activity being performed through a branch of a foreign insurance company, the assessment shall include only those insurance operations which their contract have been concluded inside the State or apt be implemented therein.
- The company carrying out any type of insurance of persons and funds accumulation operations shall examine the financial status of such type and estimate its payable liabilities once every three years by an actuary.
Article (41) Cases of Assessing the Company's Liabilities
- The Assessment referred thereto in paragraph (1) of the Article (40) of the Regulation herein shall be conducted whenever the company wanted to check its financial status to find out percentage of profit to be allotted to the shareholders or the policy holders or whenever the company wanted to announce such status.
- The Authority may request the assessment referred to in paragraph (1) of the Article (40) of the Regulation herein be conducted at any time before lapse of three years as from date of the last assessment provided; lapse of one year at least as from date of that examination.
- The Assessment referred thereto in paragraph (1) of the Article (40) of the Regulation herein shall be conducted whenever the company wanted to check its financial status to find out percentage of profit to be allotted to the shareholders or the policy holders or whenever the company wanted to announce such status.
Article (42) Contents of the Actuary's Report
The actuary's report on the result of the examination and assessment referred thereto in Articles (40) and (41) of the Regulation herein shall contain at least the following related details:
- Examination of the specimens of the documents, terms & conditions, and tariffs of the different types of insurances used by the company to verify extent of conformity with the specimens of the documents, terms & conditions, and tariffs approved by the Authority or communicated thereto in order to ensure adequacy and fairness of premium rates and that the company's work technique will not expose its financial status to danger and will not cause damages to those dealing with it.
- Examination of the paid-up compensations to ensure their settlement according to the terms & conditions and documents and studying as well claims under settlement to verify reasons of nonpayment.
- Examination of the reinsurance operations as well as the reinsurance arrangements to ensure their adequacy to protect the financial status of the company and also to ensure adequacy of the reinsurers' guarantees.
- Examination of the company's investment operations to verify the company's compliance with the provisions of the Law and the executive regulation and rules issued pursuant thereto particularly those related to adequacy of the provisions' funds, their investments and that they are not been disposed without obtaining the Authority's approval.
- Examination of the elements of the financial status of the company and verify whether the company is satisfying the increment rate of its assets over its liabilities at any time according to the provisions of the Law.
- Examination of the company's capability to fulfill its liabilities at any time and extent of its ability to continue fulfilling its liabilities and the possibility of its failure to pay same.
- Extent of the company's compliance with the licensing and registration requisites and give an account of the violations and nature of these violations, if any, and extent of their implications on the financial status of the company and the insurance market.
- All insurance operations concluded or implemented by the company inside the State and their types.
- All insurance operations concluded or implemented by the company outside the State and their types (for local insurance companies).
- Extent of the company's compliance with the rules and principles of transparency and fairness.
- Conflicts of interests whether already existed, or existing or expected to develop relevant to any of the company's board members, the general manager, or the authorized manager or any of its senior officials.
- Any other information as determined by the Authority or the regulations issued according to the Law.
- Examination of the specimens of the documents, terms & conditions, and tariffs of the different types of insurances used by the company to verify extent of conformity with the specimens of the documents, terms & conditions, and tariffs approved by the Authority or communicated thereto in order to ensure adequacy and fairness of premium rates and that the company's work technique will not expose its financial status to danger and will not cause damages to those dealing with it.
Article (43) Filing the Actuary's Report to the Authority
- The company shall send to the Authority a copy of the actuary's report on the result of the examination and assessment referred to in Articles (40) and (41) of the Regulation herein within (60) days as from lapse of the period when the examination has been conducted accompanied with the following:
- An account of the valid insurance policies concluded by the company inside or outside the State on date of the examination and should the performer of the activity happened to be a foreign insurance company such an account shall include only the policies concluded inside the State or apt be implemented therein.
- An acknowledgment by those responsible for managing the company that all particulars and information needed to arrive at authentic report have been put at the disposal of the actuary.
- An account of the valid insurance policies concluded by the company inside or outside the State on date of the examination and should the performer of the activity happened to be a foreign insurance company such an account shall include only the policies concluded inside the State or apt be implemented therein.
- On basis of a decision by the Director General after lapse of the six months period provided for in the Article herein, the company may be given an additional period to file the report provided; such period not to exceed three months.
- The company shall send to the Authority a copy of the actuary's report on the result of the examination and assessment referred to in Articles (40) and (41) of the Regulation herein within (60) days as from lapse of the period when the examination has been conducted accompanied with the following:
Article (44) Re-Examination
- Should it became evident to the Authority that the actuary's report doesn't reflect reality of the company's financial status it may order a re-examination on the company's own cost by an actuary to be chosen by the Authority for the purpose.
- The actuary chosen by the Authority shall follow in his work the directives and procedures referred thereto in the Law, the Regulation herein and the other regulatory resolutions.
- Should it became evident to the Authority that the actuary's report doesn't reflect reality of the company's financial status it may order a re-examination on the company's own cost by an actuary to be chosen by the Authority for the purpose.
Chapter Twelve Corporate Governance
Article (45) Compliance with Corporate Governance Criterions
The companies registered in the register maintained by the Authority shall comply with disclosure and transparency principles in their transactions in the insurance market and with their clients and in respect of all documents, papers, publications, advertisements, propagandas, essays, and scientific materials issued by them according to the procedures and criterions of corporate governance set out by the Board for the purpose.
Chapter Thirteen
Article (46) Penalties
Whosoever violates the provisions of the Regulation herein shall be punished by the penalties provided for in the Law and as the case might necessitate.
Article (47) Disciplinary Penalties
- The board of directors may impose the following disciplinary penalties on the company in case the violations prompting such imposition are established:
- Cease the company to carry out operations of one type or more of the insurance carried out by the company for a period no more than one month in case of violating the regulations, rules, directives or the resolutions issued by the Authority.
- Cessation for a period not to exceed three months should the company cease to carry out operation of any type of the insurance incorporated in its registration for (12) months.
- Cessation for a period not to exceed six months should the company lack any of the requisites needed for registration in the register according to the Law.
- Cessation for a period not to exceed nine months should the company fail to uphold the accrued financial liabilities or refuse to execute a final judiciary ruling relevant to an insurance contract concluded by the company.
- Cease the company to carry out operations of one type or more of the insurance carried out by the company for a period no more than one month in case of violating the regulations, rules, directives or the resolutions issued by the Authority.
- In all the cases which in their respect the Board made a decision to cease the company's operations, such cessation shall not be relieved and the company shall not be allowed to start the work under question except after eliminating the violation which prompted such cessation on basis of a report to be filed by the Director General to the Board establishing elimination of the violation.
- The Director General may take the following procedures when the violations are less important than the ones mentioned in the preceding paragraph:
- Send a warning to the company to draw its attention to the violation and to necessity of taking procedures to eliminate same.
- Serve a notice on the company demanding certain procedures to be taken or calling it to refrain from doing specific matter within a limited period.
- Send a warning to the company to draw its attention to the violation and to necessity of taking procedures to eliminate same.
- The board of directors may impose the following disciplinary penalties on the company in case the violations prompting such imposition are established:
Chapter Fourteen Final Provisions
Article (48) Issue of Directives and Decisions
The Director General shall issue the necessary directives to implement the provisions of the Regulation herein.
Article (49) Invalidation
The Executive Regulation issued according to the Ministerial Decree No. (32) of 1984 concerning the Federal Law No. (9) of 1984 on Insurance Companies and Brokers shall be invalidated.
Article (50) Publication and Implementation of the Executive Regulation
The Regulation herein shall be published in the Official Gazette and be effective as from date of its publication.
Governance, Risk Management and Internal Control, Ownership Ratios
Corporate Governance Regulation for Insurance Companies
C 24/2022 Effective from 29/9/2022The Board of Directors,
Having perused Decretal Federal Law No. (14) of 2018 Regarding the Central Bank and Organization of Financial Institutions and Activities and the amendments thereof;
Federal Law No. (6) of 2007 Concerning the Organization of Insurance Operations, the amendments thereof and its Executive Regulations;
Insurance Authority Board of Directors' Decision number (25) of 2014 Pertinent to Financial Regulations for Insurance Companies and Insurance Authority Board of Directors' Decision number (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies;
Cabinet Resolution No. (42) of 2009 Concerning Insurance Company Minimum Capital Regulation, as amended;
And, based on the recommendation of the Governor and the approval of the Board of Directors;
Has resolved,
Introduction
The Central Bank seeks to promote the effective and efficient development and functioning of the insurance sector. To this end, Companies are required to implement comprehensive corporate governance frameworks to ensure their resiliency and enhance overall financial stability. In particular, Companies and Groups must have robust corporate governance policies and processes covering, but not limited to, strategy, organizational structure, the control environment, risk management responsibilities and compensation of Boards and Staff.
In implementing this Regulation and the accompanying Standards, the Central Bank's goal is to ensure that Companies' approaches to corporate governance are in line with leading international standards. The Central Bank expects that each Company will establish and implement a corporate governance framework, which provides for sound and prudent management and oversight of its business and adequately recognizes and protects the interests of policyholders.
This Regulation and the accompanying Standards establish the overarching prudential framework for corporate governance. Regulatory requirements for selected governance areas such as risk management, internal controls, compliance, outsourcing and financial reporting are established in separate Central Bank Regulations and Standards.
This Regulation and the accompanying Standards are issued pursuant to the powers vested in the Central Bank under the Central Bank Law.
This Regulation and the accompanying Standards supplement Federal Law No. (6) of 2007 On the Organization of Insurance Operations, the amendments thereof and its Executive Regulations, the Insurance Authority's Board of Directors' Decision No. (19) of 2020 Concerning the Guidance Manual for Insurance Companies and Related Professions to Submitting the Data, information and Supervisory Reports, the Insurance Authority Board of Directors' Decision number (25) of 2014 Pertinent to Financial Regulations for Insurance Companies, the Insurance Authority Board of Directors' Decision number (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies, and The Insurance Authority's Board of Directors Resolution No (4) of 2010 Concerning the Takaful Insurance Regulations. Additional requirements may be imposed pursuant to decisions to be issued by the Central Bank in this regard.
Objective
The objective of this Regulation is to establish the minimum acceptable standards for Companies' approach to Corporate Governance, with a view to:i. Ensuring the soundness of the Companies; and;
ii. Contributing to financial stability and policyholder protection.
The accompanying Standards supplement the Regulation to elaborate on the supervisory expectations of the Central Bank with respect to Corporate Governance for Companies.The Company's Board is in control of the Company and accordingly ultimately responsible for the Company's Corporate Governance. Since each Company may comply with elements of the minimum requirements of the Regulation and Standards in a different way, the onus is on the Board to demonstrate to the Central Bank that it has implemented a comprehensive approach to Corporate Governance and has met the requirements of the Regulation and Standards. Companies are encouraged to adopt leading practices that exceed the minimum requirements of the Regulation and Standards.
Scope of Application
This Regulation and the accompanying Standards apply to all Companies. Companies established in the UAE with Group relationships including Subsidiaries, Affiliates, or international branches, must ensure that the Regulation and Standards are adhered to on a solo and Group-wide basis.
The Central Bank will apply the principle of proportionality in the enforcement of the Regulation and Standards, whereby smaller Companies may demonstrate to the Central Bank that the objectives are met without necessarily addressing all of the specifics cited therein. The Central Bank will decide on the extent to which a Company is expected to meet the requirements.
Branches of foreign Companies licensed to operate in the State must adhere to this Regulation and Standards, or establish equivalent arrangements so as to ensure regulatory comparability and consistency, with the exception of Article (5) of this Regulation. Branches of foreign Companies must establish local governance structures that meet the objectives of Articles (2), (3) and (4) of this Regulation.
The requirements established within the Regulation and the accompanying Standards are in addition to the provisions relating to Public Joint Stock Companies in the Federal Law No. 32 of 2021 on Commercial Companies (the "Commercial Companies Law"), and the Chairman of Authority's Board of Directors' Resolution No. (3/Chairman) of 2020 Concerning approval of the Public Joint Stock Companies' Governance Guide ("SCA Regulation") or their amendments. In the event of contradiction with any provisions of the SCA Regulation, the requirements of the Central Bank's Regulation and Standards shall prevail.
The Regulation and Standards are equally enforceable and must be complied with.
Article (1): Definitions
The following terms shall have the meaning assigned to them below for the purposes of this Regulation:
1. Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
2. Authorised Manager: The person appointed by the foreign insurance company to manage its branch in the State.
3. Board: The Company's board of directors.
4. Central Bank: The Central Bank of the United Arab Emirates.
5. Central Bank Law: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank and Organization of Financial Institutions and Activities, as amended.
6. Chief Executive Officer: The most senior executive appointed by the Board; and in the case of foreign branches, this refers to the Authorized Manager.
7. Company: The insurance company incorporated in the State, and the foreign branch of an insurance company, that is licensed to underwrite primary insurance and reinsurance, including Takaful insurance companies.
8. Compliance with Islamic Shari’ah: refers to compliance with Shari’ah in accordance with:
a. cresolutions, fatwas, regulations, and standards issued by the Higher Shari’ah Authority in relation to the Company's activities and businesses ("HSA's Resolutions"), and
b. resolutions and fatwas issued by the Internal Shariah Supervision Committee ("ISSC") of the Company, in relation to its activities and businesses ("the Committee's Resolutions"), provided they do not contradict HSA's Resolutions.
9. Conflict of Interest: A situation of actual or perceived conflict between the duty and private interests of a person, which could improperly influence the performance of his/her duties and responsibilities.
10. Control Function: Function (whether in the form of a person, unit or department) that has a responsibility in a Company to provide objective assessment, reporting and/or assurance; this includes the risk management, compliance, actuarial, internal audit and where applicable Shari’ah control and Shari’ah audit functions.
11. Controlling Shareholder: A shareholder who has the ability to directly or indirectly influence or control the appointment of the majority of the Board, or the decisions made by the Board or by the general assembly of the Company, through the ownership of a percentage of the shares or stocks or under an agreement or other arrangement providing for such influence.
12. Corporate Governance: A set of relationships between a Company's Board, Senior Management, customers and other stakeholders; and a structure through which the objectives of the Company are set, and the means of attaining those objectives and monitoring performance are determined.
13. Duty of Care: The duty to decide and act on an informed and prudent basis with respect to the Company. Often interpreted as requiring a member of the Board to approach the affairs of the Company and policyholders ahead of his/her own interests.
14. Duty of Confidentiality: The duty to observe confidentiality applies to all information of a confidential nature with which a member of the Board is entrusted by the Company or which is brought to his or her attention during or at any time after the carrying out of his/her assignment.
15. Duty of Loyalty: The duty to act in the good faith in the interest of the Company. The duty of loyalty should prevent individual Members of the Board from acting in their own interest, or the interest of another individual or group, at the expense of the Company and shareholders.
16. Financial Regulations: Insurance Authority Board of Directors’ Decision number (25) of 2014 Pertinent to Financial Regulations for Insurance Companies and the Insurance Authority Board of Directors’ Decision number (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies.
17. Fit and Proper Process: The evaluation of a Company's proposed members of the Board, Senior Management and other persons as determined by the Central Bank from time to time, in terms of expertise and integrity. The specific fit and proper criteria are listed in article 5.20.e.l of the Standards.
18. Government: The UAE Federal Government or one of the governments of the member Emirates of the Union.
19. Group: A group of entities which includes an entity (the ‘first entity’) and:
a. any Parent of the first entity;
b. any Subsidiary of the first entity or of any Parent of the first entity;
c. any Affiliate
20. Higher Sharfah Authority: The Higher Shari’ah Authority that was established at the Central Bank.
21. Independent Member of the Board: A member of the Board who has no relationship with the Company or Group that could lead to benefit which may affect his/her decisions. He/she must not be under any other undue influence, internal or external, ownership or control, which would impede the Independent Member's exercise of objective judgment. The Independent Member of the Board forfeits his/her independence in the cases specified in Article 5.7 of the Standards.
22. Insurance Agent: The person approved and authorised by the Company to carry out insurance operations on behalf of the Company or any of its branches.
23. Insurance Broker: The person who independently intermediates in insurance and reinsurance operations between the applicant of the insurance or reinsurance on one side and any insurance or reinsurance company on the other side and receives for his efforts commission from the insurance company or the reinsurance company with which the insurance or the reinsurance has been accomplished.
24. Material Risk Takers: Staff whose work is deemed to have a significant impact on the overall risk profile of the Company or the Group.
25. Non-Executive Member of the Board: A member of the Board who does not have any management responsibilities within the Company, and may or may not qualify as an Independent Member of the Board.
26. Parent: An entity (the ‘first entity’) which:
a. holds a majority of the voting rights in another entity (the ‘second entity’);
b. is a shareholder of the second entity and has the right to appoint or remove a majority of the Board of directors or managers of the second entity; or
c. is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity; or
d. if the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity.
27. Public Joint Stock Company: A Public Joint Stock Company is a company whose capital is divided into equal and negotiable shares. The founders shall subscribe to part of such shares while the other shares are to be offered to the public under a public subscription. A shareholder shall be liable only to the extent of his share in the capital of the company, as per the Commercial Companies Law.
28. Regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
29. Relatives: Father, mother, brother, sister, children, spouse, father-in-law, mother-in-law and children of the spouse.
30. Related Parties: The Group and its Controlling Shareholders, members of the Board and Senior Management (and their Relatives) and persons with control, joint control or significant influence over the Company (and their Relatives).
31. Related Party Transactions: Include onbalance sheet and off-balance sheet credit exposures and claims as well as dealings such as service contracts, asset purchases and sales, construction contracts, lease agreements, derivative transactions, borrowings, and writeoffs. The term transaction incorporates not only transactions that are entered into with Related Parties but also situations in which an unrelated party (with whom a Company has an existing exposure) subsequently becomes a Related Party; disclosures must reflect all Related Party events and transactions for the financial period.
32. Risk Appetite: The aggregate level and types of risk a Company is willing to assume, within its risk capacity, to achieve its strategic objectives and business plan.
33. Risk Governance Framework: As part of the overall approach to Corporate Governance, the framework through which the Board and Senior Management establish and make decisions about the Company's strategy and risk approach; articulate and monitor adherence to the Risk Appetite and risks limits relative to the Company's strategy; and identify, measure, manage and control risks.
34. Senior Management: The individuals or body responsible for managing the Company on a day-to-day basis in accordance with strategies, policies and procedures set out by the Board, generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
35. State: The United Arab Emirates.
36. Subsidiary: An entity (the ‘first entity’) is a subsidiary of another entity (the ‘second entity’) if the second entity:
a. holds a majority of the voting rights in the first entity;
b. is a shareholder of the first entity and has the right to appoint or remove a majority of the Board of directors or managers of the first entity; or
c. if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity.
37. Staff: All the persons working for a Company including the members of Senior Management, except for the members of its Board.
38. Takaful Insurance: A collective contractual arrangement aiming at achieving cooperation among a group of participants against certain risks whereby each participant pays certain contribution amount to form an account called the participants’ account through which entitled compensations are paid to the member in respect of whom the risk has realized. The Takaful Insurance company shall manage this account and invest the funds collected therein against certain compensation.
39. Takaful Regulation: The Insurance Authority's Board of Directors Resolution No (4) of 2010 Concerning the Takaful Insurance Regulations, as amended from time to time.
Article (2): Corporate Governance Framework
1. A Company must have a Corporate Governance framework that offers comprehensive management and oversight of the Company's business in a manner that protects the rights of policyholders.
2. The Corporate Governance framework must contain the following components, at a minimum:
a. Policies that define and support the Company's strategy and objectives.
b. Definition of the roles and responsibilities of persons accountable for management and oversight.
c. Description on the manner in which decisions are taken.
d. Sound compensation practices.
e. Requirements for active engagement and communication with the Central Bank relating to the management and oversight of the Company.
f. Corrective actions for non-compliance or weak oversight, controls or management.
g. An appropriate corporate culture that promotes integrity, transparency and accountability, which leads to achieving the Company's long-term objectives and the protection of the rights of policyholders and other stakeholders.
3. A Company must establish a transparent organisational structure, at the entity level and Group-wide level if applicable, that supports its objectives, including executing the key responsibilities of the Board and specifying any delegations and the key responsibilities and authorities of its committees, Senior Management and key persons in Control Functions. In this context key persons in Control Functions refers to persons responsible for heading control functions. Groups must ensure that their Corporate Governance frameworks are appropriate to their structure, business and risks.
4. The Board and Senior Management must understand the Group organisational structures, both at the level of the legal entity and business line, and the origin and responsibility for risks posed.
5. The Board is responsible for establishing and operating a clear governance framework for the Group, which must be appropriate to the structure, business and risks of the parent Company and all its related entities, including subsidiaries, Affiliates and international branches.
6. When setting up a Group, the following factors must be taken into consideration, at both the Group and entity levels:
a. Clear division of roles and responsibilities
b. Legal obligations, governance and risks associated at each level
c. Effective coordination and communication.
7. The Board must exercise appropriate/due oversight over the Group while respecting the independent legal and governance responsibilities that might apply to the individual entities.
Article (3): Oversight and Management Responsibilities
1. The Board must ensure that a Company and, if applicable, Group has in place robust Corporate Governance policies and processes commensurate with its risk profile and the nature and scale of activity. Such policies must be based on clear segregation between the oversight function and the management responsibilities.
2. The Board must ensure that there is a clear allocation of roles and responsibilities to the Board as a whole, to committees of the Board, to Senior Management and key persons in Control Functions, in a manner that guarantees appropriate segregation of duties. The Board must supervise Senior Management through creating a flexible and transparent organisational structure that guarantees the timely flow of information to decision makers, the accountability of Senior Management towards the Board and the accountability of Board Members towards shareholders and other stakeholders.
3. The Board must oversee Senior Management and their performance in order to ensure that the Company's activities are carried out in a manner consistent with the business strategy, Risk Governance Framework, compensation and other policies approved by the Board.
4. The Board must establish a Fit and Proper Process for the selection and continued assessment of Board members, Senior Management, including key persons in Control Functions and other persons as determined by the Central Bank from time to time, and the maintenance of succession plans for Board members and Senior Management. The Board must set appropriate standards for performance, compensation and on-going training and development in line with business operations for all Staff, consistent with the long-term strategy of the Company.
5. The Board must properly disclose the financial status of the Company, and is required to provide the Central Bank with such information in a timely manner in accordance with the applicable legal framework in the State and Regulations.
6. The Board must take the necessary measures to prevent any Board member from attaining personal gain at the cost of the Company's interests.
7. The Board must approve a compensation policy that is applicable to all Staff, which does not encourage excessive risk taking and must be in line with the Company's strategy and Risk Governance Framework.
8. The Board may delegate some of its tasks, under clear and well-defined terms, in a manner that does not create undue concentration of powers with the potential to influence the Company's business negatively.
9. A Company offering Takaful Insurance must demonstrate full Compliance with Islamic Shari'ah rules and establish a sound and effective Shari'ah governance framework with the key mechanisms and functionalities to ensure effective and independent Shari'ah oversight, as per the requirements set out by the Central Bank and the Higher Shari'ah Authority.
Article (4): Corporate Culture, Business Objectives and Strategies
1. The Board must set the strategies and policies for the Company, and for supervising Senior Management in implementing the business and risk strategy to ensure that the Company meets its goals, leaving daily function responsibilities to Senior Management. Strategies and polices must cover fair treatment of policyholders; Risk Appetite; choice of lines of insurance; introduction of new products; appointing competent persons with relevant qualifications commensurate with their roles and responsibilities; pricing underwriting; provision of reinsurance cover; investment; asset-liability management and the assessment of solvency requirements.
2. The Board must establish, communicate and oversee the implementation of corporate culture and values by reinforcing appropriate norms for responsible and ethical behaviour. The Board must set the "tone from the top", particularly as it relates to the ethical behavior expectations of Staff, through approving supporting policies, including, but not limited to, a written code of conduct, a conflict of interest policy, a whistleblowing policy mechanism and an insider trading policy.
3. A Company must enter into all transactions with Related Parties on an arm's length basis, monitor these transactions, and take appropriate steps to control or mitigate the risks to Related Parties in accordance with Board approved policies and procedures.
4. The Central Bank may set, on a general or case-by-case basis, limits for exposures to Related Parties, deduct such exposures from capital when assessing capital adequacy, or require collateralisation of such exposures.
5. The allocation of responsibilities to individual Board members to serve on one of the Board's committees must take account of whether the relevant Board member exercises the independence and objectivity required to carry out the functions of the said committee. Oversight of executive functions should be performed by the non-executive Board members.
Article (5): Structure and Governance of the Board
1. A Company's Board must be sufficiently diverse in its composition. Collectively, the Board must have knowledge of all significant businesses of the Company and, if applicable, the Group. The Board must have, and continue to maintain, an appropriate balance of skills, diversity and expertise commensurate with the size, nature of activities, complexity and risk profile of the Company and, if applicable, the Group. Such skills include, but are not limited to, the lines of insurance underwritten by the Company, actuarial and underwriting risks, investment analysis, the role of control functions, finance, accounting and obligations related to fair treatment of customers.
2. A Company's Board must be comprised of at least seven (7) members and a maximum of eleven (11) members, each with a maximum three (3) year renewable term of membership. All members of the Board must be Non-Executive, of which at least one third (1/3) must be Independent Members. It is recommended the chair of the Board is an independent Member of the Board. The Board should not contain any executive members with management responsibilities in the Company.
3. The Chairman and the majority of members of the Board must be UAE nationals.
4. The maximum tenure as an Independent Member of the Board in the same Company is twelve (12) consecutive years from the date of his/her first appointment. At the expiration of the tenure, the Member is no longer regarded as Independent. On the effective date of this Regulation the calculation of the twelve (12) years will consider the time already spent by a Board member in his/her directorship at the Company. Independence of a Board member shall not be affected solely on the basis of being an employee of the parent company or any of its subsidiaries if any of them is a Government entity or a company owned by at least 75% by the Government or any of its subsidiaries.
5. a. The Chairman and the members of the Board must prevent or manage conflicts of interest, and, in particular, must not:
1. Participate in managing other Companies.
2. Compete with the Company's operations or perform any actions or activities in a private or business capacity that could conflict with the Company's interests.
3. Carry out operations of an Insurance Agent or an Insurance Broker.
4. Receive any commission from any insurance operation.
b. A member of the Board must obtain permission from the Company's Board before accepting nomination to serve on another board of a Public Joint Stock Company (PJSC) and no conflict of interest must be present. The provisions of this Article shall apply equally to persons appointed by a Government shareholder.
6. A member of the Board may hold membership in the Board of only one (1) Company in the UAE. A member of the Board may hold memberships in the boards of up to a total of five (5) PJSCs in the UAE including the Company's Board. Board memberships of PJSCs inside the Group are included within this limit.
7. If the Government owns 5% or more of the Company's capital, it may appoint persons to represent it on the Board with the same proportion to the number of members of the Board. At least one member shall be appointed if the percentage required for appointing a member exceeds that percentage. A Government-owned Company's Board composition must allow the exercise of objective and independent judgment
8. At least 20% of candidates for consideration for the Board's membership must be female.
9. The non-objection of the Central Bank must be obtained prior to the nomination, appointment or renewal of any person for membership of the Board. In all cases, a Company must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fit and proper assessment of a member of the Board. The non-objection of the Central Bank must be obtained prior to the removal of a member of the Board during his/her term of membership.
10. The Board must meet at least six (6) times a year. The Company must appoint a secretary to the Board who is not a member of the Board and independent of the Company's management. The Board and its committees must maintain appropriate minutes, which reflect details of issues discussed, recommendations made, decisions taken, rationales and dissenting opinions.
11. a. The chair of the Board is responsible for providing leadership and for the overall effective functioning of the Board and its committees.
b. The Board may delegate specific authority, but not its responsibilities, to specialized Board committees. Each committee created by the Board must have an approved charter or other instrument that sets out its membership, mandate, scope, working procedures and means of accountability to the Board. The committees must have access to resources and to external expert advice, where needed, to ensure a collective balance of skills and expert knowledge commensurate with the nature of business, operations and complexity of the Company and the duties to be performed.
c. The Board and its committees may invite members of the Company's staff and external independent experts to attend meetings as deemed appropriate. In this context external independent experts include, but are not limited to, risk management consultants and actuarial and reinsurance professionals. Staff of the Central Bank may attend meetings of the Board and/or its committees and shall have access to their minutes and any other relevant documents.
d. The Board operational structure must include committees with responsibilities for audit, risk, nomination, investment and compensation. The Board may also establish other specialised committees (e.g. ethics, assets and liabilities).
e. The audit and risk committees must not be merged neither with each other, nor with any other Board committees. Both committees' chairs must be Independent Members of the Board, who are distinct from the chair of the Board and the chairs of other committees. The audit committee must be made up of a majority of Independent Members of the Board and include members who collectively have experience in audit practices, financial reporting, accounting and an understanding of risk management. It is recommended that the audit committee be made up of only Independent Members of the Board. The risk committee must be made up of a majority of Independent Members of the Board and include members who individually have noteworthy experience in risk management issues, practices, challenges and mitigation techniques.
f. Companies may merge the nomination and compensation committees.
12. The Board must carry out annual assessments, alone or with the assistance of external experts, of the functioning of the Board as a whole, its committees, and individual members.
13. The Board must periodically review and make recommendations to update the Company's memorandum of incorporation/articles of association if needed, along with procedural rules or other similar documents setting out its organisation responsibilities and key activities.
Article (6): Duties of Individual Board Members
1. Members of the Board must act in good faith, honesty and integrity while exercising their Duty of Care, Duty of Confidentiality and Duty of Loyalty. They are responsible for ensuring effective control over the Company's entire business.
2. Members of the Board must disclose to the Board, in a timely manner, any potential Conflict of Interest or apparent Conflict of Interest.
3. Members of the Board must exercise independent judgement and objectivity in their decision-making taking into account the interests of the Company, policyholders and stakeholders.
Article (7): Duties Related to Risk Management and Internal Controls
1. A Company must have an appropriate Risk Governance Framework that provides a Company-wide and, if applicable, Group-wide view of all material risks pursuant to the Financial Regulation and Takaful Regulation, as the case may be. This includes policies, processes, procedures, systems and controls to identify, measure, evaluate, monitor, report, and control or mitigate material sources of risk, on a timely basis. The Company's risk management function must be independent of the management and decision-making of the Company's risk-taking functions and have a direct reporting line to the Board and/or the Board risk committee.
2. The Board is responsible for the design and implementation of effective risk management systems and internal controls, approving and overseeing implementation of the Company's Risk Governance Framework and the alignment of its strategic objectives with its Risk Appetite.
3. a. A Company must have strong internal control frameworks pursuant to the Financial Regulations and Takaful Regulation, as the case may be, and establish permanent, independent and effective compliance and internal audit functions, and where applicable Compliance with Islamic Sharia'ah and internal Shari'ah audit. The Company's compliance function must have primary reporting obligations to the Chief Executive Officer and a right of direct access to the Board, the Board audit committee and Board risk committee. The Company's internal audit function must report directly to the Board or the Board audit committee.
b. The Company's actuarial function must have primary reporting obligations to the Chief Executive Officer and a right of direct access to the Board or the Board audit committee and/or Board risk committee. Further governance requirements for internal control and internal audit are contained in the accompanying Standards.
Article (8): Duties Related to Compensation
1. A Company must have a Board-approved compensation system that supports sound Corporate Governance and risk management, including appropriate incentives aligned with prudent risk-taking. Performance standards must be consistent with the long-term sustainability and financial soundness of the Company.
2. The Board, must approve the compensation of Senior Management and oversee the development and operation of compensation policies, systems and related control processes.
3. Compensation outcomes must be symmetric with risk outcomes. Compensation payout schedules must be sensitive to the time horizon of risks through arrangements that defer a sufficiently large portion of the compensation until risk outcomes become better known. The compensation framework must provide for mechanisms to adjust variable compensation, including through in year adjustment, and malus or clawback arrangements, which can reduce variable compensation after it is awarded or paid. Any arrangement conducted after the effective date of this Regulation must take claw backs and deferrals into consideration.
4. Members of the Board must be compensated only with fixed compensation comprising the payment of an annual fixed amount and the reimbursement of costs directly related to the discharge of their responsibilities. Bonus or any incentive-based mechanisms based on the performance of the Company must be excluded.
5. The compensation of Staff in the control functions of risk management, compliance and internal audit must be predominantly fixed, to reflect the nature of their responsibilities; and determined independently of the performance of the Company. The variable compensation must be based on performance targets related to their functions and independent of the lines of business they monitor and control.
6. For Senior Management and Material Risk Takers, a proportion of the total compensation must be performance-based. Provisions must be included so that compensation can be reduced or reversed based on realised risks and violations of laws, Regulations, codes of conduct or other policies, before compensation vests.
7. The annual individual bonus for Senior Management and Material Risk Takers must not exceed 100% of the fixed proportion of their total compensation. A higher bonus of up to 150% must be approved by the Board. A bonus of up to 200%) requires approval by the general assembly of the Company.
8. The annual total bonus for all Staff must generally not exceed 5% of the Company's net profit. A higher bonus must be approved by the General Assembly of the Company before disbursement, along with an attestation signed by all members of the Board that the Company is in compliance with all relevant laws and Regulations issued by the Central Bank.
Article (9): Financial Reporting and External Audit
A Company must maintain appropriate records; prepare financial statements in accordance with the International Financial Reporting Standards (IFRS) frameworks pursuant to the Financial Regulations and Takaful Regulation, as the case may be, and the instructions of the Central Bank; and publish annual financial statements bearing the opinion of an external auditor approved by the Central Bank. Governance requirements for financial reporting and external audit must be adhered to according to the accompanying Standards, Financial Regulations, and Insurance Authority's Broad of Directors' Decision No. (19) of 2020 Concerning the Guidance Manual for Insurance Companies and Related Professions to Submitting the Data, Information and Supervisory Reports.
Article (10): Communications
1. The Company's Corporate Governance policies and processes must ensure effective engagement with the Central Bank, and that timely and accurate disclosure is made on all material matters regarding the Company, including the financial situation, performance, ownership, and governance of the Company.
2. A Company must publish a comprehensive Corporate Governance statement in a clearly identifiable section of its annual report. In this regard, Corporate Governance statement refers to a periodic, integrated report that clarifies the relations between the operational and functional units of the Company and the resources they use or affect thereon. The main purpose of the Corporate Governance statement is to submit an integrated image about the operational sustainability of the Company.
More frequent disclosure of Corporate Governance matters is encouraged.
3. A Company must include in its Corporate Governance statement, the following, at a minimum:
a. clear, comprehensive and timely information about its compensation practices to facilitate constructive engagement with all stakeholders.
b. details of transactions with Related Parties during the reporting period and the aggregate amount of all Related Party exposures at the end of the reporting period.
c. an attestation in the form of a detailed report must be signed by the chair of the Board (or, in the case of a branch of a foreign Company, the Authorized Manager), confirming that all internal policies required to ensure compliance with the Central Bank's Regulations and Standards on Corporate Governance, risk management, internal controls, compliance, internal audit, financial reporting, external audit, outsourcing and, where applicable, Compliance with Islamic Sharia'ah and internal Sharia'ah audit, have been implemented and reviewed for adequacy by the Board, within the last year. Otherwise, the attestation must specify those requirements not met and the date by which the Company intends to comply fully.
Article (11): Duties of Senior Management
1. A Company must have a clearly defined organisational structure and decision-making process with authorities delegated by the Board to Senior Management.
2. Under the direction and oversight of the Board, Senior Management must carry out and manage the Company's activities in a manner consistent with the business strategy, Risk Appetite, compensation and other policies approved by the Board. They must also promote rigorous risk management and internal controls through personal conduct and transparent policies.
3. Senior Management must provide the Board with the information it requires to carry out its responsibilities, including the supervision and assessment of the performance of Senior Management.
4. Senior Management must report and take timely remedial action towards any breach of any applicable laws and Regulations or internal policies, and must maintain adequate and orderly records of the Company.
5. A member of Senior Management may not hold a Staff position in any other entity, neither inside nor outside of the Group, where applicable. A member of Senior Management may hold memberships in the boards of up to two (2) non-insurance entities outside of the Group. In addition, the members of Senior Management, with the exception of chief risk officers and heads of the compliance and internal audit functions, may hold memberships in the boards of entities inside the insurance Group. The member of Senior Management must obtain approval from the Board before accepting nomination to serve on a board in any other entity; and no conflict of interest must be present.
6. The non-objection of the Central Bank must be obtained prior to the appointment or renewal of employment contracts of any member of Senior Management and other persons as determined by the Central Bank from time to time. In all cases, a Company must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fit and proper assessment of a member of Senior Management or any other person determined by the Central Bank.
7. a. Senior Management are subject to the same requirements as specified in sub-article (5) of Article (5) of this Regulation.
b. Staff, including Senior Management, may not represent on the Board, any of the shareholders of the Company.
Article (12): Takaful Insurance
1. A Company offering Takaful Insurance products must ensure that its Corporate Governance framework complies with the Takaful Regulation, and provides for:
a. Internal Shari'ah controls review and Shari'ah governance reporting to ensure compliance with Shari'ah rules;
b. The processes and controls for protecting the rights of the participants in line with the general terms and conditions and Shari'ah requirements;
c. Establishment of the ISSC in the governance of the Company; and
d. Transparency of financial reporting in respect of the participants' rights.
2. A Company offering Takaful Insurance must ensure compliance with the Takaful Regulation and any direction or guidance issued by the Higher Shari'ah Authority with respect to its Shari'ah governance framework.
3. A Company offering Takaful Insurance must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fit and proper assessment or independence of an ISSC member.
4. A Company offering Takaful Insurance must issue an annual Shari'ah report stating the extent of the company's Compliance with Islamic Shari'ah and publish it within the financial statement in the Company's disclosures and other available means.
Article (13) The General Assembly
1. In all cases, the national shareholding percentage should not be less than the percentage specified in Cabinet Resolution No. (42) of 2009 Concerning Insurance Company Minimum Capital Regulation, as amended;
2. a. The Board and shareholders of a Company must ensure that national shareholding is in accordance with the minimum requirements set out in sub-article (1) of Article (13) of this Regulation and shall take reasonable measures to achieve compliance with this minimum requirement.
b. The Board shall ensure that voting decisions of a shareholder, or shareholders, at a general assembly meeting comply fully with the Central Bank Law and Federal Law No. (6) of 2007 Concerning the Organization of Insurance Operations.
3. Companies must inform the Central Bank at the time of the invitation by the Company's Board to a general assembly meeting when a proposed shareholding change is on the agenda.
4. The Central Bank may send one or more representatives to attend a general assembly meeting including when a proposed shareholding change is on the agenda, without having any right to vote. The presence of such representatives shall be stated in the minutes of meeting.
5. a. The Central Bank may take all measures it deems appropriate to maintain conduct of operations of Companies, within the frameworks and limits set by the Board of Directors of the Central Bank.
b. The Central Bank may:
1. Request to hold a meeting of a general assembly of the Company to discuss any issue the Central Bank deems important;
2. Request to include any item that the Central Bank deems necessary into the agenda of a general assembly meeting of the Company;
3. Stop the implementation of any decision issued by a general assembly of the Company in the event that it violates the laws or Regulations in force.
Article (14): Enforcement and Sanctions
1. Violation of any provision of this Regulation and the accompanying Standards may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank.
2. Without prejudice to the provisions of the Central Bank Law, supervisory action and sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of the Company, or barring individuals from the UAE insurance sector.
Article (15): Interpretation of Regulation
The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.
Article (16): Publication and Application
1. This Regulation and the accompanying Standards shall be published in the Official Gazette in both Arabic and English and shall come into effect one month from the date of publication.
2. On the effective date of this Regulation, any Company which does not comply with this Regulation and the accompanying Standards, must, within ninety (90) days, provide the Central Bank with a detailed plan for coming into compliance with the requirements herein. The Central Bank will decide on the adequacy of the proposed plan. The plan should not exceed three years to ensure full compliance with requirements of this Regulation.
Corporate Governance Standards for Insurance Companies
C 24/2022 STAIntroduction
1. These Standards form part of the Corporate Governance Regulation (Circular No. 24/2022). All Insurance Companies must comply with these Standards, which expand on the Regulation. These Standards are mandatory and enforceable in the same manner as the Regulation. 2. The Standards follow the structure of the Regulation, with each article corresponding to the specific article in the Regulation.
1. Definitions
1. Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity. 2. Authorised Manager: The person appointed by the foreign insurance company to manage its branch in the State. 3. Board: The Company’s board of directors. 4. Central Bank: The Central Bank of the United Arab Emirates. 5. Chief Executive Officer: The most senior executive appointed by the Board, and in the case of foreign branches, this refers to the Authorised Manager. 6. Company: The insurance company incorporated in the State, and the foreign branch of an insurance company, that is licensed to underwrite primary insurance and reinsurance, including Takaful insurance companies. 7. Compliance with Islamic Shari’ah: Refers to compliance with Shari’ah in accordance with:a. resolutions, fatwas, regulations, and standards issued by the Higher Shari’ah Authority in relation to the Company’s activities and businesses (“HSA’s Resolutions”), and b. resolutions and fatwas issued by the Internal Shari`ah Supervision Committee (“ISSC”) of the Company, in relation to its activities and businesses (“the Committee’s Resolutions”), provided they do not contradict HSA’s Resolutions. 8. Conflict of Interest: A situation of actual or perceived conflict between the duty and private interests of a person, which could improperly influence the performance of his/her duties and responsibilities. 9. Control Functions: Function (whether in the form of a person, unit or department) that has a responsibility in a Company to provide objective assessment, reporting and/or assurance; this includes the risk management, compliance, actuarial, internal audit, and where applicable Shari’ah control and Shari’ah audit functions. 10. Controlling Shareholder: A shareholder who has the ability to directly or indirectly influence or control the appointment of the majority of the Board, or the decisions made by the Board or by the general assembly of the Company, through the ownership of a percentage of the shares or stocks or under an agreement or other arrangement providing for such influence. 11. Corporate Governance: A set of relationships between a Company’s Board, Senior Management, customers and other stakeholders; and a structure through which the objectives of the Company are set, and the means of attaining those objectives and monitoring performance are determined. 12. Duty of Care: The duty to decide and act on an informed and prudent basis with respect to the Company. Often interpreted as requiring a member of the Board to approach the affairs of the Company and policyholders ahead of his/her own interests. 13. Duty of Confidentiality: The duty to observe confidentiality applies to all information of a confidential nature with which a member of the Board is entrusted by the Company or which is brought to his or her attention during or at any time after the carrying out of his/her assignment. 14. Duty of Loyalty: The duty to act in the good faith in the interest of the Company. The duty of loyalty should prevent individual members of the Board from acting in their own interest, or the interest of another individual or group, at the expense of the Company and shareholders. 15. Financial Regulations: Insurance Authority Board of Directors’ Decision number (25) of 2014 Pertinent to Financial Regulations for Insurance Companies and the Insurance Authority Board of Directors’ Decision number (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies. 16. Fit and Proper Process: The evaluation of a Company’s proposed members of the Board, Senior Management and other persons as determined by the Central Bank from time to time, in terms of expertise and integrity. The specific fit and proper criteria are listed in article 5.20.e.1 of the Standards. 17. Government: The UAE Federal Government or one of the governments of the member Emirates of the Union. 18. Group: A group of entities which includes an entity (the ‘first entity’) and:a. any Parent of the first entity;
b. any Subsidiary of the first entity or of any Parent of the first entity;
c. any Affiliate. 19. Higher Shari`ah Authority: The Higher Shari`ah Authority that was established at the Central Bank. 20. Independent Member of the Board: A member of the Board who has no relationship with the Company or Group that could lead to benefit which may affect his/her decisions. He/she must not be under any other undue influence, internal or external, ownership or control, which would impede the Independent Member’s exercise of objective judgment. The Independent Member of the Board forfeits his/her independence in the cases specified in Article 5.7 of the Standards. 21. Material Risk Takers: Staff whose work is deemed to have a significant impact on the overall risk profile of the Company or the Group. 22. Regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank. 23. Relatives: Father, mother, brother, sister, children, spouse, father-in-law, mother-in-law and children of the spouse. 24. Related Parties: The Group and its Controlling Shareholders, members of the Board and Senior Management (and their Relatives) and persons with control, joint control or significant influence over the Company (and their Relatives). 25. Related Party Transactions: Include on-balance sheet and off-balance sheet credit exposures and claims as well as dealings such as service contracts, asset purchases and sales, construction contracts, lease agreements, derivative transactions, borrowings, and write-offs. The term transaction incorporates not only transactions that are entered into with Related Parties but also situations in which an unrelated party (with whom a Company has an existing exposure) subsequently becomes a Related Party; disclosures must reflect all Related Party events and transactions for the financial period. 26. Risk Appetite: The aggregate level and types of risk a Company is willing to assume, within its risk capacity, to achieve its strategic objectives and business plan. 27. Risk Governance Framework: As part of the overall approach to Corporate Governance, the framework through which the Board and Senior Management establish and make decisions about the Company’s strategy and risk approach; articulate and monitor adherence to the Risk Appetite and risks limits relative to the Company’s strategy; and identify, measure, manage and control risks. 28. Senior Management: The individuals or body responsible for managing the Company on a day-to-day basis in accordance with strategies, policies and procedures set out by the Board, generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions. 29. State: The United Arab Emirates. 30. Subsidiary: An entity (the 'first entity') is a subsidiary of another entity (the 'second entity') if the second entity:a. holds a majority of the voting rights in the first entity;
b. is a shareholder of the first entity and has the right to appoint or remove a majority of the Board of directors or managers of the first entity; or
c. is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity; or
d. if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity. 31. Staff: All the persons working for a Company including the members of Senior Management, except for the members of its Board. 32. Takaful Insurance: A collective contractual arrangement aiming at achieving cooperation among a group of participants against certain risks whereby each participant pays certain contribution amount to form an account called the participants' account through which entitled compensations are paid to the member in respect of whom the risk has realized. The Takaful Insurance company shall manage this account and invest the funds collected therein against certain compensation. 2. Corporate Governance Framework
1. A Company’s organisational structure must be transparent and support the strategic objectives and operations of the Company. The Board and Senior Management must understand the structure and the risks associated with it.
2. The Board must act in the best interests of its various stakeholders while meeting regulatory expectations. Treating customers fairly and policyholder protection must be an integral part of a Company’s governance and corporate culture.
3. Branches of foreign Companies must establish local governance structures, such as a Senior Management committee or equivalent, that fulfill the responsibilities of a Board required by these Standards. Branches must ensure their Control Functions are operating effectively. Branches must establish Control Functions that are robust, report to the local management structures and are accountable to the Group’s heads of Control Functions. The local management structure of the branch must take steps, as necessary, to help the branch meet its own Corporate Governance responsibilities in line with the Regulation and Standards. It is the responsibility of the local governance structures to ensure that local legal and regulatory requirements are implemented and, where appropriate, make adjustments where the Group structures conflicts with a provision of these Standards.
4. Group Structure:
a. In order to fulfil its responsibilities, the Board must ensure that: 1. There is a Corporate Governance framework at the Group level, with clearly defined roles and responsibilities, taking into account the complexity and significance of the individual entities;
2. There is an appropriate Group management structure and internal control framework which takes into account the material risks to which the Group and its individual entities are exposed;
3. The Group’s Corporate Governance framework includes adequate policies, processes and controls, and addresses risk management across the entities;
4. The Group’s Corporate Governance framework includes appropriate processes and controls to identify and address potential intragroup Conflicts of Interest, such as those arising from intragroup transactions;
5. There are Board-approved policies and clear strategies for establishing new structures and legal entities, which ensure that they are consistent with the policies and interests of the Group;
6. There are effective systems in place to facilitate the exchange of information and coordination among the various entities, to manage the risks of the individual entities as well as of the Group as a whole, and to ensure effective control of the Group;
7. There are sufficient resources to monitor the compliance of all entities with all applicable legal, regulatory and governance requirements; and
8. There is an effective internal audit function, and in the case of a Company offering Islamic financial services, an effective internal Shari`ah audit function, which ensures audits are being performed on all Group entities and the Group itself.
b. While the Board of the Company must conduct strategic, Group-wide risk management and prescribe corporate risk profiles, the Company’s management and Affiliate boards must have appropriate input into their local or regional application and the assessment of local risks. It is the responsibility of the Companies’ boards, or equivalent in the case of foreign branches, to assess the compatibility of the Group policies with local legal and regulatory requirements.
c. The Board and Senior Management must take into account the financial, legal, reputational and other risks to the Company from operating through complex or non-transparent structures. Measures to avoid or mitigate these risks include, but are not limited to:
1. Avoiding setting up complex structures that lack economic substance or business purposes;
2. Continually maintaining and reviewing appropriate policies, procedures and processes governing the approval and maintenance of those structures or activities, including fully vetting the purpose, the associated risks and the Company’s ability to manage those risks prior to setting up new structures and initiating associated activities;
3. Having a centralised process for approving the creation of new legal entities and dissolution of dormant entities based on established criteria, including the ability to monitor and fulfil each entity’s regulatory, tax, financial reporting, governance and other requirements;
4. Establishing adequate procedures and processes to identify and manage all material risks arising from these structures, including lack of management transparency, operational risks introduced by interconnected and complex funding structures, intragroup exposures, trapped collateral and counterparty risk, ensuring that structures are only approved if the material risks can be properly identified, assessed and managed; and
5. Ensuring that activities and structures are subject to regular internal and external audit reviews and Shari`ah audit reviews in case of providing Takaful Insurance products.
5. The Board must have a formal written Conflict of Interest policy for its members. The policy must include the following, at a minimum,:
a. Duties of the members of the Board to avoid, to the extent possible, activities that could create Conflicts of Interests or the appearance of Conflicts of Interests;
b. Examples of how Conflicts of Interest can arise when serving as a member of the Board;
c. A process for management of Conflicts of Interests by the Board or an ethics committee, where one exists;
d. A Board review and approval process applicable to members of the Board before they engage in specific activities, such as serving on another Board, to ensure that such activities will not create a Conflict of Interest;
e. A process to prevent members from holding directorships in other Companies;
f. A member of the Board’s duty to promptly disclose any matter that may result, or has already resulted, in a Conflict of Interest;
g. A member of the Board’s duty to abstain from voting on any matter where the member of the Board may have a Conflict of Interest (existing or potential) or where the member of the Board’s objectivity or ability to properly fulfil duties to the Company may be otherwise compromised;
h. Procedures to ensure that transactions with Related Parties must be undertaken on an arm’s length basis; and
i. The way the Board will deal with non-compliance with the Conflict of Interest policy.
6. Transactions with Related Parties must not be undertaken on more favourable terms than corresponding transactions with non-related counterparties.
7. Companies must have policies and processes in place to identify individual exposures to and transactions with Related Parties, as well as the total amount of such exposures; and monitor and report on them through an independent credit review or audit process. Exceptions to policies, processes and limits must be reported to the appropriate level of the Company’s Senior Management and, if necessary, to the Board for timely action, based on the stipulations of the policy. Senior Management must monitor Related Party Transactions on an ongoing basis, and the Board must also provide oversight of these transactions.
8. The Board must ensure that transactions with Related Parties (including intragroup transactions) are reviewed to assess risk and are subject to appropriate restrictions (e.g. by requiring that such transactions be conducted on arm’s length terms) and that corporate or business resources of the Company are not misappropriated or misapplied.
9. Transactions with Related Parties and the write-off of related-party exposures are subject to prior approval by the Company’s Board. Members of the Board with Conflicts of Interest must be excluded from the approval process for granting and managing Related Party Transactions. Companies must report any breaches promptly to the Central Bank. The Central Bank may impose additional capital and/or provisioning requirements to cover any such breaches.
10. Companies must have policies and procedures in place to prevent persons benefiting from a transaction that has an existing or potential Conflict of Interest and/or persons related to such a person, from being part of the process of granting and managing the transaction.
11. Companies must maintain a register of Related Parties and details of every Related Party Transaction.
3. Oversight and Management Responsibilities
1. The Board must provide oversight of Senior Management. It must hold members of Senior Management accountable for their actions and document the consequences if these actions are not aligned with the Board’s expectations. This oversight involves ensuring that Senior Management is adhering to the Company’s values, Risk Appetite and risk culture. Oversight by the Board should include, but is not limited to:
a. Monitoring Senior Management’s actions to ensure that they are consistent with the strategic objectives and policies approved by the Board and are aligned with the Company’s Risk Appetite;
b. Overseeing implementation of the Company’s governance framework and reviewing it annually to ensure that it remains appropriate in the light of any material changes to the Company’s size, complexity, business strategy, markets and regulatory requirements;
c. Overseeing the Company’s adherence to its Risk Appetite and Risk Limits;
d. Overseeing the Company’s approach to Board and Staff compensation, including monitoring and reviewing executive compensation and assessing whether it is aligned with the Company’s culture and Risk Appetite;
e. Meeting regularly with Senior Management;
f. Critically reviewing and challenging explanations and information provided by Senior Management;
g. Setting appropriate performance and compensation standards for Senior Management consistent with the long-term strategic objectives and the financial soundness of the Company;
h. Assessing whether Senior Management’s collective knowledge and expertise remain appropriate given the nature of the business and the Company’s risk profile; and
i. Actively engaging in succession planning for the Chief Executive Officer and ensuring that appropriate succession plans are in place for all Senior Management positions.
2. The Board should review the Company’s policies and procedures on a regular basis to ensure that they are being implemented by those responsible within Senior Management. The Board should obtain reports from Senior Management in this regard, at least annually.
3. The responsibilities of the Board in this regard include, but are not limited to:
a. Determining the Company’s Risk Appetite, taking into account the competitive and regulatory landscape and the Company’s long-term interests, risk exposures and ability to manage risk effectively;
b. Approving and overseeing the implementation of key policies including, but not limited to, liquidity , capital adequacy, technical provisions and solvency margin;
c. Overseeing the appointment of the external auditor;
d. Approving the annual financial statements and requiring periodic independent review of critical areas of the business and internal controls;
e. Approving the selection of and overseeing the performance of Senior Management;
f. A Takaful Company must demonstrate full Compliance with Islamic Shari’ah and establish a sound and effective Shari`ah governance framework with key mechanisms and functionalities to ensure effective and independent Shari`ah oversight, as per the requirements of the Takaful Regulation and any other requirements set by the Central Bank and the Higher Shari`ah Authority.
4. Corporate Culture, Business Objectives and Strategy
1. The Board is responsible for the implementation of an effective risk management culture and internal control framework across the Company and the Group. In order to promote a sound corporate culture, the Board must establish the “tone from the top” by:
a. Setting and adhering to corporate values that create the expectation that all business must be conducted in a legal and ethical manner, and overseeing the adherence to such values by Staff;
b. Promoting risk awareness within a strong risk culture, and setting the expectation that all Staff are responsible for ensuring that the Company operates within the established Risk Governance Framework, Risk Appetite and Risk Limits;
c. Ensuring that appropriate steps have been taken to communicate throughout the Company the corporate values, professional standards and codes of conduct approved by the Board, together with supporting policies; and ensuring that Staff are aware that appropriate disciplinary or other actions will follow unacceptable behaviours and breaches.
2. The Company’s corporate culture must recognise the critical importance of timely and frank discussion and escalation of problems to higher levels. Staff must be encouraged and must be able to communicate legitimate concerns about illegal, unethical and/or questionable practices confidentially and without the risk of reprisal.
3. The Board must approve and oversee a whistleblowing policy mechanism and ensure that Senior Management appropriately addresses legitimate issues flagged through the whistleblowing mechanism. The Board is responsible for ensuring that Staff who raise concerns are protected from detrimental treatment or reprisals. The Board must oversee and approve how and by whom legitimate matters are investigated and that they are addressed by an objective internal or external body, Senior Management, and/or by the Board itself.
4. A Company must have a written code of conduct for Staff that defines acceptable and unacceptable behaviours. It must explicitly prohibit illegal activity including fraud, breach of sanctions, money-laundering, anti-competitive practices, bribery and corruption, and the violation of consumer rights. It must make clear that Staff are expected to conduct themselves ethically and perform their jobs with skill, due care and diligence. The code of conduct covers, at a minimum:
a. The obligation to comply with all Regulations and the Company policies.
b. Prevention and management of Conflicts of Interest.
c. Guidance on decision-making.
d. Reporting mechanisms on any breach of applicable laws and Regulations, and protection for whistle blowers from retaliation.
e. Fair treatment of policyholders.
f. Information sharing with stakeholders.
5. Structure and Governance of the Board
1. A Company’s Board must be comprised of individuals with a balance of skills, diversity and expertise, who collectively possess qualifications commensurate with the size, complexity and risk profile of the Company. In assessing its collective suitability, the factors a Board should take into account include, but are not limited to:
a. Whether members of the Board have a range of knowledge and experience in relevant areas and varied backgrounds to promote diversity of views;
b. Relevant individual areas of competence which may include, but are not limited to, capital markets, financial analysis, financial stability, financial reporting, information technology, strategic planning, risk management, compensation, regulation, Corporate Governance, management, accounting, underwriting, actuarial, reinsurance, investment, audit and Shari`ah rules and principles in the case of a Takaful Company;
c. Whether the Board collectively has a good understanding of local, regional and global economic and market forces and of the legal and regulatory environments applicable to the Company’s operations; and
d. Whether individual members of the Board can contribute to effective communication, collaboration and critical debate at the meetings of the Board and its committees.
2. The Board must have well-defined powers, including the ability to obtain timely information from Senior Management and key persons in Control Functions, in order to manage the Company.
3. The Board must have documented procedures for its own internal governance which must be periodically reviewed and assessed for their effectiveness. These may be included in organisational rules or by-laws, and should set out how the Board will carry out its roles and responsibilities, the nomination process, selection and removal of Board members, a specified term of office and succession planning.
4. The Board must be adequately funded and have access to resources, staff and facilities in order to carry out its responsibilities effectively. The Board must have documented procedures to access external, independent experts including procedures related to their appointment and dismissal.
5. Where the Board makes any delegations, it should ensure that:
a. The delegation does not hinder the Board from discharging its roles and responsibilities effectively.
b. The scope of delegation is well defined in terms of the powers, accountabilities and procedures related to the delegation.
c. There is no undue concentration of powers, giving anyone inappropriate levels of power capable of affecting the Company.
d. It has the ability to monitor and obtain reports on whether the delegated tasks are properly carried out.
e. It retains the ability to withdraw the delegation if it is not properly discharged, and to have contingency plans in this regard.
6. Members of the Board, individually and collectively, must be and continue to remain qualified for their positions. Members of the Board must understand their oversight and Corporate Governance role and be able to exercise sound, objective judgement about the affairs of the Company. Members of the Board must not have any Conflict of Interest that may impede their ability to perform duties independently and objectively, or be subject to any undue influence from:
a. Other persons/business;
b. Previous or current positions held; or
c. Personal, professional or other economic relationships with other members of the Board or Senior Management, or
d. Other entities within the Group.
7. A member of the Board shall lose his/her independence in the following cases:
a. If his/her tenure as an Independent Member of the Board in the same Company exceeds twelve (12) consecutive years from the date of his or her appointment. This provision applies equally to persons appointed by a Government shareholder;
b. If he/she, or any of his/her Relatives, has worked as Staff of the Company, or its Subsidiaries during the past two (2) years;
c. If he/she has worked for, or is a partner, in a company that performs consulting works for the Company or its Group or he/she has acted in such capacity during the past two (2) years;
d. If he/she has had any personal services contracts with the Company or its Group during the past two (2) years;
e. If he/she has been affiliated with any non-profit organisation that receives significant funding from the Company or its Group;
f. If he/she, or any of his/her Relatives, has been a partner or employee of the Company’s auditor during the past two (2) years;
g. If he/she, or any of his/her Relatives, has or had a direct or indirect interest in the contracts and projects of the Company or its Subsidiaries during the past two (2) years, and the total of such transactions exceeds the lower of 5% of the Company’s paid capital or of the amount of five million Dirhams or its equivalent amount in a foreign currency, unless such relationship is part of the nature of the Company’s business and involves no preferential terms; and
h. If he/she and/or any of his/her Relatives (individually or collectively) own directly or indirectly 10% or more of the Company’s capital or is a representative of a shareholder who owns directly or indirectly more than 10% of the Company’s capital.
The provisions in items b to h above do not apply to members of the Board appointed by a Government shareholder.
8. All nominated members of the Board must have sufficient competence, knowledge and experience to effectively carry out their duties and be subject to the Fit and Proper Process.
9. An ex-ante review and approval process must be completed before a member of the Board accepts nomination to serve on another board as permitted by the Corporate Governance Regulation and these Standards, so as to ensure that the activity will not create a Conflict of Interest. In addition, each member of the Board must confirm annually that he/she has sufficient time available to manage the time commitments required from the role on the Board.
10. The chair of the Board must provide leadership to the Board and is responsible for its overall effectiveness. The chair must ensure that Board decisions are taken on a sound and well-informed basis, encourage and promote critical discussion, and ensure that dissenting views can be freely expressed during the decision-making process. The chair must:
a. Ensure that the Board acts efficiently, fulfils its responsibilities and discusses all issues on a timely basis;
b. Approve the agenda of each Board meeting, ensuring that the content, organisation, quality of documentation and time allocated to each topic allows for sufficient discussion and decision making;
c. Encourage all Members of the Board to fully and efficiently participate in Board meetings in order to ensure that the Board acts in the best interests of the Company;
d. Adopt suitable procedures to ensure efficient communication with the shareholders, and the communication of their views to the Board; and
e. Facilitate the effective participation of Independent Members of the Board and the development of constructive relations between individual Board members.
A Takaful Company must safeguard an effective independent oversight of Compliance with Islamic Shari’ah within the organisational framework.
11. The majority of the members of the Board must be present at each Board and its committees’ meetings to establish a quorum. Attendance at meetings must be by physical presence or via audio or audio-videoconferencing subject to appropriate safeguards to preserve confidentiality and accuracy of deliberations.
12. The Board’s and its committees’ resolutions must be approved by the majority of votes. In the case of parity, the Chair shall have a casting vote.
13. There must be effective communication and coordination between the audit committee and the risk committee to facilitate the exchange of information and effective coverage of all risks, including emerging risks, and any needed adjustments to the Company’s Risk Governance Framework. The risk committee must, without prejudice to the tasks of the compensation committee, examine whether incentives provided by the remuneration system take into consideration risk, capital, liquidity and the likelihood and timing of earnings.
14. The Board must ensure that new members of the Board participate in an appropriate induction programme that must include an introduction to the strategy, structure, codes of conduct, main policies and material businesses of the Company. In addition, the induction programme must include an overview of the regulatory environment applicable to the Company, including the requirements of all relevant laws and Regulations.
15. The Board must dedicate sufficient time, budget and other resources to an ongoing training and development programme for its members and draw on external expertise, as needed. The Board must review annually its programme for ensuring that its members acquire, maintain and enhance knowledge and skills relevant to their responsibilities.
16. The Board, or the Board nomination committee, must carry out, at least annually, an assessment of the Board as a whole, its committees, and individual members. The Board must also ensure that an independent assessment is carried by an external third party at least once every five (5) years.
17. Annual assessments of the Board must include, but are not limited to:
a. Reviewing the structure, size and composition of the Board as a whole and its committees;
b. Reviewing the effectiveness of Board governance procedures, determining where improvements are needed and making any necessary changes; and
c. Assessing the ongoing suitability of each member of the Board, taking into account the fit and proper criteria and his/her performance on the Board.
18. Factors to be considered in the assessment of the Board as a whole include, but are not limited to:
a. Has the Board set clear performance objectives, and how well has it performed against these objectives?
b. Has the Board been effective in the strategy development process?
c. What has been the Board’s contribution to ensuring effective risk management?
d. Is the membership of the Board appropriate with the right mix of skills and knowledge?
e. Is the organisational structure and interaction between the Board and Senior Management working effectively?
f. How well has the Board responded to problems and challenges?
g. Is the Board dealing with the right issues?
h. Is the relationship between the Board and its committees working effectively?
i. Is the Board taking the necessary steps to stay up to date with regulatory and market developments?
j. Is the Board taking the necessary steps to acquire timely information of the right depth and quality?
k. Are Board meetings of the right frequency and length to enable proper consideration of issues?
l. Is the content of the agenda appropriate for the size, nature and complexity of the Company?
m. Are Board procedures adequate for effective performance?
19. Factors to be considered in the assessment of the performance of individual members of the Board include, but are not limited to:
a. Does the member of the Board continue to meet the requirements of the Fit and Proper Process, and in the case of Independent Members of the Board, independence?
b. Has the member of the Board actively contributed to the work of the Board, and if applicable, Board committees?
c. If newly appointed, has the member of the Board participated in the Board’s induction programme?
d. Has the member of the Board participated in ongoing training on relevant issues?
e. Is the member of the Board taking the necessary steps to stay up to date with regulatory and market developments?
f. Has the member missed meetings of the Board without an excuse acceptable by the Board?
20. COMMITTEES:
a. The Board elects the audit committee and sets its mandate and responsibilities, including, but not limited to:
1. Assessing the adequacy of Senior Management, and the extent of their application of the Board’s directions.
2. Assessing and following up on the efficiency of the internal controls, through:
a. Holding regular meetings with persons who are primarily responsible for internal controls over financial reporting, including but not limited to the heads of internal audit, risk management and accounting functions.
b. Mitigating key financial reporting risks through discussing controls with Senior Management, including fraud risks.
c. Understanding how Senior Management plans to assess internal controls and what role internal audit and other Related Parties will play.
d. Understanding the external auditors' scope and plan to test the controls.
e. Conducting regular meetings with Senior Management, internal and external audit to discuss findings and relevant action plans.
3. Assessing the extent of compliance with relevant laws and Regulations.
4. Nominating external auditors to be selected by the general assembly; terminating their services, when required; and determining their fees.
5. Effectively overseeing and supporting the internal audit function, that incudes, but is not limited to:
a. Understanding internal audit resources.
b. Being involved in hiring the head of internal audit, evaluating his/her performance, and verifying the sufficiency of his/her compensation.
c. Reviewing the internal audit's charter annually, and approving any changes to the charter.
d. Approving the annual internal audit plan and reviewing the recommendations issued by the internal auditor.
6. Approving the appointment and dismissal of the head of internal audit.
7. Following up on the recommendations made by internal and external audit and the Central Bank.
8. Overseeing the integrity and accuracy of the financial statements and related disclosures, that includes:
a. Taking an active role in overseeing annual and interim financial statements and related disclosures.
b. Assessing whether the significant accounting policies the company uses are reasonable and appropriate. This includes discussions with the chief financial officer and external auditors about the impact on the results and financial disclosures of any new accounting development.
c. Assessing and making submissions to the Board regarding the suitability of the Company’s accounting policies. This includes discussions with the chief finance officer or equivalent and the external auditors about the impact on the results and financial disclosures of any changes to accounting standards and policies.
d. Reporting to the Board, any limitations in the reliability of accounting and financial processes, including management information systems.
9. Meeting with internal and external auditors and appointed actuaries at least twice a year, without the presence of representatives from Senior Management.
10. Enabling Staff to report in confidentiality, any violation concerning the financial statements or internal controls, and producing a report to the Board in this regard.
11. To report to shareholders by preparing a report to be included in the annual financial statements describing how the committee carried out its functions, confirming the independent nature of the audit, and commenting on the financial statements, accounting practices and internal financial control measures of the Company.
12. Ensuring integrated reporting to the Central Bank (integrating financial and sustainability reporting, to the extent that it is relevant). At a minimum, the audit committee should provide the following information in the integrated report:
a. A summary of the role of the audit committee;
b. A statement on whether or not the audit committee has adopted a formal terms of reference that has been approved by the Board, and if so, whether the committee satisfied its responsibilities for the year in compliance with its terms of reference;
c. The names and qualifications of all members of the audit committee during the period under review, and the period for which they served on the committee;
d. The number of audit committee meetings held during the period under review and members’ attendance at these meetings;
e. A statement on whether or not the audit committee considered and recommended the internal audit charter for approval by the Board;
f. A description of the working relationship with the chief audit executive;
g. Information about any other responsibilities assigned to the audit committee by the Board;
h. A statement on whether the audit committee complied with its legal, regulatory and/or other responsibilities; and
i. A statement on whether or not the audit committee has reviewed the integrated report and submitted the report to the Board with a recommendation for approval.
b. The Board elects a risk management committee and sets its mandate and responsibilities including, but not limited to:
1. Proposing the Company's risk management policies, risk tolerance and Risk Appetite to the Board for approval, and to follow up on their implementation and update them on an annual basis. The committee should ensure that risk assessments are performed regularly, monitor the whole risk management process, and receive assurance from internal and external assurance providers regarding the effectiveness of the risk management process.
2. Assessing and making submissions to the Board regarding the Company’s risk management through:
a. Satisfying itself with regard to the expertise, resources and experience of the risk management function;
b. Meetings with individuals who are primarily responsible for the design, implementation and effectiveness of risk management, as well as continual risk monitoring; and
c. Meeting regularly with management to discuss the controls in place to: assume and accept risk, avoid risk, control risk, transfer risk, watch and monitor risk, amongst other things.
3. Proposing the Company's reinsurance strategy and ensuring appropriate oversight and consistent implementation of reinsurance programmes. The committee should consider the Company’s business objectives, levels of capital and business lines, with particular reference to the following:
a. Risk Appetite;
b. Large exposures and frequency of perils;
c. Level of diversification; and
d. The ability of reinsurers to fulfill their obligations.
4. Assessing the extent to which the Company applies the provisions contained in the Financial Regulations, and submitting reports to the Company’s Board in this regard.
5. Without prejudice to the tasks of the compensation committee, proposing a compensation policy for management that is aligned to the business strategy and risk levels.
6. Ensuring detailed job descriptions for the roles, duties, and responsibilities of each Board member, and that controls for measuring their performance are in place.
c. The Board elects from among its members an investment committee, and sets its mandate and responsibilities including, but not limited to:
1. Preparing and reviewing the investment policy, reviewing its performance, implementation and managing its risks, on an annual basis.
2. Reviewing the performance of the Company's assets annually.
3. Submitting quarterly reports to the Board on the performance of the Company's investment portfolio.
4. Establishing the necessary controls to prevent investments in related companies, unless it is proven that this is in the interest of the Company; maintain relevant information, documents, restrictions and studies in this regard.
d. The Board elects from among its members a compensation committee, and sets its mandate and responsibilities including, but not limited to:
1. Providing the Board with the design and oversight of the Company’s compensation system.
2. Periodically reviewing the compensation policies and determining if they are appropriate to each Board member and the Staff.
3. Preparing a policy for granting allowances and incentives to Senior Management.
4. Reviewing the performance of Senior Management.
e. The Board elects from among its members a nomination committee, and sets its mandate and responsibilities, including, but not limited to:
1. Identifying, assessing fitness and propriety of candidates for the Board and Senior Management. Fit and proper criteria must ensure that selected candidates:
a. Possess the necessary knowledge, skills, and experience;
b. Have a record of integrity and good repute;
c. Have sufficient time to fully discharge their responsibilities;
d. Provide for collective suitability and added value to the Board/ Senior Management;
e. Do not have any Conflict of Interest; and
f. Have a record of financial soundness.
Before providing the non-objection for nominations, appointments or renewals, the Central Bank will conduct additional interviews and/or background checks to ensure that the candidates are fit and proper, including assessing their ability to manage the time commitments required for their role in the Company, and confirm the accuracy and completeness of the information and documentation provided by the Company.
2. Establishing a policy to require at least 20% of candidates for consideration for the Board to be female. Information on the policy and actual numbers of female candidates’ consideration and representation on the Board must be disclosed in the Company’s annual Corporate Governance statement.
6. Duties of Individual Board Members
1. Members of the Board are fully responsible for the overall interests of the Company. This applies to members of the Board representing or appointed by an individual shareholder or group of shareholders. The Duty of Loyalty precludes individual members of the Board acting in their own interest, or the interest of another individual or group, at the expense of the Company, its policyholders or shareholders. Policyholders’ interests must take precedence over shareholders’ interests.
2. Members of the Board must exercise their Duty of Care, Duty of Confidentiality and Duty of Loyalty to the Company when carrying out their activities, which include, but are not limited to:
a. Actively engaging in the affairs of the Company to ensure strategy and policies are implemented as designed as well as acting in a timely manner to protect the long-term interests of the Company;
b. Overseeing the development of and approving the Company’s business objectives and strategy, and monitoring their implementation;
c. Playing a lead role in establishing the Company’s corporate culture and values.
7. Duties Related to Risk Management and Internal Controls
1. The Board approved Risk Governance Framework must incorporate a “three lines of defense” approach including Senior Management of the business lines, the functions of risk management, actuarial and compliance, and an independent and effective internal audit function. In the case of a Takaful Company, independent and effective internal Shari`ah Control and internal audit functions must be in place.
2. The Risk Governance Framework may vary with the specific circumstances of the Company, particularly its risk profile, size, business mix and complexity. Companies must incorporate the minimum requirements specified in the Central Bank Regulations and Standards on risk management and internal controls.
3. The internal controls framework must contain the following elements, at a minimum:
a. Empowering Senior Management according to the organisational structure, commensurate to the nature of the Company, which clearly defines lines of communication and responsibilities for each unit in the Company.
b. Segregation of duties, along with separation between managing risks and supervising the management of such risks.
c. Written procedures accredited by the Board for applying and reviewing information technology strategies, in a manner that guarantees the provision of information to decision makers in a timely manner, along with a crisis management strategy.
4. A Company shall set up a documented internal control system approved by its Board in line with the Company’s business and volume, and it shall be supported by information systems that ensure the accuracy of such information. This system shall be reviewed periodically by the internal audit, external audit and actuarial auditors to ensure its compliance with the legal framework in force and to assess its effectiveness and adequacy.
5. The internal auditor shall assess the effectiveness and adequacy of the internal controls system and the company’s operations, to make sure that the Company operates in compliance with the legal framework and within the strategic objectives of the Company. A report in this regard along with the relevant recommendations must be submitted to the audit committee.
6. Governance requirements for risk management and internal controls are contained in separate Regulations issued by the Central Bank.
8. Duties Related to Compensation
1. The compensation committee is responsible for the overall oversight of management’s implementation of the compensation system for the entire Company. In addition, the compensation committee must regularly monitor and review outcomes to assess whether the Company-wide compensation system is creating the desired incentives for managing risk, capital and liquidity. It must have clear terms of reference, be properly constituted to exercise competent and independent judgement on the Company’s compensation policies and practices and work closely with the Company’s risk committee in the evaluation of incentives created by the compensation system. The committee must review the compensation plans, processes and outcomes, at least annually. An independent assessment of the compensation system by an external third party must be conducted at least once every five (5) years.
2. The Board must have oversight of the compensation system for the whole Company, not just for Senior Management. The compensation structure must be in line with the strategy, Risk Appetite, objectives, values and long-term interests of the Company. Incentives embedded within compensation structures should not incentivise Staff to take excessive risk.
3. Issues that the compensation committee of the Board must consider in overseeing the operation of Company-wide compensation policies include, but are not limited to:
a. the ratio and balance between the fixed (basic salary and any routine employment allowances that are predetermined and not linked to performance) and variable components of compensation;
b. the nature of the duties and functions performed by the relevant Staff and their seniority within the Company;
c. the assessment criteria against which performance-based components of compensation are to be awarded; and
d. the integrity and objectivity of the process of performance assessment against the set criteria.
4. The annual fixed amount paid to the members of the Board should be comprised of payment for their service on the Board and for their participation on Board committees, with greater weighting applied to members chairing committees. The payment may also include the value of other non-monetary benefits, e.g. insurance and healthcare. The agreement with each member of the Board must specify all the details of his/her compensation.
5. Negative financial performance or net loss reported by a Company in a financial year should generally lead to a contraction of the Board’s total compensation and Senior Management bonus. The Central Bank may impose additional reductions to the Board’s total compensation where the negative financial performance was due to non-compliance with laws or Regulations, omission or error by the Board. In addition, a net loss reported by a Company in a financial year is expected to lead to a contraction of the Staff bonus pool.
6. Staff in the Control Functions of risk management, compliance and internal audit and in the case of Takaful Companies, Shari`ah control and Shari’ah audit, must be compensated in a way that makes their incentives independent of the lines of business whose risk taking they monitor and control. Instead, their performance measures and performance incentives must be based on achievement of their own objectives so as not to compromise their independence. This also applies to the compliance function staff embedded in independent support or control units.
7. If Staff in the Control Functions receive variable compensation, their total compensation must be made up of a higher proportion of fixed relative to variable compensation.
8. Companies must identify, both on a solo basis and at the Group level, the Staff who have the potential to take or commit the Company to significant risk, including reputational and other forms (Material Risk Takers), and consider the extent to which the structure of their compensation is effectively risk aligned. The identification must be performed by means of an annual assessment and based primarily on control and influence over risk; i.e. Staff who receive incentive compensation and have an ability, either alone or as a member of a group of Staff, to take or influence risk that is significant to the Company. These may include, but are not limited to:
a. Senior Management and key Staff (including but not limited to the Chief Executive Officer and other members of Senior Management who are responsible for oversight of the Company’s key business lines and, if applicable, the Control Functions).
b. Staff whose duties involve the assumption of risk or the taking on of exposures on behalf of the Company (including but not limited to proprietary traders, dealers, and loan officers).
c. Staff who engage in the design, sales and management of insurance products.
d. Staff who are incentivised to meet certain quotas or targets by payment of variable remuneration (including, but not limited to, those in marketing, sales and distribution functions).
e. Staff in the Control Functions.
9. For Senior Management and Material Risk Takers:
a. a proportion of compensation must be variable and paid on the basis of individual, business-unit and Company-wide measures that adequately measure performance;
b. a substantial portion of the variable compensation must be payable under deferral arrangements over at least three (3) years. These proportions should increase significantly along with the level of seniority and/or responsibility. For Senior Management and the most highly paid staff, the percentage of variable compensation that is deferred should be substantially higher than other Staff;
c. a portion of variable compensation may be awarded in shares or equivalent ownership interests or share-linked or equivalent non-cash instruments in the case of non-listed Companies, as long as these instruments create incentives aligned with long-term value creation and the time horizons of risk. Awards in shares or share-linked instruments must be subject to an appropriate share retention policy; and
d. The remaining portion of the deferred compensation can be paid as cash compensation vesting gradually. In the event of negative financial performance or net loss of the Company and/or the relevant line of business in any year during the vesting period, any unvested portions should be clawed back, subject to the realised performance of the Company and the business line.
10. Contractual payments related to the termination of employment should be examined to ensure there is a clear basis for concluding that they are aligned with long-term value creation and prudent risk-taking; any such payments must be related to performance achieved over time and designed in a way that does not reward failure.
11. Where the Company makes any severance payments, such payments must be subject to appropriate governance, limits and controls, and should relate to performance over time. Severance payment must not reward failure or potential failure of the Company.
12. Companies are encouraged to follow best international practices in sound compensation, Including the guidance provided by the Financial Stability Board in its issued Principles and Standards on Sound Compensation Practices as updated from time to time.
9. Financial Reporting and External Audit
1. Governance requirements for financial reporting and external audit must be adhered to as stipulated in the Financial Regulations, Insurance Authority’s Board of Directors’ Decision No. (19) of 2020 Concerning the Guidance Manual for Insurance Companies and Related Professions to Submitting the Data, information and any separate Regulations issued by the Central Bank in this regard.
2. The Board is responsible for overseeing the necessary controls to ensure the soundness and accuracy of the financial reports, including:
a. Overseeing the financial statements, financial reporting and disclosure process.
b. Assessing the effectiveness of the accounting policies and practices.
c. Overseeing the internal audit process (reviews by internal audit of the Company’s financial reporting controls) and reviewing the internal auditor’s plans and material findings.
d. Significant findings and observations regarding the weakness in the financial reporting process are promptly rectified. This should be supported by a formal process for reviewing and monitoring the implementation of recommendations by the external auditor.
e. Reporting to the Central Bank on significant issues regarding the financial reporting process, and the remedial action taken in this regard.
3. The Board is responsible for ensuring the sound governance and oversight of the external audit process, including:
a. Approving, recommending, appointing, reappointing, dismissing and determining the compensation of the external auditor.
b. Ensuring the independence of the external auditor through robust processes to ensure that the appointed external auditor has the necessary knowledge, skills, expertise, integrity and resources to conduct the audit and meet any additional regulatory requirements.
c. Assessing the effectiveness of the external audit.
d. Investigating circumstances of resignation or removal of the external auditor, and reporting the same to the Central Bank.
4. The Board must ensure an effective relationship with the external auditor, through:
a. Setting clear and adequate terms of engagement of the external auditor, along with a defined scope of work and resources required to conduct the audit. For this purpose the Board must ensure that the terms of engagement of the external auditor are clear and appropriate to the scope of the audit and resources required to conduct the audit and specify the level of audit fees to be paid.
b. An undertaking by the external auditor that the audit is going to be conducted according to the applicable legislation and international standards.
c. Ensuring that the external auditor complies with internationally acceptable ethical and professional standards.
d. Ensuring that there are adequate policies to ensure the independence of the external auditor, including restrictions and conditions for the provision of non-audit services which are subject to approval by the Board, periodic rotation of members of the audit team and/or audit firm and the provision of safeguards to eliminate or reduce to an acceptable level identified threats to the independence of the external auditor.
e. Ensuring that there is unrestricted access to information or persons to conduct the audit.
5. The Board must have effective communication with the external auditor, including scope and timing of the audit to understand the nature of risk. The Board should hold regular meetings with the external auditor without the presence of Senior Management, and all internal audit weaknesses must be identified and communicated.
6. The Company must provide the Central Bank with the external auditor’s report.
7. The external auditor must promptly report to the Central Bank without the prior consent of the Company on all matters that are likely to be of material significance, such as breaches of applicable legislation, fraud or the suspicion of fraud.
10. Communications
1. Disclosures in the annual Corporate Governance statement must include, but not be limited to, information on the following:
a. Material information on the Company’s objectives, organisational and governance structures and policies;
b. Major share ownership and voting rights;
c. Related Party Transactions;
d. The recruitment approach for the selection of members of the Board and for ensuring an appropriate diversity of skills, backgrounds and viewpoints;
e. Education and experience of members of the Board and key members of Senior Management;
f. Type and composition of Board and its committees; the number of times they met and attendance records;
g. Incentive and compensation policy including the decision-making process used to determine the Company-wide compensation policy, the most important design characteristics of the compensation system and aggregate quantitative information on compensation;
h. The individual compensation of the members of the Board and key members of Senior Management;
i. Individual board membership in any other companies;
j. Information on the policy as to, and actual figures of, female candidates’ consideration and representation on the Board;
k. Key points concerning its risk exposures and risk management strategies without breaching necessary confidential;
l. Information on the purpose, strategies, structures, and related risks and controls of material and complex or non-transparent activities;
m. Forward looking statements and foreseeable risk factors; and
n. In the case of Takaful Companies, Annual Shari`ah Reports on the compliance with Shari`ah rules and the resolutions of the Higher Shari`ah Authority, or any other disclosures required by the Company or the Higher Sharia Authority.
2. Where useful, Companies may make reference to the information contained in the financial statements’ notes.
3. Qualitative and quantitative disclosure requirements on compensation to be published annually in a Company’s Corporate Governance statement must include the following information for Board members, Senior Management and Material Risk Takers:
a. Description of the main elements of their compensation system and how the system has been developed;
b. Fixed and variable compensation awarded during the financial year;
c. Special Payments: guaranteed bonuses, sign-on awards and severance payments;
d. Deferred compensation;
e. Any sanctions imposed on any Board member by a national or foreign judicial or supervisory authority that is relevant to the matters stated herein.
4. Boards should approve and publicly disclose a statement providing assurance that the Corporate Governance arrangements of their Companies are adequate and efficient.
5. The Company’s communication policies and strategies should cater for providing the Central Bank with any commercially sensitive information in a timely and efficient manner. Such information may include assessments by the Board of the effectiveness of the Company’s governance system, internal audit reports, information on the compensation structures adopted by the Company for the Board, Senior Management, Control Functions and Material Risk Takers.
11. Duties of Senior Management
1. Senior Management is responsible and accountable to the Board for compliance, fair treatment of policyholders, record keeping and for the sound and prudent day-to-day management of the Company in accordance with the Company’s corporate culture, business objectives and strategies for achieving those objectives. The organization, procedures and decision-making of Senior Management must be transparent and provide clarity on the role, authority and responsibility of the various positions within Senior Management.
2. Consistent with the direction given by the Board, Senior Management must implement business strategies, risk management systems, risk culture, processes and controls for managing the risks to which the Company is exposed in alignment with the Risk Appetite. This includes comprehensive and independent risk management, compliance and audit functions as well as an effective overall system of internal controls. Senior Management must recognise and respect the independent duties of the risk management, compliance and internal audit functions, and in the case of a Company offering Islamic financial services, Shari`ah compliance and audit functions, and must not interfere with the exercise of such duties.
3. Senior Management must provide oversight of those they manage, and ensure that the Company’s activities are consistent with the business strategy, Risk Appetite and the policies approved by the Board. Senior Management is responsible for delegating duties to Staff and must establish a management structure that promotes accountability and transparency throughout the Company.
4. Senior Management must provide the Board with comprehensive and timely reports to enable it to effectively discharge its responsibilities, including the oversight of Senior Management. Information that Senior Management must regularly provide to the Board includes, but is not limited to:
a. Performance relative to the Company’s strategy and Risk Appetite;
b. Performance against budget and other financial targets, and the financial condition of the Company;
c. Breaches of Risk Limits or compliance rules categorised by frequency, scope and impact;
d. Internal control failures;
e. Legal or regulatory concerns and remedial actions taken or proposed;
f. Current and developing market conduct issues, including a semi-annual analysis on client complaints and inquiries;
g. Issues raised as a result of the Company’s whistleblowing mechanism;
h. Breaches of Shari`ah rules and principles in the case of a Takaful Company; and
i. Proposed changes in Company strategy.
5. An ex-ante review and approval process must be completed before a member of Senior Management accepts nomination to serve on a board as permitted by the Regulation so as to ensure that the activity will not create a Conflict of Interest. In addition, each member of Senior Management must confirm annually that he/she has sufficient time available to manage the time commitments required for their role in the Company.
6. A Company is prohibited from terminating the services of a member of the Senior Management because of their compliance with the law, decisions, regulations, instructions and circulars issued pursuant thereto.
Risk Management and Internal Controls Regulation for Insurance Companies
The Board of Directors
Having perused Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities as amended;
Federal Law No. (6) of 2007 Concerning the Organization of Insurance Operations, as amended, and its Executive Regulations;
Insurance Authority Board of Directors' Decision No. (25) of 2014 Pertinent to Financial Regulations for Insurance Companies and Insurance Authority Board of Directors' Decision No. (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies;
The Central Bank of the UAE's Board of Directors' Resolution published in the Official Gazette issue No. (740) on 30 November 2022 Regulation Regarding Takaful Insurance; and
Based on the recommendation of the Governor and the approval of the Board of Directors;
Has resolved as follows:
Introduction
The Central Bank seeks to promote the effective and efficient development and functioning of the insurance sector. To this end, Companies are required to have a comprehensive approach to Risk Management and effective Internal Controls, including Board and Senior Management oversight, to ensure their resiliency and enhance overall financial stability.
Risk Management, internal audit, compliance, and actuarial functions constitute key control functions in a Company. The control functions have a responsibility, independent of the management of the Company's business lines, to provide objective assessment, reporting and/or assurance. The control functions (as defined in article 1.11) are an essential foundation for effective corporate governance.
In introducing this Regulation and the accompanying Standards, the Central Bank intends to ensure that Companies' approaches to Risk Management and Internal Controls are in line with leading international standards and industry best practice.
This Regulation and the accompanying Standards establish an overarching prudential framework for Risk Management and Internal Controls. Standards and supervisory expectations for selected specific risks are, or will be, established in other Regulations.
This Regulation and the accompanying Standards are issued pursuant to the powers vested in the Central Bank under the Central Bank Law.
This Regulation and the accompanying Standards supplement Federal Law No. (6) of 2007 Concerning the Organization of Insurance Operations, as amended, and its Executive Regulations, Insurance Authority's Board of Directors' Decision No. (19) of 2020 Concerning the Guidance Manual for Insurance Companies and Related Professions to Submitting the Data, information and Supervisory Reports, Insurance Authority Board of Directors' Resolution No. (11) of 2016 Concerning the Revision of the Pricing Policy Applied by a Company in the Classes of Property and Liability Insurance, Insurance Authority Board of Directors' Decision No. (49) of 2019 Concerning Instructions for Life Insurance and Family Takaful Insurance, Insurance Authority Board of Directors' Decision No. (25) of 2014 Pertinent to Financial Regulations for Insurance Companies, Insurance Authority Board of Directors' Decision No. (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies, and the Central Bank of the UAE's Board of Directors' Resolution published in the Official Gazette issue No. (740) on 30 November 2022 Regulation Regarding Takaful Insurance. Additional requirements may be imposed pursuant to decisions to be issued by the Central Bank in this regard.
Objective
The objective of this Regulation is to establish the Central Bank's minimum requirements for Companies' approach to Risk Management and Internal Controls with a view to:
a. Ensuring the safety and soundness of Companies; and
b. Contributing to the financial stability of the UAE.
Scope of Application
This Regulation and the accompanying Standards apply to all Companies. Companies established in the UAE with Group relationships including Subsidiaries, Affiliates, or international branches, must ensure that the Regulation and Standards are adhered to on a solo and Group-wide basis.
The Central Bank will apply the principle of proportionality in the enforcement of the Regulation and Standards, whereby smaller Companies may demonstrate to the Central Bank that the objectives are met without necessarily addressing all of the specifics cited therein. The Central Bank will decide on the extent to which a Company is expected to meet the requirements.
Article (1): Definitions
1. Actuaries' Regulation: Insurance Authority Board of Directors Decision No. (9) of 2017 Concerning the Regulations on Licensing and Registration of Actuaries and Regulation of their Operations.
2. Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity
3. Authorized Manager: The person appointed by the foreign insurance company to manage its branch in the State.
4. Board: The Company's board of directors.
5. Central Bank: The Central Bank of the United Arab Emirates.
6. Chief Executive Officer: The most senior executive appointed by the Board, and in the case of foreign branches, this refers to the Authorized Manager.
7. Central Bank Laws: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities, as amended; and Federal Law No. (6) of 2007 Concerning the Organization of Insurance Operations, as amended and its Executive Regulations.
8. Company: The insurance company incorporated in the State, and the foreign branch of an insurance company, that is licensed to underwrite primary insurance and reinsurance, including Takaful insurance companies.
9. Conflict of Interest: A situation of actual or perceived conflict between the duty and private interests of a person, which could improperly influence the performance of his/her duties and responsibilities.
10. Confidential Data: Account or other data relating to a Company customer, who is or can be identified, either from the Confidential Data, or from the Confidential Data in conjunction with other information that is in, or is likely to come into, the possession of a person or organization that is granted access to the Confidential Data.
11. Control Functions: Function (whether in the form of a person, unit or department) that has a responsibility in a Company to provide objective assessment, reporting and/or assurance; this includes the risk management, compliance, actuarial, internal audit and where applicable Shari'ah control and Shari'ah audit functions.
12. Enterprise Risk Management (ERM): The strategies, policies and processes of identifying, assessing, measuring, monitoring, controlling, reporting and mitigating risks in respect of the Company's enterprise as a whole.
13. Financial Regulations: Insurance Authority Board of Directors' Decision No. (25) of 2014 Pertinent to Financial Regulations for Insurance Companies and the Insurance Authority Board of Directors' Decision No. (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies.
14. Group: A group of entities which includes an entity (the 'first entity') and:
a. any Parent of the first entity;
b. any Subsidiary of the first entity or of any Parent of the first entity;
c. any Affiliate.
15. Internal Controls: A set of processes, polices and activities governing a Company's organizational and operational structure, including reporting and Control Functions.
16. Life Insurance Regulation: Insurance Authority Board of Directors' Decision No. (49) of 2019 Concerning Instructions for Life Insurance and Family Takaful Insurance.
17. Material Business Activity: An activity of the Company that has the potential, if disrupted, to have a significant impact on the Company's business operations or its ability to manage risks effectively.
18. Matter of Significance: A matter, or group of matters, that would have a significant impact on the activities or financial position of the Company. Examples include failure of preserving the assets of the Company and policyholders, failure to comply with Central Bank Laws/the Financial Regulations, major deviations from the Risk Appetite and or other matters that are likely to be of significance to the function of the Central Bank as regulator.
19. Master System of Record: The collection of all data, including Confidential Data, required to conduct all core activities of a Company, including the provision of services to policyholders, managing all risks, and complying with all legal and regulatory requirements.
20. Model: A quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates.
21. Outsourcing: An arrangement between a Company and a service provider, whether the service provider operates within or outside the UAE, for the latter to perform a process, service or activity which would otherwise be performed by the Company itself.
22. Own Risk and Solvency Assessment (ORSA): an internal process undertaken by a Company/ Group to assess the adequacy of its Risk Management and current and prospective solvency positions under normal and severe stress scenarios. It requires a Company to analyze all reasonably foreseeable and relevant material risks. It covers current and future risks and requires Company-specific judgment about risk management and the adequacy of their capital position that could have an impact on it's ability to meet both its business objectives as well as its policyholder obligations. This encourages management to anticipate potential business challenges, capital needs and to take proactive steps to reduce risks. ORSA is not a one-off exercise. It is a continuously evolving process and must be a component of a Company's Enterprise Risk Management (ERM) framework. Whilst there is not one specific way of conducting an ORSA, the output is expected to be a set of documents that demonstrate the results of management's proactive approach to its own self-assessment.
23. Parent: An entity (the 'first entity') which:
a. holds a majority of the voting rights in another entity (the 'second entity');
b. is a shareholder of the second entity and has the right to appoint or remove a majority of the Board or managers of the second entity; or
c. is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity; or
d. if the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity.
24. Pricing Regulation: Insurance Authority Board of Directors' Resolution No. (11) of 2016 Concerning the Revision of the Pricing Policy Applied by a Company in the Classes of Property and Liability Insurance.
25. Regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
26. Risk Appetite: The aggregate level and types of risk a Company is willing to assume, within its risk capacity, to achieve its strategic objectives and business plan
27. Risk Governance System: As part of the overall approach to Corporate Governance, the framework through which the Board and Senior Management establish and make decisions about the Company's strategy and risk approach; articulate and monitor adherence to the Risk Appetite and Risks Limits relative to the Company's strategy; and identify, measure, manage and control risks.
28. Risk Culture: The set of norms, values, attitudes and behaviors of a Company that characterizes the way in which it conducts its activities related to risk awareness, risk taking and risk management and controls.
29. Risk Limits: Quantitative measure based on a Company's Risk Appetite, which gives clear guidance on the level of risk to which the Company is prepared to be exposed and is set and applied in aggregate or individual units such as risk categories or business lines.
30. Risk Profile: Point in time assessment of the Company's gross and, as appropriate, net risk exposures aggregated within and across each relevant risk category based on forward looking assumptions.
31. Risk Management: The process through which risks are managed allowing all risks of a Company to be identified, assessed, monitored, mitigated (as needed) and reported on a timely and comprehensive basis.
32. Senior Management: The individuals or body responsible for managing the Company on a day-to-day basis in accordance with strategies, policies and procedures set out by the Board, generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
33. Solvency Capital Requirement: Funds that the Company must maintain to cover current and projected operations during the next twelve months, which are measured to ensure that all quantitative risks have been taken into account.
34. Staff: All the persons working for a Company including the members of Senior Management, except for the members of its Board.
35. State: The United Arab Emirates.
36. Stress Testing: A method of assessment that measures the financial impact of stressing one or more factors which could severely affect the Company.
37. Subsidiary: An entity (the 'first entity') is a subsidiary of another entity (the 'second entity') if the second entity:
a. holds a majority of the voting rights in the first entity;
b. is a shareholder of the first entity and has the right to appoint or remove a majority of the Board of directors or managers of the first entity; or
c. is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity; or
d. if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity.
38. Takaful Insurance: A collective contractual arrangement aiming at achieving cooperation among a group of participants against certain risks whereby each participant pays certain contribution to form an account called the participants' account through which entitled compensations are paid to the member in respect of whom the risk has realized. The Takaful Insurance Company shall manage this account and invest the funds collected therein against certain compensation.
39. Takaful Regulation: The Central Bank of the UAE's Board of Directors' Resolution published in the Official Gazette issue No. (740) on 30 November 2022 Regulation Regarding Takaful Insurance, as amended from time to time.
Article (2): Systems of Risk Management and Internal Controls
1. A Company must have comprehensive and effective systems of Risk Management and Internal Controls that provide a Company-wide and, if applicable, Group-wide view of all material risks to which they are or could be exposed, and their interdependencies. This includes strategies, policies, processes, procedures, and controls to identify, assess, measure, monitor, control, report and mitigate material sources of risk, on a timely basis. A Company's definition and assessment of material risks must take into account its Risk Appetite, Risk Profile, nature, size and the complexity of its business and structure.
2. The Board must be in control of the Company and bears ultimate responsibility for ensuring that there are effective systems of Risk Management and Internal Controls appropriate to the Risk Profile, nature, size and complexity of the Company's business and structure
3. Senior Management is responsible for the implementation of sound policies, effective procedures and robust systems consistent with Board-approved systems of Risk Management and Internal Controls. The Board remains ultimately accountable, notwithstanding specific responsibilities delegated to Senior Management
4. A Company's organisational structure must incorporate a "three lines of defence" approach comprising of :
a. The business lines;
b. The risk, actuarial and compliance functions;
c. Independent internal audit function.
5. The Board must provide oversight of Senior Management. It must hold members of Senior Management accountable for their actions if they are not aligned with the Company's strategy and objectives.
6. Companies who have Group relationships must ensure the following:
a. Companies, for which the Central Bank is the primary regulator, who have significant Group relationships including Subsidiaries, Affiliates, or international branches must develop and maintain processes to coordinate the identification, assessment, measurement, evaluation, monitoring, reporting and control or mitigation of all internal and external sources of material risks across the Group. The process must provide the Board with a solo and Group-wide view of all material risks, including the roles and relationships of other Group entities to one another and to the Company.
b. The methods and procedures applied by Subsidiaries, Affiliates and international branches must support Risk Management on a Group-wide basis. Companies must conduct Group-wide Risk Management and prescribe Group policies and procedures, while Boards and Senior Management of Subsidiaries and Affiliates must have input with respect to the local and regional application of these policies and procedures and the assessment of local and regional risks.
Article (3): Effective Risk Management System
1. A Company's Risk Management system must be designed to operate at all levels to allow for the identification, assessment, monitoring, measuring, controlling, reporting and mitigating of all risks of the Company in a timely manner. It must take into account the probability, potential impact and time horizons of risk. An effective Risk Management system must include the following elements:
a. A documented Risk Management strategy, including a clearly defined Risk Appetite statement that is Board-approved, which mustbe in line with the Company's business activities.
b. Allocation of responsibilities for managing risks.
c. A documented process for the Board's approval for any deviation from the Risk Appetite.
d. Policies containing all material risks that the Company is exposed to and the levels of acceptable Risk Limits. The policies describe the obligations of Staff members in dealing with risk, including risk escalation and risk mitigation tools.
e. Processes and tools including Stress Testing, scenario analysis and Models for identifying, assessing, measuring, monitoring, controlling reporting and mitigating risks, along with contingency plans.
f. Regular reviews of the Risk Management system.
g. An effective Risk Management function.
2. The Risk Management system must cover, at a minimum underwriting, reserving, asset-liability management, investments, liquidity, reinsurance, concentration of risk, operational risk, risk-mitigation techniques and conduct of business. It must also cover the risks to be included in the calculation of the Solvency Capital Requirement as set out in the Financial Regulations as well as the risks which are not, or not fully, included in the calculation thereof.
3. In developing the Risk Management system, the following matters must be taken into consideration:
a. The Risk Profile of the Company must be modified according to circumstances, which requires incorporating new risks and updating the information related to risks that are already identified. The changing expectations of policyholders and other stakeholders must be taken into consideration.
b. Material changes, specifically that affect the Risk Profile, to the Risk Management system must be approved by the Board, documented and made available to internal audit, external audit and the Central Bank.
c. The Risk Management system must incorporate a feedback loop that provides for a process of assessing the effect of changes in risk leading to changes in Risk Management policy, Risk Limits and risk mitigating actions. Within a Group, sufficient coordination between the Parent and its Subsidiaries and Affiliates must be available, as part of their feedback loop
4. Where the Central Bank is not the primary regulator of a Company that is part of a Group and any element of its comprehensive approach to Risk Management is controlled or influenced by another entity in the Group, the Company's Risk Management system must specifically take into account risks arising from the Group relationship and clearly identify:
a. Linkages and any significant differences between the Company's and the Group's Risk Governance System.
b. Whether the Company's Risk Management function is derived wholly or partially from Group Risk Management functions.
c. The process for monitoring by, or reporting to, the Group on Risk Management.
5. As part of its Risk Management system the Company shall conduct its Own Risk and Solvency Assessment (ORSA) which must be conducted by the Risk Management function. That assessment must include at least the following:
a. The overall solvency needs, taking into account the specific risk profile, approved risk tolerance limits and the business strategy of the Company. The Company shall demonstrate the methods used in that assessment.
b. The compliance, on an ongoing basis, with the capital requirements, as set out in the Financial Regulations;
c. The compliance, on an ongoing basis, with the requirements regarding technical provisions, as laid out in the Financial Regulations;
d. The significance with which the risk profile of the Company deviates from the assumptions underlying the Solvency Capital Requirement as laid down in the Financial Regulations. Companies must take an active assessment of whether changes in the standard Model are consistent with their actual exposures;
e. The completion of the ORSA which must be an integral part of the business strategy and business planning process and must be taken into account on an ongoing basis in the strategic decisions of the Company and without any delay following any significant change in the Company's Risk Profile;
f. The reporting to the Central Bank of the results of each ORSA at the same time as it submits the Company's annual business plan in accordance to the timetable published by the Central Bank.
g. The reporting to the Central Bank of any additional requirements concerning (ORSA) which may be imposed pursuant to Regulations/decisions to be issued by the Central Bank in this regard.
Article (4): Effective System of Internal Controls
1. The Internal Controls system must ensure effective operations, adequate control of risks, prudent conduct of business, reliability of financial and non-financial information reported, compliance with Central Bank Laws and other relevant laws, Regulations and supervisory requirements and the Company's internal rules and decisions. It must cover all units and activities and must be regularly assessed, reviewed by the Board or the Board audit committee and updated as necessary. It must include appropriate control structure with control activities defined at every business unit level, as they must own, manage and report risks and must be accountable for establishing and maintaining effective Internal Controls policies and procedures. Control Functions must assess the adequacy of the controls used by the business units. The Internal Controls system must contain, at a minimum, the following components:
a. Segregation of duties and measures to prevent Conflicts of Interest, as follows:
1. Adequate independence and clear separation of duties and reporting lines between the persons who are responsible for certain processes or policies, and those who verify that the processes or policies are being applied.
2. Adequate independence, and clear separation of duties and reporting lines between those who design or operate certain controls and those who check if the controls are effective.
b. Policies and processes:
1. Incorporate adequate controls for all key business processes and policies, including processes for taking major business decisions and approving transactions, critical information technology functionalities, cyber security, access to critical information technology infrastructure by employees and related third parties and important legal and regulatory obligations.
2. Incorporate policies on training on controls, especially for Staff undertaking roles requiring elevated trust or responsibility, or Staff involved in the oversight of high-risk activities.
3. Centralised documented key processes and policies and their corresponding controls.
c. Information and communication:
1. All Staff must be fully aware of the requirements to comply with the Company's Internal Controls system.
2. The necessary information for decision making must be made available to decision makers in a timely manner, including, but not limited to, financial, operational, compliance and market information.
d. Monitoring and review:
1. Processes must be checked on a regular basis by the internal audit function to ensure that controls are effective.
2. The Internal Controls system must be assessed on a regular basis by the internal audit function, to determine its efficiency and effectiveness.
e. Reporting on the Internal Controls system must reference the policy for Internal Controls (such as responsibilities, compliance levels, validation and implementation of remediation plans), the stage of development, the performance of the business units, and deficiencies in application.
2. The Board must understand the control environment and direct Senior Management to ensure that for each business process and policy, there is an appropriate control. The Board must ensure the allocation of responsibilities for the design, documentation and operation of Internal Controls.
3. a. For branches of foreign Companies, a senior management committee or equivalent must be in place that consists of local functionaries. These internal Control Functions should report directly to their entity-level counterpart and/or to the board and/or relevant committees.
b. Local functionaries stated in the aforementioned paragraph (a) may not undertake more than one Control Function.
Article (5): Control Functions
1. A Company must have effective Control Functions with the necessary independence, authority and resources covering Risk Management, internal audit, compliance and actuarial. The effectiveness of the Control Functions must be assessed periodically by the Board.
2. The existence of a control function does not relieve the Board and Senior Management of their responsibilities.
3. Control functions must be well resourced, with qualified staff who must receive regular training relevant to their roles.
4. Control Functions must an have appropriate level of authority. The head of the control function must not participate in operational business responsibilities, such as underwriting, investment, reinsurance, sales or accounting.
5. The head of each control function must have access to the Board or the Board risk and/or audit committees and must submit periodic reports on the matters determined by the Board. The head of each control function must be able to meet regularly with the chair of any relevant Board committee without the presence of management.
6. Duties of the Board related to Control Functions include:
a. The Board must approve and document the authority and responsibilities of Control Functions, which must be reviewed periodically based on the recommendation of each Control Function.
b. The Board or the relevant Board committee must approve the appointment, dismissal, compensation, performance and any disciplinary action taken against the heads of Control Functions.
c. The Company must not dismiss the heads of Control Functions without first obtaining the no-objection of the Central Bank.
7. Compensation of employees in the Control Functions must be determined independently of the performance of the Company.
8. Control Functions must avoid Conflicts of Interest. Where any conflicts remain and cannot be resolved with Senior Management, these must be brought to the attention of the Board for resolution.
Article (6): Risk Management Function
1. The Risk Management system must address the following:
a. A Company must have an effective Risk Management function to identify, assess, measure monitor, control, report and mitigate its key risks in a timely manner and to promote and sustain a sound Risk Culture.
b. The Risk Management function is responsible for assisting the Board, Board committees and Senior Management with developing and maintaining the Risk Governance System.
c. A Company must have an adequately resourced Risk Management function headed by a Chief Risk Officer (CRO) or equivalent. The function must be independent of the management and decision-making of the Company's risk-taking functions.
2. The Risk Management function must have direct access to the Board and/or the Board risk committee and must provide them with reports on the following matters, at a minimum:
a. Assessment of risk positions, exposures and the steps being taken to manage them;
b. Assessment of changes in the Company's Risk Profile relative to Risk Appetite, including the ORSA;
c. Assessment of pre-defined Risk Limits;
d. Risk Management issues resulting from strategic affairs such as corporate strategy, mergers, acquisitions, major projects and investments;
e. Assessment of risk events and the identification of appropriate remedial actions and the assessment of results after implementation.
3. In developing the Risk Management system the following must be considered:
a. The head of the Risk Management function, the CRO or equivalent, must be of sufficient seniority and stature within the Company, to credibly challenge the heads of business lines and functions. The head of the Risk Management function must have the authority and obligation to inform the Board romptly of any circumstance that may have a material effect on the Risk Management system of the Company.
b. Outsourced activities must remain fully in scope of the Company's Risk Management responsibilities.
Article (7): Risk Measurement & Use of Models
1. A Company must have systems, including information technology capabilities, which are commensurate with the Risk Profile, nature, size and complexity of its business and structure, in order to identify, measure and monitor risk.
2. The Board must have sufficient expertise to understand and oversee the risk measurement systems, including any use of Models.
3. Where a Company uses Models to measure components of risk, it must have appropriate internal processes for the development and approval of use of such Models and must perform regular and independent validation and testing of the Models. The Board remains ultimately accountable whether the approval for use of such Models is provided by the Board or through authority delegated to management.
Article (8): Stress Testing of Material Risks
1. A Company must implement a forward-looking Stress Testing programme as part of its comprehensive approach to Risk Management. Extreme, but plausible, adverse scenarios for a range of material risks must be included in the Stress-Testing programme, commensurate with the size of the Company's risk exposures. The results of the Stress Testing programme must be reflected on an ongoing basis in the Company's risk management, in order to help the Company in maintaining an awareness of the impact of the stresses on its financial position, including contingency planning and the Company's internal assessment of its capital and liquidity.
2. A Company's internal process for assessing capital and liquidity requirements must take into account the nature and level of risks taken by the Company. In addition to the specific risks identified by the Central Bank in the Financial Regulations, a Company must consider all other material risks.
Article (9): Compliance Function
1. A Company must have an effective compliance function in order to fulfil its legal and regulatory obligations and to promote and sustain a compliance culture. The compliance function must establish and maintain appropriate mechanisms and activities to identify, assess, report on and address key legal and regulatory obligations, conduct training on key legal and regulatory obligations, facilitate confidential reporting and conduct assessments on matters related to compliance.
2. The Board is ultimately responsible for creating a corporate culture that is based on honesty, integrity and a commitment to comply with all relevant legislation, regulations and Internal Controls. Such commitment must be reflected in the code of conduct of the Company.
3. A Company must have a Board-approved compliance policy that is communicated to all members of Staff specifying the purpose, standing, and authority of the compliance function within the Company, and if applicable the Group.
4. The compliance function must have access to and provide written reports to the Board and Senior Management on matters related to compliance risks, including but not limited to:
a. Assessment of the key compliance risks the Company faces and the steps being taken to ddress them;
b. Assessment of how the various parts of the Company such as divisions, major business units, and products are performing against compliance standards and goals;
c. Any compliance issues involving management or persons in positions of major responsibility within the Company, and the status of any associated investigations or other actions being taken; and
d. Material compliance violations or concerns involving any other person or unit of the Company and the status of any associated investigations or other actions being taken.
5. The Head of the compliance function must have primary reporting obligations to the Chief Executive Officer and must have direct access to the Board and/or Board audit and/or risk committee. The head of the compliance function must have access to the Chair of the Board to report any delay on rectifying any material noncompliance issues.
6. The Staff within the compliance function must be adequate, competent and collectively have the appropriate experience to ensure that compliance risk within the Company is managed effectively.
7. Outsourced activities must remain fully in scope of the Company's compliance responsibilities.
8. The compliance function must prepare and regularly update a compliance risk programme that sets out its planned activities. The activities of the compliance function must be subject to periodic and independent review by the internal audit function.
Article (10): Actuarial Function
a. A Company must have an effective and independent actuarial function capable of evaluating and providing advice regarding, at a minimum, technical provisions, premium and pricing adequacy, solvency, capital adequacy and reinsurance, so as to contribute to the effective implementation of the risk management system to satisfy all of the actuarial requirements pursuant to the following, as amended from time to time:
1. Federal Law No. (6) of 2007 Concerning On the Organization of Insurance Operations, as amended and its Executive Regulations;
2. The Financial Regulations;
3. The Actuaries' Regulation;
4. The Pricing Regulation;
5. The Takaful Regulation;
6. The Life Insurance Regulation; and
7. Any other regulation or requirement issued by the Central Bank.
b. The Company's actuarial function must have primary reporting obligations to the Chief Executive Officer and a right of access to the Board or the Board audit committee and/or Board risk committee.
Article (11): Internal Audit Function
1. A Company must have an effective internal audit function that provides the Board/Board audit committee and Senior Management with independent evaluation and assurance of the adequacy and effectiveness of the Internal Controls system, Risk Management, compliance and other elements of the corporate governance framework.
2. Internal audit must also use general and specific audits, reviews and testing, in respect of:
a. Preserving the assets of the Company and policyholders, preventing fraud and misappropriation of assets, and assessing the effectiveness of the controls in place in this regard;
b. Assessing the reliability and efficiency of the accounting, financial, risk and compliance reporting information and the effectiveness of the controls in place; and
c. Other matters requested by the Board.
3. The internal audit function must be independent from management or any other Control Functions, and report directly to the Board or the Board audit committee, and must be able to meet with them without the presence of Senior Management, as needed.
4. The internal audit function must be independent of the audited activities and have sufficient standing and authority within the Company, thereby enabling the internal audit function to carry out its responsibilities and main activities as specified in the accompanying Standards, in an independent manner.
5. The Board must ensure that the internal audit function has the authority to:
a. Communicate with all members of Staff and obtain all records, files or data of the Company, and if applicable Group and Affiliates, whenever relevant to the performance of its duties.
b. Initiate a review of any area consistent with its mission; and
c. Require management's response to any audit report, and details on the remedial action taken.
6. The internal audit function must cover within its scope of work, all material areas of risk, including underwriting, reserving, asset-liability management, investments, liquidity, reinsurance, concentration of risk, operational risk, risk-mitigation techniques and conduct of business, intra-group transaction(if any), compensation and timeliness of reporting. The Internal audit function must have full access to and communication with any member of Staff, as well as full access to records, files or data of the Company, and if applicable, the Group and Affiliates, whenever relevant to the performance of its duties.
7. The Internal Controls within a Company must address the following:
a. Outsourced activities must remain fully in scope of the Company's internal audit responsibilities.
b. The internal audit function must regularly review and report to the Board, or the Board audit committee, on compliance with and the ffectiveness of the Company's outsourcing policies and procedures.
8. Any findings and recommendations of the internal audit function must be reported to the Board and/or audit committee, which shall review what actions are to be taken with respect to each of the internal audit findings and recommendations and must ensure that those actions are carried out.
9. The Staff within the internal audit function must be adequate, competent and collectively have the appropriate experience to understand and evaluate all of the business activities, support and Control Functions of the Company, and if applicable, the Group.
10. The head of internal audit must ensure that the function complies with the Institute of Internal Auditors' (IIA) international Standards for the Professional Practice of Internal Auditing.
11. Companies must have an internal audit charter approved by the Board audit committee, that articulates the purpose, standing and authority of the internal audit function within the Company, and if applicable, the Group.
12. Senior Management must inform the internal audit function, on a timely basis, of any changes to the Company's, or if applicable, the Group's, Risk Governance System.
13. Senior Management must ensure that timely and appropriate actions are taken on all internal audit findings and recommendations.
Article (12): Outsourcing
1. The Risk Governance System must address the following matters:
a. Companies' Risk Governance Systems must include policies and procedures for the assessment of any proposed Outsourcing and the identification, assessment measurement, monitoring, controlling, reporting and mitigating of any risks associated with existing and proposed Outsourcing arrangements.
b. The Risk Governance System must provide an entity-wide or, if applicable, Group-wide view of the risks associated with Outsourcing, including any services the Company provides to, or receives from, other Group members.
c. Companies must maintain a comprehensive and updated register of all Outsourcing arrangements, including all material and non-material Outsourcing arrangements, on an entity and group-wide basis.
2. When a Company is Outsourcing, it must ensure that the following measures are in place, at a minimum:
a. Any outsourced Material Business Activity or function must be subject to oversight, accountability, review and assessment in the equivalent manner that non-outsourced activities or functions are. Outsourcing must not adversely affect the Company's ability to manage its risks.
b. A Company is fully responsible for the risks arising from any process or activity they outsource.
c. A Company must have a process for determining the materiality of outsourced activities. The process of identifying Material Business Activity must consider the potential of the outsourced activity to adversely affect the Company's operations and its ability to manage risks, if disrupted or performed poorly.
d. Companies must obtain the 'no objection' of the Central Bank prior to outsourcing any Material Business Activity.
3. The Board and Senior Management are ultimately responsible for any outsourced functions or activities. The Board must assess the ability of the Company's Risk Management and Internal Controls to manage the outsourced risks effectively in respect of business continuity.
4. Outsourced activity must be governed by written contracts that state the parties' rights and obligations. The Board and Senior Management must consider when outsourcing an activity, the effects of the Company's Risk Profile, the service provider's expertise, knowledge, governance, Risk Management, Internal Controls, financial viability along with the succession issues upon the ending of the contractual relationship with the service provider.
5. A Company is responsible for compliance with Central Bank Laws and Regulations and all other relevant laws and regulations applicable to their outsourced activities.
6. The compliance function must regularly review and report to Senior Management, or to the Board as necessary, on the compliance of Outsourcing service providers with the laws, regulations and policies applicable to the Company.
7. When Outsourcing outside the State:
a. The Master System of Record, which includes all Confidential Data, must be ontinuously maintained and stored within the State.
b. As an exception to paragraph (12.7.a) above and subject to Central Bank approval, branches of foreign Companies may comply with this requirement by retaining a copy of the Master System of Record, updated on at least a daily basis, within the State.
c. A Company's customers' Confidential Data must not be shared outside the State without Central Bank approval and obtaining prior written consent from the customer. Companies must also obtain written acknowledgement from their customers that their Confidential Data may be accessed as part of legal proceedings or pursuant to an order of a court of competent jurisdiction outside the State in such circumstances.
d. A Company must not enter into Outsourcing agreements that involve sharing Confidential Data with a service provider domiciled in a jurisdiction that cannot provide the same level of safeguarding of Confidential Data that would apply if the data was kept in the tate. This applies to all jurisdictions applicable to all parties to the agreement.
e. Companies are not permitted to enter into Outsourcing agreements that propose the storage of data in any jurisdiction where Company secrecy, or other laws, restrict or limit access to data necessary for supervisory and regulatory purposes.
Article (13): Countering Fraud in Insurance
1. In order to reduce fraud risks, a Company must undertake the following, at a minimum:
a. A Company must have effective measures to deter, prevent, detect, report and remedy internal and external fraud.
b. The Board and Senior Management are ultimately responsible for fraud Risk Management.
c. A Company's fraud Risk Management system must cover strategy, organizational structure, policies and procedures. The fraud management strategy must be regularly reviewed by the Board and Senior Management to ensure that it continues to be effective.
d. A Company must identify, assess, measure, monitor, control, report and mitigate fraud risk and create appropriate fraud Risk Management policies and procedures in its processes across the Company.
2. A Company must require high standards for integrity in its Board and Staff as part of its business values and organizational culture. These standards must be communicated throughout the Company.
3. The Board must approve the fraud Risk Management strategy and ensure that there are adequate resources, support and expertise for the effective implementation of such strategy. Any deviation from the fraud Risk Management strategy must require the Board's approval.
4. Additional requirements concerning countering fraud in insurance may be imposed pursuant to Regulations or decisions, which may be issued by the Central Bank in this regard.
Article (14): Duty To Report To The Central Bank
1. The heads of Risk Management, compliance, actuarial and/or internal audit must promptly report to the Central Bank any violations of the Central Bank Laws, any of the Regulations and/or instructions issued by the Central Bank and any Matters of Significance. Heads of Risk Management, compliance, actuarial and internal audit making such reports in good faith shall not be considered to have breached any of their obligations.
2. Companies must promptly notify the Central Bank in case of resignation of their heads of Risk Management, compliance or internal audit and the reasons thereto.
3. Companies must also promptly notify the Central Bank when they become aware of a significant deviation from their Board-approved Risk Management and/or compliance and actuarial policies, and internal control charters.
Article (15): Takaful Insurance
A Company offering Takaful Insurance must ensure compliance with Shari'ah provisions pursuant to the Financial and Takaful Regulations, in addition to the requirements of this Regulation.
Article (16): Enforcement
1. Violation of any provision of this Regulation and the accompanying Standards may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank.
2. Without prejudice to the provisions of the Central Bank Law, supervisory action and sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of the Company, or barring individuals from the UAE insurance sector.
Article (17): Interpretation of the Regulation
The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.
Article (18): Publication And Application
1. This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one month from the date of publication.
2. On the effective date of this Regulation, any Company which is not compliant with the Regulation must, within ninety (90) days, provide the Central Bank with a detailed plan for coming into compliance with the requirements herein. The Central Bank will decide on the adequacy of the proposed plan.
Risk Management and Internal Controls Standards for Insurance Companies
Introduction
1. These Standards form part of the Risk Management and Internal Controls Regulation for Insurance Companies (Circular No. 25/2022 dated 30 December 2022). All Companies must comply with these Standards which expand on the Regulation. These Standards are mandatory and enforceable in the same manner as the Regulation.
2. A Company’s Board is in ultimate control of the Company and therefore responsible for ensuring that a comprehensive approach to the systems of Risk Management and Internal Controls is implemented. There is no one-size-fits-all or single best solution. Accordingly, each Company could meet the minimum requirements of the Regulation and Standards in a different way and thus may adopt an organisational framework appropriate to the Risk Profile, nature, size and complexity of its business and structure. The onus is on the Board to demonstrate that it has implemented a comprehensive approach to systems of Risk Management and Internal Controls. Companies are encouraged to adopt leading practices that exceed the minimum requirements of the Regulation and Standards.
3. The Standards follow the structure of the Regulation, with each article corresponding to the specific article in the Regulation.
Article (1): Definitions
1. Affiliate: An entity that, directly or indirectly, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
2. Authorized Manager: The person appointed by the foreign insurance company to manage its branch in the State.
3. Board: The Company’s board of directors.
4. Central Bank: The Central Bank of the United Arab Emirates.
5. Chief Executive Officer: The most senior executive appointed by the Board, and in the case of foreign branches, this refers the Authorized Manager.
6. Central Bank Laws: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities, as amended and Federal Law No. (6) of 2007 Concerning the Organization of Insurance Operations, as amended and its Executive Regulations.
7. Company: The insurance company incorporated in the State, or a foreign branch of an insurance Company, that is licensed to underwrite primary insurance and reinsurance, including Takaful insurance companies.
8. Conflict of Interest: A situation of actual or perceived conflict between the duty and private interests of a person, which could improperly influence the performance of his/her duties and responsibilities.
9. Confidential Data: Account or other data relating to a Company customer, who is or can be identified, either from the Confidential Data, or from the Confidential Data in conjunction with other information that is in, or is likely to come into, the possession of a person or organization that is granted access to the Confidential Data.
10. Control Function: Function (whether in the form of a person, unit or department) that has a responsibility in a Company to provide objective assessment, reporting and/or assurance; this includes the risk management, compliance, actuarial, internal audit and where applicable Shari’ah control and Shari’ah audit functions.
11. Controlling Shareholder: A shareholder who has the ability to directly or indirectly influence or control the appointment of the majority of the Board, or the decisions made by the Board or by the general assembly of the Company, through the ownership of a percentage of the shares or stocks or under an agreement or other arrangement providing for such influence.
12. Enterprise Risk Management (ERM): The strategies, policies and processes of identifying, assessing, measuring, monitoring, controlling, reporting and mitigating risks in respect of the Company’s enterprise as a whole.
13. Financial Regulations: Insurance Authority Board of Directors’ Decision No. (25) of 2014 Pertinent to Financial Regulations for Insurance Companies and the Insurance Authority Board of Directors’ Decision No. (26) of 2014 Pertinent to Financial Regulations for Takaful Insurance Companies.
14. Group: A group of entities which includes an entity (the ‘first entity’) and:a. any Parent of the first entity;
b. any Subsidiary of the first entity or of any Parent of the first entity;
c. any Affiliate.
15. Internal Controls: A set of processes, polices and activities governing a Company’s organisational and operational structure, including reporting and control functions.
16. Insurance Related Professions: Any person licensed to practice any of the activates of an insurance agent, actuary, insurance broker, surveyor and loss adjuster, insurance consultant or any other insurance-related profession that the Central Bank decides to regulate.
17. Model: A quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates.
18. Outsourcing: An arrangement between a Company and a service provider, whether the service provider operates within or outside the UAE, for the latter to perform a process, service or activity which would otherwise be performed by the Company itself.
19. Own Risk and Solvency Assessment (ORSA): an internal process undertaken by a Company/ Group to assess the adequacy of its Risk Management and current and prospective solvency positions under normal and severe stress scenarios. It requires a Company to analyze all reasonably foreseeable and relevant material risks. It covers current and future risks and requires Company-specific judgment about risk management and the adequacy of their capital position that could have an impact on it’s ability to meet both its business objectives as well as its policyholder obligations. This encourages management to anticipate potential business challenges, capital needs and to take proactive steps to reduce risks. ORSA is not a one-off exercise; it is a continuously evolving process and must be a component of a Company’s Enterprise Risk Management (ERM) framework. Whilst there is not one specific way of conducting an ORSA, the output is expected to be a set of documents that demonstrate the results of management's proactive approach to its own self-assessment.
20. Parent: An entity (the 'first entity') which:
a. holds a majority of the voting rights in another entity (the 'second entity');
b. is a shareholder of the second entity and has the right to appoint or remove a majority of the Board of directors or managers of the second entity; or
c. is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity; or
d. if the second entity is a Subsidiary of another entity which is itself a Subsidiary of the first entity.
21. Regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
22. Risk Appetite: The aggregate level and types of risk a Company is willing to assume, within its risk capacity, to achieve its strategic objectives and business plan.
23. Risk Culture: The set of norms, values, attitudes and behaviors of a Company that characterizes the way in which it conducts its activities related to risk awareness, risk taking and risk management and controls.
24. Risk Governance System: As part of the overall approach to Corporate Governance, the framework through which the Board and Senior Management establish and make decisions about the Company’s strategy and risk approach; articulate and monitor adherence to the Risk Appetite and Risks Limits relative to the Company’s strategy; and identify, measure, manage, and control risks.
25. Risk Limits: Quantitative measure based on a Company’s Risk Appetite which gives clear guidance on the level of risk to which the Company is prepared to be exposed and is set and applied in aggregate or individual units such as risk categories or business lines.
26. Risk Profile: Point in time assessment of the Company’s gross and, as appropriate, net risk exposures aggregated within and across each relevant risk category based on forward looking assumptions.
27. Risk Management: The process through which risks are managed allowing all risks of a Company to be identified, assessed, monitored, mitigated (as needed) and reported on a timely and comprehensive basis.
28. Senior Management: The individuals or body responsible for managing the Company on a day-to-day basis in accordance with strategies, policies and procedures set out by the Board, generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
29. Staff: All the persons working for a Company including the members of Senior Management, except for the members of its Board.
30. State: The United Arab Emirates.
31. Stress Testing: A method of assessment that measures the financial impact of stressing one or more factors which could severely affect the Company.
32. Subsidiary: An entity (the 'first entity') is a subsidiary of another entity (the 'second entity') if the second entity:a. holds a majority of the voting rights in the first entity;
b. is a shareholder of the first entity and has the right to appoint or remove a majority of the Board of directors or managers of the first entity; or
c. is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity; or
d. if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity.
33. Takaful Insurance: A collective contractual arrangement aiming at achieving cooperation among a group of participants against certain risks whereby each participant pays certain contribution fees to form an account called the participants' account through which entitled compensations are paid to the member in respect of whom the risk has realized. The Takaful Insurance Company shall manage this account and invest the funds collected therein against certain remuneration.
2. Systems of Risk Management and Internal Controls
1. A Company must establish, implement and maintain systems of Risk Management and Internal Controls that enable it to identify, assess, measure, monitor, control, mitigate and report on risk. Systems of Risk Management and Internal Controls will vary with the specific circumstances of the Company, particularly the Risk Profile, nature, scale and complexity of its business and structure.
2. The Board is responsible for the implementation of an effective Risk Culture and Internal Controls across the Company and its Subsidiaries, Affiliates and international branches, where applicable. The Board approved systems of Risk Management and Internal Controls must incorporate a "three lines of defense" approach which includes the business lines being the first line, Control Functions of Risk Management, compliance and actuarial, being the second line and an independent and effective internal audit function as the third line.
a. Business line management - must take the responsibility of identification and control of risks. The business line management must : 1. Manage and identify risks arising from the activities of the business line;
2. Ensure that activities are within the Company's Risk Appetite, Risk Management policies and limits;
3. Design, implement and maintain effective system of Internal Controls; and
4. Monitor and report on business line risks.
b. Risk Management, actuarial and compliance functions- must take responsibility for setting standards and challenging business lines. The following must be adhered to: 1. The Risk Management function must establish Company-wide, or if applicable, Group-wide risk and control strategies and policies, provide oversight and independent challenge of business lines' accountabilities, develop and communicate risk and control procedures, and monitor and report on compliance with Risk Appetite, policies and Risk Limits.
2. The Compliance function must assess Company-wide adherence to requirements, develop and communicate compliance policies and procedures, measure, monitor and report on compliance with Central Bank laws and other relevant laws, corporate governance and Internal Controls rules, Regulations and policies to which the Company is subject.
3. The actuarial function must provide advice on technical provisions, premium and pricing activities, capital adequacy, reinsurance and compliance with related statutory and regulatory requirements, at a minimum.
c. Internal audit function has the duty of providing independent assurance. The function is responsible to the following matters, at a minimum: 1. Independently assess the effectiveness and efficiency of the Internal Controls, Risk Management and governance systems and processes.
2. Independently assess the effectiveness of business line management in fulfilling their mandates and managing risks.
3. The Risk Management and Internal Controls systems must be comprised of the following at a minimum: a. Strategies setting out the approach of the Company to dealing with specific areas of risk and regulatory obligations in accordance with the Company's nature, Risk Profile, scale and complexity.
b. Policies defining the procedures and other requirements that members of the Board and Staff need to follow in order to ensure consistency in approach.
c. Process for the implementation of the Company's strategies and policies in order to ensure completeness in approach.
d. Controls to ensure that strategies, policies and processes are in fact in place, are being observed and are attaining their intended objectives in order to ensure adequacy and appropriateness in approach.
3. Effective Risk Management System
1. The Risk Management system must address the following:
a. Identification:
1. All reasonably foreseeable and relevant material risks are taken into consideration.
2. New activities and products must be subject to risk review and must be approved by the Board, including strategic affairs, such as corporate strategy, mergers, acquisitions, major projects and investments.
b. Assessment:
1. Qualitative and quantitative assessments of all reasonably foreseeable and relevant material risks and risk interdependencies for risk and capital management.
2. Quantification of risk and risk interdependencies using appropriate tools under a sufficiently wide range of techniques for risk and capital management.
3. As necessary, include the results of Stress Testing to assess the resilience of the Company's total balance sheet against severe but plausible stresses including considerations of macroeconomic stresses.
c. Monitoring:
Early warning indicators that enable the appropriate response to all identified material risks. This shall reflect the relationship between the Company's Risk Appetite, Risk Limits, regulatory capital requirements, economic capital and the processes and methods for monitoring risk. A Company must have its own view on how much capital it needs over and above the regulatory capital to fulfill its wider economic needs and manage risks.
d. Mitigation:
1. Strategies and tools are in place to mitigate material risks.
2. The Company must reduce or control material risks to within Risk Appetite and Risk Limits, or transfer to/share with a third party.
3. If a Company cannot mitigate or control the risk, then it must cease or change the activity.
e. Reporting:
1. Risks and assessments must be reported to the Board using qualitative and quantitative indicators, including ORSA along with effective action plans, at least annually.
2. The Board is ultimately responsible for risk oversight. The Risk Management policy covers the frequency of reporting. Any deviation from Risk Appetite is subject to Board review and approval.
f. Risk Management policies:
1. Must enable Staff to understand their risk responsibilities.
2. Must explain the relationship between the Risk Management system and how it addresses risks according to the insurer's Risk Appetite and Risk Limits, and the overall corporate governance framework.
3. Must outline how relevant material risks are managed.
4. On-going communication and training on risk policies must be conducted.
2. Groups must adopt a strong and consistent Risk Management and compliance culture across the Group and at the entity levels. Coordination between the Group and the Company is required to ensure the overall effectiveness of Risk Management and Internal Controls.
3. The Risk Appetite statement is a written articulation of the aggregate level and types of risk that a Company is willing to accept or avoid in order to achieve its business objectives. At a minimum, it must include the following:
a. For each material risk, the maximum level of risk that the Company is willing to operate within, expressed as a limit in terms of:
1. Quantitative measures expressed relative to earnings, capital, liquidity and other relevant measures as appropriate.
2. Qualitative statements or limits, as appropriate, particularly for reputation, compliance and legal risks.
b. Delineation of any categories of risk that the Company is not prepared to assume.
c. The process for ensuring that the Risk Limits are set at an appropriate level for each risk, considering both the probability of loss and the magnitude of loss in the event that each material risk is realised.
d. The process for monitoring compliance with each Risk Limit and for taking appropriate action in the event that they are breached.
e. The timing and process for review of the Risk Appetite and Risk Limits.
f. Quantitative Risk Limits and metrics must include, but not be limited to:
1. Capital targets beyond regulatory requirements, such as economic capital or capital-at-risk;
2. Various liquidity ratios and survival horizons;
3. Earnings volatility;
4. Value at risk;
5. Risk concentrations by internal or external rating;
6. Expected loss, expense, commission and/or combined ratios;
7. Economic value added; and
8. Stressed targets of capital, liquidity and earnings.
9. Underwriting risk, including growth and renewal rates of business, risk retention, balance between lines of business, premium rate adequacy versus technical rates, and claim settlement.
10. Credit risk, including credit quality of reinsurers, credit quality of investment assets and receivable delay management.
11. Investment risk, including asset allocations to achieve adequate diversification and target investment returns. This must be linked to the asset-liability management (ALM) policy and investment policy which specifies the nature, role and extent of ALM activities and their relationship with product development, pricing and investment management.
12. Operational risk, including consideration of risks arising from people, systems, processes as well as cyber security.
4. The Risk Management system must include risk policies that cover at least the following areas:
a. Credit risk;
b. Balance sheet and market risk (including investment, asset-liability management, liquidity and derivatives risks);
c. Reserving risk;
d. Insurance risk (including underwriting, product design, pricing and claims settlement risks);
e. Reinsurance risk;
f. Operational risk (including business continuity, outsourcing, fraud, technology, legal and project management risks);
g. Concentration risk; and
h. Group risk.
4. Effective System of Internal Controls
1. The Board or the Board audit committee must review, at least annually, the effectiveness of the Company's Internal Controls system and processes, by means of:
a. Periodic discussions with Senior Management about the effectiveness of the Internal Controls system.
b. A timely review of evaluations of Internal Controls conducted by Senior Management, internal auditors, the Risk Management function and external auditors.
c. Periodic follow up to ensure that Senior Management has promptly complied with the recommendations and concerns on control weaknesses expressed by Risk Management, internal auditors and external auditors and the Central Bank.
d. A periodic review of the appropriateness of the internal controls, commensurate to the Company's strategy and Risk Limits.
2. The Company's Internal Controls system must, at a minimum, address:
a. Organisational structure: definitions of duties and responsibilities including clear delegations of authority, such as decision-making policies and processes and procedures, separation of critical functions, including, but not limited to, Risk Management, actuarial, accounting, audit and compliance.
b. Accounting and financial reporting policies and processes.
c. Checks and balances (or "four eyes" principle): segregation of duties, cross checking, dual control of assets and double signatures.
d. Safeguarding assets and investment: physical control and computer access, measures of prevention and early detection and reporting of misuse, such as fraud, embezzlement, unauthorised trading and computer intrusion.
5. Control Functions
1. The authority and responsibilities of each control function must be set out in writing and made part of the Company's governance documentation.
2. Staff who perform Control Functions must be suitable for their role and meet any applicable professional qualifications and standards. Higher expectations must be placed on the head of each control function.
3. The head of each control functions must regularly review the adequacy of the function's resources and request adjustments from Senior Management/ Board as necessary.
4. Each control function must have the authority to communicate on its own initiative with any employee and to have unrestricted access to information in any business unit that it needs to carry out its responsibilities. The control functions must have the right to conduct investigations of possible breaches and to request assistance from specialists from within or outside of the Company.
6. Risk Management Function
1. The Risk Management function must have responsibility for the following, at a minimum:
a. Providing risk analysis and performance risk reviews to the Board and Senior Management;
b. Identifying individual and aggregated risks (actual, emerging and potential) that the Company faces;
c. Identifying, assessing, monitoring, mitigating, controlling and reporting risks, including the Company's capacity to absorb risk with due regard to the nature, probability, duration, correlation and potential severity of risks;
d. Gaining and maintain an aggregated view of the Risk Profile of the Company on an entity and/or Group-wide basis;
e. Assessing the impact of the compensation arrangements and incentives;
f. Evaluating the internal and external risk environment on an on-going basis in order to identify and assess potential risks as early as possible. This may include looking at risks from different perspectives, such as by geographic region or by line of business;
g. Establishing a process for conducting forward-looking assessments of the Risk Profile on a regular basis;
h. Providing periodical reports to the Board, Senior Management and other Control Functions on the Risk Profiles, risk exposures and the necessary mitigation actions; and
i. Reporting material changes affecting the Risk Management system to the Board along with recommendations to improve the system.
2. The CRO, or equivalent, must:
a. Not have a decision-making role in the Company's risk-taking functions, including underwriting or other equivalent function.
b. Have no revenue-generating responsibilities.
c. Have no compensation based on the performance of any of the Company's risk-taking functions.
d. Not be the Chief Executive Officer of the Company, or the head of underwriting or reinsurance, or the head of the compliance or internal audit functions.
e. Have a direct reporting line to the Board and/or risk committee and appropriate reporting lines to Senior Management.
f. Have unfettered access directly to the Board's risk committee, including the ability to meet without other Senior Management present.
3. The Board must ensure that the Risk Management function is properly staffed, resourced and carries out its responsibilities independently and effectively. This includes unrestrained access to all information needed for the Risk Management function to fulfill its duties.
7. Risk Measurement and the Use of Models
1. A Company must use measurement methodologies commensurate with the Risk Profile, nature, size and complexity of the business and the structure of the Company, including, but not limited to, scenario analysis and Stress Testing. Common metrics must be employed on a Company (or Group)-wide basis to foster a Company (or Group)-wide approach and effective identification and monitoring of risks across the Company (or Group).
2. Risk measurement and modelling techniques must be used in addition to qualitative risk analysis and monitoring. The comprehensive approach to risk management must include policies and procedures for the development and internal approval for the use of Models or other risk measurement methodologies. Where the Models, or data for the Models, are supplied by a third party, there must be a process for the validation of the Model and data relative to the specific circumstances of the Company.
3. A Company must perform regular validation and testing of Models. This must include evaluation of the conceptual soundness, ongoing monitoring including process verification and benchmarking and outcomes analysis, including back-testing. Stress Testing and scenario analysis must be used to take into account the risk of Model error and uncertainties associated with valuations and concentration risks.
4. Model-based approaches must be supplemented by other measures. These include qualitative assessment of the logic, judgement and types of information used in Models, as well as assessment of policies, procedures, Risk Limits and exposures, especially with respect to difficult to quantify risks such as operational, compliance and reputational.
8. Stress Testing of Material Risks
1. A Company must have a forward looking Stress Testing programme that addresses inter alia, underwriting, reserving, asset-liability management, investments, liquidity, reinsurance, concentration of risk, operational risk, risk-mitigation techniques and conduct of business , taking into account, that based on the Risk Profile of the Company, capital may be required in excess of the minimum capital requirements. The Stress Testing programme must also include any risks that are material for the Company given the nature of the business. These may include, but are not limited to, Credit risk, balance sheet and market risks, reserving; pricing, claims, reinsurance, operational, concentration and Group risks.
2. A Company's Stress-Testing programme must be undertaken on a regular basis to facilitate the tracking of trends over time and developments in key risk factors and exposure amounts, in addition to ad hoc Stress Tests, when needed. The programme must cover at a minimum a range of scenarios based on reasonable and plausible assumptions regarding dependencies and correlations. Senior Management and, as applicable, the Board or Board risk committee must review and approve the scenarios.
3. Stress Test programme results must be periodically reviewed by the Board or the Board risk committee. Results must be incorporated into reviews of the Risk Appetite, capital and liquidity planning processes. The Risk management function is responsible for recommending any action required, for example adjustments of Risk Limits or contingency arrangements, based on Stress Test results. The results of Stress Tests and scenario analysis must be communicated to the relevant business line management and functional heads within the Company to assist them in understanding and mitigating the risks inherent in their activities. Stress test programme results must factor into the Company's contingency planning, particularly liquidity Risk Management and contingency funding.
9. Compliance Function
1. Compliance Staff must have a sound understanding of the Central Bank laws and other relevant laws, Regulations, rules and standards, relevant to the Company's business and keep abreast with their development and any amendments thereof. The professional skills of compliance Staff must be maintained through regular and systematic education and training, including courses on real cases relating to money laundering, financing of terrorism and proliferation financing.
2. The compliance function must have access to any member of Staff and all records and data of the Company, and if applicable, the Company's Affiliates and Subsidiaries, which are required to comply with the Central Bank's requirements.
3. A consistent approach to compliance across the Group may be achieved through the establishment of a Group compliance function accountable to the Board of the Controlling Shareholder, or through compliance functions established in each entity (or branch) and accountable to those entities' Boards and also reporting to the Group's head of compliance.
4. The compliance function must be assigned responsibility for the following, at a minimum:
a. Establishing a compliance policy and a compliance plan. The compliance policy must define the responsibilities, competencies and reporting duties of the compliance function. The compliance plan must set out the planned activities of the compliance function which take into account all relevant areas of the activities of the Company and exposure to compliance risk.
b. Assessing the adequacy of the measures adopted by the Company to prevent non-compliance with Central Bank Laws and Regulations.
c. Maintaining a corporate culture that is based on responsible conduct and compliance with internal and external obligations.
d. Identifying, assessing, monitoring, mitigating, reporting on, and addressing regulatory obligations and the risks associated therewith.
e. Conducting on-going training on regulatory obligations for Staff responsible for high risk activities.
f. Enabling confidential reporting by Staff regarding any breach of legal or regulatory obligations or internal policies.
g. Addressing any instances of non-compliance and ensuring that disciplinary action is taken, along with the required reporting to the Central Bank.
10. Actuarial Function
An effective actuarial function must be well resourced and properly authorised and staffed as it plays a major role in the Company's overall system of Risk Management and Internal Controls. The actuarial function conducts all the actuarial undertakings per Article (10) of the Regulation, which must include, among other undertakings, the following:1. Applying methodologies and procedures to assess the sufficiency of the Company's liabilities, including policy provisions and aggregate claim liabilities, as well as determination or reserves for financial risks and to ensure that their calculation is consistent with the requirements set out in the Financial Regulations. This must also include assessing the uncertainty associated with the estimates made in the calculation of the Company's liabilities;
2. Asset liability management with regards to the adequacy and the sufficiency of assets and future revenues to cover the Company's obligations to policyholders and capital requirements, as well as other obligations or activities;
3. Reviewing the Company's investment policies and completing the valuation of assets;
4. The solvency position of the Company, including a calculation of minimum capital required for regulatory purposes and liability and loss provisions;
5. Advising on the Company's prospective solvency position by conducting capital adequacy assessments and Stress Tests under various scenarios, and measuring their relative impact on assets and/or liabilities, and actual and future capital levels;
6. Developing risk assessment and management policies and controls relevant to actuarial matters or the financial condition of the Company;
7. Ensuring the fair treatment of policyholders with regard to distribution of profits awarded to them, when their policies contain elements of bonus/dividend.
8. Ensuring the adequacy and soundness of underwriting policies, which must at least include conclusions on the following matters:
a. Sufficiency of the premiums to be earned to cover future claims and expenses, taking into consideration the underlying risks (including underwriting risks), and the impact of options and guarantees included in insurance and reinsurance contracts;
b. The effect of inflation, legal risk, change in the composition of the Company's portfolio, and of systems which adjust the premiums policy-holders pay upwards or downwards depending on their claims history (bonus-malus systems) or similar systems, implemented in specific homogeneous risk groups; and
c. The progressive tendency of a portfolio of insurance contracts to attract or retain insured persons with a higher risk profile (anti-selection).
9. The development, pricing and assessment of the adequacy of reinsurance arrangements must include analysis of the following matters:
a. The Company's risk profile and underwriting policy;
b. Reinsurance providers, taking into account their credit standing;
c. The expected cover under stress scenarios in relation to the underwriting policy; and
d. The calculation of the amounts recoverable from reinsurance contracts and special purpose vehicles, if any.
10. Product development and design, including the terms and conditions of insurance contracts and pricing, along with estimation of the capital required to underwrite the product;
11. Ensuring the sufficiency, accuracy and quality of data, the methods and the assumptions used in the calculation of technical provisions and ensure that any limitations of data used to calculate technical provisions are properly dealt with;
12. Comparing best estimates against experience, review the quality of past best estimates and use the insights gained from this assessment to improve the quality of current calculations. The comparison of best estimates against experience shall include comparisons between observed values and the estimates underlying the calculation of the best estimate, in order to draw conclusions on the appropriateness, accuracy and completeness of the data and assumptions used as well as on the methodologies applied in their calculation.
13. Reporting to the Board and Senior Management on the calculation of the Company's insurance liabilities which must include at least a reasoned analysis on the reliability and adequacy of their calculation and on the sources and the degree of uncertainty of the estimates. That reasoned analysis shall be supported by a sensitivity analysis that includes an investigation of the sensitivity to each of the major risks underlying the obligations which are covered in the Company's liabilities. The actuarial function shall clearly state and explain any concerns it may have concerning the adequacy of Company's liabilities.
14. The actuarial function must produce a written report to be submitted to the Board, at least annually. This report must document all of the tasks that have been undertaken by the actuarial function and a summary of their results, and must clearly identify any deficiencies and give recommendations as to how such deficiencies must be remedied.
15. Any other actuarial or financial matters determined by the Board.
11. Internal Audit Function
The internal audit function must be responsible for the following matters, at a minimum:
1. Establishing, implementing and maintaining an audit plan, setting out the audit work to be undertaken in the upcoming years, taking into account all activities and the Company's complete system of governance. The plan must be developed taking a risk-based approach in deciding its priorities and the audit plan must be presented to the Board for approval. Where necessary, the internal audit function may carry out audits which are not included in the audit plan.
2. Disclosing any adverse matters affecting the function's independence.
3. Disclosing any material findings, and the extent of management's compliance with agreed upon corrective measures.
4. Conducting risk-based audits to assess the Company's alignment with the Company's Risk Culture, Risk Appetite, Risk Profile and Risk Limits.
5. Assessing the Company's processes, policies and the documentation thereof on an entity and Group-wide basis and on an individual Subsidiary and business unit basis.
6. Assessing the employees' and business units' compliance with applicable Central Bank Laws, Regulations and internal controls.
7. Assessing the reliability of management information systems and processes.
8. Evaluating the methods of safeguarding Company and policyholder assets and, as appropriate, verifying the existence of such assets and the required level of segregation in respect of Company and policyholder assets;
9. Monitoring and evaluating the effectiveness of the Company's other Control Functions, particularly the Risk Management, actuarial and compliance functions.
10. Coordinating with the external auditors and, to the extent requested by the Board and consistent with applicable law, evaluating the quality of performance of the external auditors.
11. Issuing recommendations based on the result of work carried out in accordance with the audit plan and submit a written report on the findings and recommendations to the Board on at least an annual basis;
12. Verifying compliance of Senior Management with the decisions taken by the Board on the basis of those recommendations referred to in the internal audit report.
12. Outsourcing
1. The Risk Governance System must, at a minimum, provide for the following with respect to Outsourcing:
a. A Board-approved policy that sets out how the materiality of a proposed Outsourcing arrangement is assessed and requiring any material Outsourcing arrangements to be approved by the Board, or the risk/audit committee of the Board;
b. Policies and procedures to ensure that potential Conflicts of Interest are identified, managed and appropriately mitigated, or avoided;
c. Policies and procedures that clearly identify and assign to the Company's departments, committees, Internal Controls functions, and other individuals, the roles and responsibilities with regard to Outsourcing and determine in which cases and at which stage, they must be involved;
d. Policies and procedures to ensure that all material risks related to Outsourcing are identified, assessed, measured, monitored, controlled, mitigated, and reported to the Board in a timely and comprehensive manner;
e. Ensure that any outsourced critical business functions are covered in their disaster recovery and business continuity plans, that Outsourcing service providers are fully prepared to implement them and that Outsourcing service providers have their own disaster recovery and business continuity plans to resolve disruptions at their end.
2. All outsourced activity must be governed by written contracts that state the parties' rights and obligations. The Board and Senior Management must consider the effects on the Company's Risk Profile, and assess the service provider's expertise, knowledge, governance, Risk Management, Internal Controls, and financial viability along with the succession issues upon the ending of the contractual relationship with the service provider. The Company must conduct the following: a. Perform a detailed examination to ensure that the potential service provider has the ability, the capacity and any authorisation required by law to deliver the required functions or activities satisfactorily, taking into account the Company's objectives and needs;
b. Ensure The service provider has adopted all means to ensure that no explicit or potential Conflict of Interests jeopardise the fulfilment of the deliverables of the outsourcing Company;
c. Execute a written contract with the service provider which clearly defines the respective rights and obligations of the Company and the service provider;
d. Ensure that the general terms and conditions of the outsourcing contract are clearly explained to the Company's Board and authorised by them;
e. Ensure that the outsourcing agreement does not entail the breaching of any law in particular with regard to rules on data protection; and
f. Ensure that the service provider is subject to the same provisions on the safety and confidentiality of information relating to the Company or to its policyholders or beneficiaries that are applicable to the Company.
3. A Company must have an outsourcing register that contains key information for each Outsourcing arrangement, and includes at a minimum: a. Key non-risk related data, such as the details of the Outsourcing service provider, start and end date of the arrangement, and a brief description of the services being provided.
b. Whether the Outsourcing arrangement involves any Confidential Data; and
c. Whether the Outsourcing arrangement is considered Material Business Activity.
4. a. Companies must ensure compliance with all the applicable State legislation and regulations in managing and processing data, when using Outsourcing services.
b. Companies must ensure that they retain ownership of all data provided to an Outsourcing service provider, and that their customers retain ownership of their data, including but not limited to, Confidential Data, and can effectively exercise their rights and duties in this regard.
c. Where the Outsourcing service provider subcontracts elements of the service which involve Confidential Data, Companies must ensure that the subcontractor fully complies with the applicable requirements as established by law and under this and other applicable regulations.
d. Companies must ensure their data is secured from unauthorised access, including unauthorised access and/or use by the Outsourcing service provider or its Staff.
5. a. Outsourcing agreements must ensure that the Company has unfettered access to all of its data for the duration of the contract, including upon termination of the contract.
b. Outsourcing agreements must include appropriate provisions to protect a Company's data, including non-disclosure agreements and provisions related to the destruction of the data and/or transfer to the Company upon termination of the agreement.
c. Outsourcing agreements must specifically establish standards for data protection, including any nationally recognised information assurance and/or data protection and confidentiality of information requirements in the State.
d. Outsourcing agreements must specifically establish that the Outsourcing service provider, or any of its subcontractors must not provide any other party with access to Confidential Data without first obtaining the specific authorisation of the Company, or the customer, as the case may be.
e. Outsourcing agreements must specify to what extent subcontracting is allowed and under what conditions.
f. Outsourcing agreements must include an explicit provision giving the Central Bank, and any agent appointed by the Central Bank, access to the Outsourcing service provider. This provision must include the right to conduct on-site visits at the Outsourcing service provider, if deemed necessary by the Central Bank and require the Outsourcing service provider to provide the Central Bank, or its appointed agent, any data or information required for supervisory purposes.
g. Outsourcing agreements must include an obligation for the Outsourcing service provider to notify the Company without undue delay of any breach of the Company's data and in particular, breaches of Confidential Data.
6. When Outsourcing outside of the State:
a. Any Outsourcing agreement with a party located outside of the State, must stipulate that the Company and the customer retain ownership of the data at all times, and that the Central Bank can access the Company's data upon request.
b. A Company must explicitly consider the possibility that changes in economic, political, social, legal or regulatory conditions may affect the ability of a service provider outside of the State to fulfil the terms of the agreement. This risk must be managed by a careful selection of service providers and jurisdictions, adequate contractual and practical arrangements, and appropriate business continuity planning.
c. A Company must explicitly consider any other relevant risks arising when the service provider is located outside of the State. These must include, but are not limited to: 1. Higher levels of operational risk due to poor infrastructure in another jurisdiction;
2. Legal risk due to differing laws and possible shortcomings in the legal system in the countries where the service is provided; and
3. Reputational risk due to the breach of the service agreement by the service provider.
d. A Company must ensure compliance with all relevant personal data protection legislation and regulations prior to entering into an Outsourcing agreement with an Outsourcing service provider or third party outside of the State.
e. A Company must establish policies, processes and procedures regarding controls and monitoring activities specifically addressing the business relationship of the Company with an Outsourcing service provider, which includes the sharing of Confidential Data outside of the State.
f. For each of its business relationships a Company holds with an Outsourcing service provider, which includes the sharing of Confidential Data outside of the State, the Company must define concrete security requirements and must ensure that its Staff are sufficiently trained in respect of these requirements.
g. Companies must ensure that third parties implement and maintain the appropriate level of information security and service delivery.
h. With regard to Outsourcing service providers located outside of the State, the Central Bank may exercise its powers through collaboration with the relevant authorities of any relevant jurisdiction.
7. Prior to Outsourcing any material activity, including to any related party, Companies must obtain a prior notice of non-objection from the Central Bank. When requesting the non-objection, Companies must provide the Central Bank with the following at a minimum:
a. A brief explanation of the business activity to be outsourced;
b. A summary of the materiality assessment;
c. A summary of the risk assessment;
d. A summary of the due diligence performed and its outcome;
e. A confirmation of the agreement of the internal audit function and the compliance function;
f. An overview of any closely related outsourcing agreements;
g. Confirmation of compliance with the requirements of the Risk Management and Internal Controls Regulation for Insurance Companies and these Standards.
h. Evidence of the approval of the proposed Outsourcing by the Board or Board committee.
The Central Bank will either grant the non-objection, request further information, or decline the request. Companies are encouraged to discuss their material Outsourcing plans early and coordinate with the Central Bank to avoid the non-objection process delaying the Outsourcing.
8. Although all requests for non-objection will be considered on their individual merits, the Central Bank, will in general, not permit the Outsourcing of core insurance activities, and key management and Control Functions, including but not limited to Senior Management oversight and internal audit. The Central Bank may determine adding further requirements in this regard, from time to time.
13. Countering Fraud in Insurance
1. A Company must have policies, procedures and controls to minimise the risk of internal and external fraud in the following areas, at a minimum: a. Product development;
b. Onboarding clients;
c. Hiring and dismissal Staff;
d. Outsourcing;
e. Claims' management and settlements; and
f. Dealing with practitioners of Insurance Related Professions.
2. Insurance fraud categories include: a. Internal fraud, which is committed by a Board member, Senior Manager or other member of Staff on his/her own or in collusion with others who are either internal or external to the Company.
b. Insurance Related Professions' fraud, which is committed by practitioners against the Company, policyholders or beneficiaries.
c. Policyholder fraud, which is committed against the Company in the purchase and/or execution of an insurance product by one or more persons by obtaining wrongful coverage or payment.
3. Preventive policies, procedures and controls to manage internal fraud must include:
a. Creating a culture based on integrity;
b. Developing and maintaining policy and guidelines on ethical behavior;
c. Adequate supervision of Staff;
d. Performing pre-employment and in-employment screening of permanent or temporary Staff;
e. Documented job descriptions;
f. Periodical job rotation and mandatory vacations for Staff in fraud sensitive positions;
g. Observing the "four eyes" principle.
h. Segregation of duties;
i. Having procedural safeguards over the use, handling and availability of cash;
j. Establishing a transparent policy in dealing with internal fraud by Board members and Staff, including a policy on reporting to the relevant law enforcement agency;
k. Establishing a clear dismissal policy for internal fraud cases in order to deter potential perpetrators.
4. Preventive policies, procedures and controls to manage policyholder fraud must include:
a. Customer due diligence prior to inception.
b. Requesting additional supporting documents to verify the policyholder's sources of wealth.
c. In terms of claims settlement, procedures must include:
1. Using professional judgement based on experience;
2. Identifying red flag lists;
3. Conducting peer reviews;
4. Reviewing internal and/or external databases or other sources;
5. Using information technology tools, such as voice stress analysis, data mining, neural networks and tools to verify the authenticity of documents; and
6. Interviewing claimants.
5. Preventive policies, procedures and controls to manage Insurance Related Professions' fraud must include:
a. Having in place a documented policy and procedure for the appointment of new practitioners of Insurance Related Professions.
b. Having an application form and terms of business agreement that have to be completed and signed by the practitioners of Insurance Related Professions.
c. Ensuring the application form requires applicants to disclose relevant facts about themselves, including qualifications, experience, and qualifying body.
d. Verifying the financial soundness of the applicant and checking references.
e. Having an effective sanction policy in case of non-compliance by the practitioners of Insurance Related Professions.
6. A Company must collect information in respect of insurance fraud from the market and to provide same to the Board and Staff. Such information must be used to evaluate the effectiveness of policies, procedures and controls, and to make changes were necessary.
7. A Company must establish and maintain an independent audit function to test fraud, fraud risk management, procedures and controls.
8. A Company must encourage Staff to report all irregularities and must have a whistle blowing policy in place for this purpose.
9. A Company's fraud management strategy must be aligned with the Risk Profile of the Company. In determining the Risk Profile, the following factors must be taken into consideration: 1. size of the Company;
2. organisational structure;
3. products and services offered;
4. payment methods used for premiums and claims;
5. types of policyholder; and
6. market conditions.
10. A Company must retain records of all reported cases of fraud along with the findings, and must establish standards relating to the turnaround time for the assessment of fraud, documentation of analysis and keeping records of fraud incidents.
11. A Company must have effective reporting systems to the Board in terms of frequency of incidents, along with recommendations to address the issues.
12. A Company must report any suspected or confirmed fraud cases to the proper law enforcement authorities immediately and notify the Central Bank of such reporting.
13. A Company must provide the Board and Staff with guidance on fraud indicators and training on preventing, detecting, reporting and remedying fraud. Such training must be commensurate with the position that the person holds within the Company.
Decision No. (50) of 2019 Concerning Enhancing the Shari’a Controller’s Role in Takaful Insurance Companies Operating in the State
Effective from 17/4/2019Director General of the Insurance Authority,
Having pursued:
- The Federal Law No. (6) of 2007, concerning the Establishment of the Insurance Authority and the Organization of Insurance Operations and the amendments thereof;
- Insurance Authority Board of Directors Resolution No. (2) of 2009 concerning the issuance of the Executive Regulation of Federal Law No. (6) of 2007 pertinent to the Establishment of the Insurance Authority and Organization of its Operations;
- And, Takaful Insurance Regulations issued by The Insurance Authority’s Board of Directors Resolution No (4) of 2010 Concerning the Takaful Insurance Regulations,
Has Decided:
Conditions that must be met in Shari’a Controller
Article (1)
To approve the employment of a Shari’a Controller at Takaful insurance companies, following conditions must be met:
- To be a natural person.
- The Shari’a Controller shall be appointed in the company by its Board of Directors, and based on the recommendation of the Shari'a Supervisory Committee in the Company.
- To practice the Shari’a Controller duties on full-time basis, and it is not permissible to combine between the job of a Shari’a Controller and any other job in the Company.
- To be a Muslim with full legal capacity, and has a sound reputation and good conduct and to be knowledgeable in the Arabic language.
- Has never been dismissed from service for disciplinary reasons.
- Submit a certificate confirming that he has not been sentenced in a felony or misdemeanor that violates honor or honesty and public morals, and to submit a declaration that he has not been declared bankrupt unless he is rehabilitated.
- The following qualifications and experience are required:
- Must be a holder of a university qualification in Shari’a and a degree in either law, insurance, business or economics.
- Must have passed training courses in Shari’a or any legal, insurance, business or financial training courses.
- To be knowledgeable in the jurisprudence of Islamic financial transactions.
- To have practical experience for a period of not less than three years in the field of insurance or have worked in the field of Shari’a Control and other related activities. The experience shall be for one year for UAE Nationals.
- To be a natural person.
Duties and Functions of the Shari’a Controller
Article (2)
The Shari’a Controller shall conduct and ensure the following:
- Review Insurance contracts and transactions to confirm that they comply with the provisions of the Islamic Shari’a Principles and the Fatwa(s) issued to newly originated transactions.
- Takaful insurance operations in the company are carried out in accordance with the provisions of Islamic Shari’a Principles.
- The Company carries out its business either in accordance with the basis of WAKALA or WAKALA and MUDARABA together.
- The Participants' accounts and the accounts of shareholders are separated.
- Covering the realized deficit in participants' account is followed up through interest-free loan “QARD HASSAN”
- The existence of a documented and approved mechanism for the distribution of surplus to the participants in the Company’s Takaful insurance operations.
- The company has prepared the membership document, attached to the insurance policy and its clauses are reviewed.
- There are no charges imposed on the participants' accounts in the general insurance more than the percentage of the WAKALA remuneration prescribed in the Financial Regulations for Takaful Insurance companies.
- The company is providing the Insurance Authority with a copy of the report of the Shari'a Supervisory Committee.
- The company has implemented the recommendations contained in the reports of the Shari'a Supervisory Committee.
- The External Auditor's report is prepared to review the extent of compliance with the Anti Money Laundering and Terrorist Financing Instructions and other relevant decisions.
- The Actuary has carried out his role in terms of reviewing the actuarial aspects in the family Takaful insurance.
- The Zakat Fund is established in the company in accordance with the provisions of the Regulations.
- The nature of clients and properties to be insured, to what extent they are compliant with Islamic Shari'a provisions, and whether the approval of the Shari'a Supervisory Committee is acquired.
- To prepare periodic reports and submit them to the Shari'a Supervisory Committee and the Board of Directors on the extent to which the company's operations are compliant with the Shari'a Supervisory Committee’s decisions and opinions.
- To attend the Shari'a Supervisory Committee’s meetings and to present their report in the general assembly of the company.
- Any other matters affecting the Company's compliance with the Islamic Shari’a provisions and the related legislation.
- Issues requiring clarification, interpretation or Fatwa are collected in order to be introduced to the Shari'a Supervisory Committee at its periodic meetings to take the necessary action to issue Fatwa concerning them.
- Violations and deficiencies are clarified for Takaful insurance operations and General Manager of the Company was informed for correction.
- Any other duties assigned to him are carried out.
Regularization
Article (3)
Takaful insurance companies shall regularize the positions of Shari’a Controllers in accordance with the provisions of the decision herein within six months from the date of issuance.
Board of Directors’ Decision No. (15) of 2019 On the Instructions Concerning the Rules of Ownership Ratios in the Capital of Insurance Companies
Effective from 17/4/2019The Chairman of the Insurance Authority,
Having pursued,
- Federal Law No. (4) of 2000 Concerning the Emirates Securities and Commodities Authority and Market, and the amendments thereof;
- The Federal Law No. (6) of 2007 Concerning the Establishment of the Insurance Authority and Organization of its Operations, and the amendments thereof;
- - Federal Law No. (4) of 2012 on the Regulation of Competition;
- Federal Law No. (2) of 2015 Concerning Commercial Companies and its amending laws;
- Cabinet Resolution No. (42) of 2009 Concerning Insurance Company Minimum Capital Regulations and the amendments thereof;
- The Insurance Authority Board of Directors Decision No. (2) of 2009 Concerning the. Issuance of the Executive Regulations of the Law No. (6) of 2007 Concerning the Establishment of the Insurance Authority and Organization of its Operations;
- Insurance Authority Board Resolution No. (13) of 2015 on the Instructions Concerning Anti-Money Laundry and Combating Terrorism Financing in Insurance Activities;
-And, based on the recommendation of the Director General of the Insurance Authority and the approval of the Board of Directors,
Has decided,
Definitions
Article (1)
1. The following words and phrases shall have the meanings ascribed thereto hereunder unless the context indicates otherwise:
State: The United Arab Emirates
Law: Federal Law No. (6) of 2007 Concerning the Establishment of the Insurance Authority and Organization of its Operations and the amendments thereof.
Authority/IA: The Insurance Authority established by virtue of the provisions of the Law.
Board: The Board of Directors.
Chairman: The Chairman of the Board.
Director General: The Director General of the Insurance Authority.
Company: The insurance company incorporated in the State, and the foreign insurance company licensed to carry out insurance activities in the State, either through a branch or an Insurance Agent, including Takaful insurance companies.
Person: Any natural or legal person.
Strategic Partner: A partner whose contribution in the company provide Technical, operational or marketing support to the company for its benefit.
Control: The Insurance company shall be in controlling position in the following cases:
(a) A single person or with the Related Parties possesses 10% or more of the capital or financial instruments (such as convertible bonds to shares) or voting rights in the company.
(b) Any agreement or position leading to the empowerment to appoint and disqualify most of the Board of Directors members, managers and executive committees in the company.
Related Parties: Shall mean the following:
1- The persons who are linked with an agreement or arrangement for the purpose of controlling a company.
2- The Natural person and his minor children.
3- The legal person, in addition to any of the Board of Directors members, or companies to which he contributes at least 30% of its capital, or sister, subsidiary or associated companies, unless they prove that there is no agreement or arrangement between them for the purpose of control.
4- Relatives such as father, mother, brother, sister, children, spouse, spouse's father, spouse's mother and spouse's children, unless they prove that there is no agreement or arrangement between them for the purpose of control.
Rules of Ownership Ratios in the Capital of Insurance Companies: Controls and conditions that are necessary for the entry of persons as shareholders in insurance companies.
Electronic Systems: Electronic and smart or any other services adopted by the Insurance Authority.
2. Exception to what was provided above, the words and phrases contained in this Instructions shall have the meanings given to them pursuant to the provisions of the Law and its Executive Regulations.
Scope of Applicability
Article (2)
1- The provisions of these Instructions shall apply to any changes may occur to the Ownership Ratios Rules after their entry into force and shall not apply to any changes in Ownership Ratios of existing shareholders.
2- Without prejudice to the provisions of legislations and companies’ articles of association with respect to the minimum ownership limit of a UAE Nationals in the capital of insurance companies, and taking into consideration the provisions of Federal Law No. (2) of 2015 Concerning Commercial Companies, and mergers and acquisitions rules of public joint stock and the Strategic Partner requirements issued by Securities and Commodities Authority, the provisions of these instructions shall apply to the controlling operations of insurance companies.
Requisites for the Shareholders Wishing to Control
Article (3)
- Natural persons wishing to control shall comply with the following:
- Providing information, documents and data with respect to their address, nationality, jobs, previous experience in the field of insurance and related professions inside and outside the State, the share of each of them and their financial solvency.
- Submitting a statement indicating if there is a relationship with the company to be controlled or not.
- Submitting a statement of his membership in one or more boards of directors of a financial institution or his ownership of more than 20% of the issued and paid up capital for any financial institution or more inside or outside the State.
- Submitting a certificate showing that he has never been convicted on a felony or misdemeanour prejudicial to honour, trustworthiness or public morals, and submitting a declaration that he has not been declared bankrupt unless he has been rehabilitated.
- Submitting a declaration on his financial resources of the applicant and an undertaking of his ability to provide more capital and other support forms to the insurance company when needed
- The legal person wishing to control shall commit to providing the following:
- Complete information regarding his addresses, nationality, legal form, branches, field of work and geographical scope of his activity.
- Names and nationalities of those who are responsible for managing the legal person;
- Two audited balance sheets for the last two financial years at least;
- Providing an undertaking or a letter of guarantee in an admissible form, stating that he is committed to providing financial support to the company he is wishing to control;
- Full information about the main owners, the nature of their work, their experience and shares in the insurance or reinsurance companies or related professions inside and outside the country;
- Providing the consent of the main regulatory authority to which the legal person is subject concerning the ratio or for his entry as a controlling person, as the case may be, with respect to the company that he is requesting to control if he is subject to a regulatory authority.
- Natural persons wishing to control shall comply with the following:
Strategic Partner Requisites
Article (4)
The Following Requisites should be fulfilled in the Strategic Partner:
- His activity is similar or supplementary to the activity of the issuing company and leads to a real benefit thereof;
- has issued at least two audited balance sheets for at least two financial years. This shall not apply to the Federal Government or the Local Government in the State;
- A Strategic Partner may be a foreign person provided that his entry as a Strategic Partner in the company's capital shall not affect the UAE Nationals’ ownership ratios or the company's articles of association;
- The Strategic Partner shall conclude a contract with the company, indicating the mechanisms of his contribution, disassociation, and the company's development plan.
5- The availability of minimum required capital as well as the ability to provide more capital or any other form of support to the insurance company, if needed.
6- Documents and data referred to in paragraph (2) of the previous Article shall be made available.
Requesting Clarifications
Article (5)
In the light of the application of these Instructions, the Authority may request any clarifications, information, data or additional procedures from the companies or the person who submits the controlling application, including any requirements pertaining to applying instructions concerning Anti-Money Laundering and Terrorist Financing in Insurance Activities, and all other relevant legislation applicable in the State.
Approving the Application for Controlling
Article (6)
1- A person, whether individually or with the Related Parties may not increase his ownership more than 10% or double this Ratio of the issued and paid up share capital of the company or any Ratio leading to the control over the company without obtaining the approval of the Authority.
2- Subject to the Ratio mentioned in the previous clause, if any person wishes to increase his ownership more than 5% and not exceeding 10% of the issued and paid up capital, he shall notify the Insurance Authority within fifteen days from the date of ownership.
3- Exception from the provisions of this Article, with regards to obtaining prior consent in the event of increasing the person’s ownership ratios more than the ratios referred to herein or any ratio that leads to controlling the company, is by inheritance or bequest.
Submitting an Application to Control
Article (7)
The application to approve the ownership of more than 10% of the issued and paid up capital shall be submitted to the Insurance Authority at least 60 days prior to the date of the control in accordance with the electronic systems prepared for this purpose or other means adopted by the Insurance Authority.
Decision on the Control Application
Effective from 17/4/2019Article (8)
The Insurance Authority shall take its decision on the application within thirty days from the date of submitting the application, fully completed with all required data and information, and shall notify the applicant of the acceptance or rejection in accordance with the electronic systems prepared for this purpose or other means adopted by the Insurance Authority. In case the decision was to reject the application, then the reason for such decisions must be provided. If the decision was to approve, then the decision shall specify the period of validity of such approval or the Insurance Authority shall restrict its approval with any conditions it deems appropriate for the public interest.
Article (9)
The Authority may reject the request for control if the conditions referred to in Articles (3), (4) and (5) of the Instructions herein are not met or if the request for control may cause unjustifiable harm to the policy holders, the company or the insurance sector or in case of a potential conflict of interest when controlling the company or breach of the objectives to protect and promote competition and anti-monopoly practices or in accordance with the criteria determined by the Insurance Authority.
Grievance
Article (10)
A grievance against the Decision to reject the application for control may be filed before the Authority within (Twenty) working days from the date of notification of such Decision in accordance with the electronic systems prepared for this purpose or other means adopted by the Authority. the grievance shall be submitted to the Board, which will decide on the application at its first meeting from the day following the submission of the complete application. The decision of the Board on such grievance shall be final.
Company Obligations
Article (11)
The company shall comply with the following:
- Notify the Authority of any potential controlling operation and provide all information about the persons wishing to control as soon as such information is available.
- Notify the Authority in case the ownership of the shareholders has decreased from the levels of control specified in the Instructions herein.
- Provide the Authority with the information and data it has with regard to the controlling persons or any other person who practices control directly or indirectly in the preceding financial year within one month of the end of the financial year in accordance with the electronic systems prepared for this purpose or other means adopted by the Authority.
- The branches of foreign companies shall inform the Authority in case changes made to the control of the parent company as soon as they occur, and shall provide the Authority with the approval of the regulatory body to which the parent company is subject.
Penalties
Article (12)
Penalties stipulated in the relevant legislation, shall be applied to the acts violating the provisions of the Instructions herein.
Article (13)
The Director General shall issue decisions and circulars as required for the implementation of these Instructions.
Article (14)
These Instructions shall be published in the Official Gazette and shall come into force from the following day of its publication.
Financial and Capital Regulations
Insurance Authority Board Decision Number (25) of 2014 Pertinent to Financial Regulations for Insurance Companies
IA-BOD-RES 25/2014 Effective from 28/12/2014Chairman of Insurance Authority
Having considered:
- Federal Law No. (6) of 2007 on Establishment of the Insurance Authority and Organization of the insurance operations and its amendments;
- Board Decision No. (2) of 2009 related to the issuance of the Executive Regulation of the Federal Law No. (6) of 2007 on Establishment of the Insurance Authority and Organization of the insurance Operations and its amendments; and
- Pursuant to what has been presented by the Director General of the Authority and approved by the Insurance Authority Board of Directors, it was decided to issue the following Financial Regulations for Insurance Companies:
Preamble: Glossary.Part One: Financial Regulations:
Section 1 The Basis of Investing the Rights of the Policyholders. Section 2 The Solvency Margin and Minimum Guarantee Fund. Section 3 The Basis of Calculating the Technical Provisions. Section 4 Determining the Company’s assets that meet the accrued insurance liabilities. Section 5 The Records which the Company shall be obligated to Organize and Maintain as well as the Data and Documents that shall be made Available to the Authority. Section 6 The Principles of Organizing Accounting Books and Records of Each of the Companies, Agents and Brokers and Determining Data to be maintained in these Books and Records. Section 7 Accounting policies to be adopted and the necessary forms needed to prepare reports and financial statements and presentations. Part Two: General Provisions.
Preamble
First Article - Glossary
The following words and expression shall bear the meaning indicated beside each of them unless the context provides otherwise:
State The United Arab Emirates. Law Federal Law No. (6) of 2007 on Establishment of the Insurance Authority and Organization of the insurance Operations and its amendments. Executive Regulations The Executive Regulation of the Federal Law. Minister The Minister of Economy. Authority The Insurance Authority established by virtue of the provision of the Federal Law. Board Board of Directors of the Insurance Authority. Director General Director General of the Insurance Authority. The Company The insurance Company incorporated in the State, or foreign branch of an insurance Company, licensed to carry out insurance operations in the State either through a branch or an insurance agent. Board of Directors Board of Directors of the Company or its equivalent in the governance structure of Foreign Insurance Companies. Insurer An insurance company incorporated in the State, or foreign branch licensed to carry out insurance operations in the State. Insured The person who has concluded an insurance contract with the Company. Premium An amount of money that the Company receives from the insured to provide him with the insurance coverage specified in the insurance policy. Insurance Policy (Insurance Contract) The insurance document (policy) concluded by the insurer and insured containing the terms and conditions of the contract between the two parties, their obligations, and rights or the rights of the beneficiary of the insurance or any endorsements therein. Property and Liability Insurance It covers the lines of business as detailed in Article (5) of the Executive Regulations. Insurance of Persons and Fund Accumulation operation It covers the lines of business as detailed in Article (4) of the Executive Regulations. Technical Provisions The provisions which the insurer (the Company) must deduct and maintain to meet the insured’s accrued financial liabilities as per Law's stipulations. Actuary The person who estimates values of the insurance contracts, documents and the related accounts. Risk Management Policy The process of identification, evaluation and mitigation of the economic effects of the past, present or future events, or their impact, that cause a Company to deviate from its stated objectives whether positively or negatively. These events can impact both the asset and liability side of the Company’s balance sheet, the Company’s profit and loss account, its cash flows, its earning capacity, profitability, ability to continue operating, reputation and its intellectual and technological capital. Risk management should be well integrated into the organizational structure and decision making processes. Risk Appetite The degree of risk that the Company and Board of Directors are willing to accept in respect of conducting the business. Derivatives A financial asset or liability whose value is derived from an underlying asset, liability or related index. Common forms of derivative instruments include forwards, futures, options, swaps, credit derivatives or combinations thereof (as applicable). Investments The act of investing, laying out money or capital by a Company with the expectation of profit. Hedging To invest in a manner that reduces the risks related to underlying assets or liabilities. Total Invested Assets The sum of all assets held for investment purposes, including derivatives or other hedging instruments and cash. Admissible Assets The value of total assets, after taking into account the constraints and limitations that are taken into consideration when calculating the solvency margin of the Company. Solvency Margin Funds that the Company is required to maintain to fulfill the obligations of the Minimum Capital Requirement, Minimum Guarantee Fund and Solvency Capital Requirement. Minimum Capital Requirement The minimum capital required to be maintained by a Company at all times as directed by the Authority. Own Funds The capital that an insurance Company has available to meet solvency requirements, which includes Admissible Assets less liabilities. Solvency Capital Requirement Funds that the Company must maintain to cover current and projected operations during the next twelve months, which are measured to ensure that all quantitative risks have been taken into account. Minimum Guarantee Fund Funds that the Company must maintain to cover current and projected operations during the next twelve months, which is at least one third of the Solvency Capital Requirement or a greater amount as determined by the Authority. Unearned Premium Reserves (UPR) Provisions for the premium which represents the portion of the premium corresponding to the responsibilities extended beyond the date of the statement of financial position. Unexpired Risk Reserves (URR) Provisions for the premiums which represent the portion of the premium subsequent to the financial statement date and where the premium is expected to be insufficient to cover anticipated claims, expenses and a reasonable profit margin. Outstanding Loss Reserves (OSLR) Provisions representing claims that have been reported but not yet settled. Typically, this is the sum of the remaining liabilities for each open claim estimated on a case-by-case basis. Incurred but Not Reported (IBNR) Provisions for claims that have been incurred but not yet reported or have not obtained enough information related to such claims as of the reporting date. Allocated Loss Adjustment Expense (ALAE) or Unallocated Loss Adjustment Expense (ULAE) Provisions representing future claim expenses and related handling costs. The Allocated (ALAE) reserve is for expenses and costs that can be assigned to a specific claim. The Unallocated (ULAE) reserve is for all other overhead expenses and costs that can’t be assigned to a specific claim. Mathematical Reserve Provisions created for long term insurance contracts (Insurance of Persons and Fund Accumulation operations products more than one year) to cover all future claim liabilities as determined by the Actuary. External Auditor The External auditor licensed to operate in the State. Authority Examiners Employees of the Authority, or delegated personnel, authorized to perform examination and inspection of Company records, transactions and documents. Insurance Agent The person approved and authorized by the Company to carry out insurance operation on its behalf or in behalf of any branch thereof. Beneficiary The person who acquired the rights of the insurance contract at the start or these rights that have been legally transferred thereto. Unit Linked Insurance Policies Insurance plans that provide the option to invest in any number of qualified investments, such as stock, bonds, mutual funds. Second Article - Glossary Application
The Glossary mentioned in the first article of this Section should be applied to all regulations and provisions identified in Part One and Part Two of these regulations.
Third Article - Regulations Application
The provisions of the regulations herein should be applied to insurance companies incorporated in the State and the foreign insurance companies licensed to practice the activity in the State.
Part One: Financial Regulations for Insurance Companies
Fourth Article - Financial Regulations
The Financial Regulations for Insurance Companies include the following sections:
Section 1: Regulations Pertinent to the Basis of Investing the Rights of the Policyholders Section 2: Regulations Pertinent to the Solvency Margin and Minimum Guarantee Fund Section 3: Regulations Pertinent to the Basis of Calculating the Technical Provisions Section 4: Regulations Pertinent to Determining the Company's Assets that Meet the Accrued Insurance Liabilities. Section 5: Regulations Pertinent to the Records which the Company shall be obligated to Organize and Maintain as well as the Data and Documents that shall be made Available to the Authority Section 6: Regulations Pertinent to the Principles of Organizing Accounting Books and Records of Each of the Companies, Agents and Brokers and Determining Data to be maintained in these Books and Records Section 7: Regulations Pertinent to Accounting policies to be adopted and the necessary forms needed to prepare and present reports and financial statements Section 1 Regulations Pertinent to the Basis of Investing the Rights of the Policyholders
Article (1) - General Requirements for Investments
The Company shall apply the following rules in investments operations:
- The Company must ensure that the assets are diversified and adequately spread and allow the Company to respond adequately to changing economic circumstances. In particular for developments in the financial and real estate markets or major catastrophic events; the Company must assess the impact of irregular market circumstances on its assets and must diversify the assets in such a way as to reduce such impact.
- Investments in products or instruments issued by the same issuer or by issuers belonging to the same group must not expose the Company to excessive risk concentrations. Limits defined for asset class and counterparty are defined in Article (3) and should be adhered to.
- An active Investment Committee should be in place to ensure there is adequate segregation of duties between execution, recording, authorization, reconciliation and related assurance.
- For the purpose of matching of Assets and Liabilities subject to paragraph (6) of this Article, the assets held by a Company to cover its technical provisions and all other long-term insurance liabilities must:
- Have characteristics of safety, yield and marketability which are appropriate to the type of business carried on by the Company; and
- Be diversified and adequately spread.
- Have characteristics of safety, yield and marketability which are appropriate to the type of business carried on by the Company; and
- The assets referred to in paragraph (4) must be of a sufficient amount, and of an appropriate currency and maturity, to ensure that the cash inflows from those assets will meet the expected cash outflows from the Company's insurance liabilities as they become due.
- For the purpose of paragraph (4), a Company must take into consideration any options which exist in the Company's insurance contracts when determining expected cash outflows.
- For the purpose of these regulations, paragraph (4) does not apply to assets held to cover unit-linked liabilities, except where the respective long-term insurance contract in question includes a guarantee of investment performance or some other guaranteed benefits, paragraph (4) will nevertheless apply to assets held to cover that guaranteed element.
- Further guidance for investments in Addendum (1) of the regulations herein shall be applied.
- The Company must ensure that the assets are diversified and adequately spread and allow the Company to respond adequately to changing economic circumstances. In particular for developments in the financial and real estate markets or major catastrophic events; the Company must assess the impact of irregular market circumstances on its assets and must diversify the assets in such a way as to reduce such impact.
Article (2) - General Rules for Investment Policy
- To ensure proper investment of funds, each Company must put in place investment and risk management policies that are in line with the risk appetite set by the Board of Directors of the Company. The investment and risk management policies shall be approved and reviewed on an annual basis by the Board of Directors and cover overall investment strategy and proper risk management systems, including oversight mechanisms.
- The risk management systems must cover the risks associated with investment activities that may affect the coverage of insurance liabilities and capital adequacy. The main risks include market, credit and liquidity risks.
- Appropriate procedures shall be in place to monitor and ensure that the asset limits and counterparty concentration limits are as directed in Article (3) and are being adhered to.
- An appropriate process to assess the credit-worthiness of counterparties to whom the Company is significantly exposed to in large transactions must be in place.
- The Company shall establish a stress testing framework and policy for all its investments (including regular stress testing for a range of market scenarios and changing investment and operating conditions, like socio-economic or regulatory changes, in order to assess the appropriateness of asset allocation limits) and stress testing is to be performed at least annually as per the Company policy.
- Branches of Foreign Insurance Companies need to demonstrate in all cases to the authority that the stress testing framework and policy for investments are established at the head office level which shows the UAE operations.
- The Authority may impose requirements on an individual Company to invest in a specified manner, or restrict or prohibit a Company from investing in certain asset classes or individual asset to safeguard insurance funds. Such requirements, restrictions or prohibitions will form part of supervisory actions as a result of the Authority assessment of a Company's risk profile and investment risk management practices.
- The Company shall have a separate investment strategy for Life (Insurance of Persons and Fund Accumulation operations) and Non-Life (Property and Liability insurance) operations in situations where both businesses are undertaken by the same entity.
- The Company shall document its Contingency Funding Plan, to address how it will meet its current and future insurance liabilities in case it does not have adequate assets or liquidity of assets to honor its current and future insurance liabilities. The Company shall address the events or circumstances identified in the Contingency Funding Plan. The Contingency Funding Plan is an internal document that should be made available to the Authority upon request.
- Further guidance on the Investment policy in Addendum (2) of the regulations herein shall be applied.
- To ensure proper investment of funds, each Company must put in place investment and risk management policies that are in line with the risk appetite set by the Board of Directors of the Company. The investment and risk management policies shall be approved and reviewed on an annual basis by the Board of Directors and cover overall investment strategy and proper risk management systems, including oversight mechanisms.
Article (3) - Asset Distribution and Allocation Limits
- For asset distribution and allocation limits, the following apply:
Type of Invested Asset Maximum Limit for aggregate exposure in a particular asset class Sub-limit for exposure to a single counter-party Real Estate 30% No Sub Limit Equity instruments in listed and not listed companies within UAE. 30% 10% Equity instruments issued by companies listed and not listed outside UAE. 20% 10% Government securities/instruments issued by the UAE and/or by one of the Emirates in the UAE. 100% 25% Government securities/instruments issued by (A) rated countries. 80% 25% Cash and deposits with Banks in the UAE (e.g. current account, demand deposits, term deposits, notice deposits, certificates of deposit, etc.) Minimum 5% 50% Loans secured by life policies (excluding unit-linked funds' related policies) issued by the Company. 30% No Sub Limit Derivatives or complex financial instruments to be used for hedging purposes only. 1% No Sub Limit Secured loans, deposits with non-banks, debentures, bonds & other debt instruments which are rated strong or very strong by reputed and independent rating agency. 30% 20% Other Invested Assets 10% No Sub Limit - The above limits shall be applicable for Total Invested Assets.
- For the purpose of the application of the limits contained in paragraph (1) of this Article, real estate shall be at market value. As an exception to what is stated in paragraph (1) of this Article, the Authority may allow, in specific cases, insurance companies to invest in real estate with a maximum of up to 40% on the basis of a request from the Company stating the reasons for the exception along with an investment risk analysis report as described in Article (10) of the regulation herein.
- As an exception to what is stated in paragraph (1) of this Article, Derivative limits may exceed 1% if employed to hedge against currency fluctuation only.
- Statutory Deposits provided as collateral for the Company to fulfill its obligations are excluded from the concentration and asset allocation limits listed in paragraph (1) of this Article.
- The limits mentioned in this Article are not applicable to unit-linked funds.
- For branches of Foreign Insurance Companies, the limits mentioned in paragraph (1) of this Article, shall be applicable to the assets backing the insurance fund for UAE policies only.
- Strong and very strong rating by an independent agency for investments inside or outside UAE would mean ratings equivalent to or better than following weighted average ratings for each asset class portfolio:
S&P Fitch A.M. Best Moody's A A A A2
- For asset distribution and allocation limits, the following apply:
Article (4) - Compliance Period for Concentration and Asset Allocation Limits
- A Company not in compliance with the limits of assets in real estate listed in paragraph (1) of Article (3) will have three (3) years to comply with the limits effective from the day following the date of publication of these regulations in the Official Gazette.
- The compliance period is two (2) years for Companies not in compliance with the limits other than real estate listed in paragraph (1) of Article (3), effective from the day following the date of publication of these regulations in the Official Gazette.
- A Company not in compliance with the limits of assets in real estate listed in paragraph (1) of Article (3) will have three (3) years to comply with the limits effective from the day following the date of publication of these regulations in the Official Gazette.
Article (5) - Investment Related Risks
- For the purpose of this Article, “Investment Risk” refers to the possibility of an adverse movement in the value of a Company's on-balance sheet assets or certain off-balance sheet obligations. Investment risk derives from a number of sources including market risk, credit quality risk, investment concentration risk, and liquidity risk, as well as risk associated with the use of derivatives.
- The Company's Board of Directors shall endorse policies and procedures regarding the risks detailed in Addendum (3) to be implemented by its senior management, who shall take adequate steps to disseminate the policy and train the relevant staff such that they can effectively implement the policies and procedures.
- Further guidance on investment related risks in Addendum (3) of the regulations herein shall be applied.
- For the purpose of this Article, “Investment Risk” refers to the possibility of an adverse movement in the value of a Company's on-balance sheet assets or certain off-balance sheet obligations. Investment risk derives from a number of sources including market risk, credit quality risk, investment concentration risk, and liquidity risk, as well as risk associated with the use of derivatives.
Article (6) - Domiciling of Investments
- The Company is permitted to hold, for the purpose of investment, assets of its insurance fund for UAE policies in a foreign jurisdiction with a sovereign rating which is better or at least equivalent to the sovereign rating of the UAE. Total invested assets held outside the UAE shall not exceed 50% of the total invested assets or 100% of the total technical provisions for policies outside the UAE only (excluding unit-linked funds), whichever is greater.
- This restriction in terms of the location and value of invested assets held outside the UAE is applicable to both the insurance fund for UAE policies and the shareholders' fund, notwithstanding whether the invested assets are held to support the solvency margin.
- The restriction in terms of the location and value of invested assets held outside the UAE for branches of Foreign Insurance Companies is applicable to the insurance fund for the UAE policies only, notwithstanding whether the invested assets are held to support the solvency margin.
- The Company shall at all times invest inside the UAE the assets required to match the technical provisions, for policies inside the UAE only, with consideration of Article (2) of Section (3) in regards to the Regulations Pertinent to the Basis of Calculating the Technical Provisions.
- The above domiciling investment limits are not applicable to unit-linked funds.
- The Company is permitted to hold, for the purpose of investment, assets of its insurance fund for UAE policies in a foreign jurisdiction with a sovereign rating which is better or at least equivalent to the sovereign rating of the UAE. Total invested assets held outside the UAE shall not exceed 50% of the total invested assets or 100% of the total technical provisions for policies outside the UAE only (excluding unit-linked funds), whichever is greater.
Article (7) - Derivatives
- Companies are allowed to engage in derivative activities for hedging purposes where such derivative transactions are identified with the corresponding risk exposures being hedged, and the risks associated with such derivative transactions are insignificant and remote given the risk reduction benefits that can reasonably be expected from the transactions.
- Derivative positions which no longer meet the hedging intent shall be closed out promptly.
- Further guidance on derivatives in Addendum (4) of the regulations herein shall be applied.
- Companies are allowed to engage in derivative activities for hedging purposes where such derivative transactions are identified with the corresponding risk exposures being hedged, and the risks associated with such derivative transactions are insignificant and remote given the risk reduction benefits that can reasonably be expected from the transactions.
Article (8) - Investment Outsourced Activities
The Company is entitled to engage with a third party inside the UAE to execute and manage its investment policy, provided that:
- The policies, procedures and limits for the outsourced party must meet the same objectives of the Company's investment policies and procedures approved by its Board of Directors.
- The arrangements for outsourcing the investment activities to the third party are in compliance with supervisory expectations specified by the Authority.
- The Company is responsible for the management of investment activities with an authorized third party.
- The Company provides the Authority with a copy of the agreement with the third party and any amendments thereto and any other requirements as requested by the Authority.
- Further guidance on investment outsourced activities in Addendum (5) of the regulations herein shall be applied.
- The policies, procedures and limits for the outsourced party must meet the same objectives of the Company's investment policies and procedures approved by its Board of Directors.
Article (9) - Borrowed Funds
The Company shall not utilize borrowed funds for the purpose of investments to cover Gross Technical provisions, Minimum Capital Requirement, Minimum Guarantee Fund and Solvency Capital Requirement. For this purpose, borrowed funds include bank loans and other debt instruments, but it does not include Surplus Bonds issued to raise working capital in lieu of Shares.
Article (10) - Reporting Requirements to the Authority
- The Company shall submit to the Authority a quarterly report and analysis of its investment portfolio classified as per the regulations in Article (3) of this Section, and authenticated by its External Auditor, the deadline for the submission of these reports to be within (45) days from the end of the quarter period.
- The Company shall submit to the Authority an annual risk analysis report of its investment portfolio, strategy and management process which is certified by the Actuary, authenticated by the External Auditor and endorsed by the Chairman of the Board of Directors. The timeline for submission of this report will be at the same time as the submission of the audited annual financial results. The risk analysis report should include, but is not limited to, the following:
- A summary of the overall investment strategy as outlined in Addendum (2);
- Analysis of the investment portfolio classified as per the regulations in Article (3) above; and
- Analysis of the Market and Liquidity (Investment) Risk and Credit Risk, including scenario / stress testing, as outlined in Addendum (3).
- A summary of the overall investment strategy as outlined in Addendum (2);
- The Company shall submit to the Authority a quarterly report and analysis of its investment portfolio classified as per the regulations in Article (3) of this Section, and authenticated by its External Auditor, the deadline for the submission of these reports to be within (45) days from the end of the quarter period.
Article (11) - Addendums
The Addendums attached to these regulations are an integral part of the regulations and are to be read along with the regulations.
Addendums to Section 1 Basis of Investing the Rights of the Policyholders
Addendum (1)
- The investment portfolio shall consider the type of business carried out by the Company, in particular the nature, amount and duration of expected claim payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its assets.
- With respect to the whole portfolio of assets, the Company shall only invest in assets and instruments whose risks can be properly identified, measured, monitored, managed, controlled and reported thereof, and appropriately take into account in the assessment of its overall solvency needs as detailed in the Solvency Margin and Minimum Guarantee Fund regulations.
- All assets, in particular those covering the Minimum Capital Requirement, Solvency Capital Requirement and Minimum Guarantee Fund, shall be invested in such a manner as to ensure the security, quality, liquidity and profitability of the portfolio as a whole. In addition the localization of those assets shall be as such to ensure their availability.
- Assets held to cover the technical provisions shall also be invested in a manner appropriate to the nature and duration of the insurance and reinsurance liabilities. Those assets shall be invested in the best interest of all policyholders and beneficiaries taking into account any disclosed policy objective.
- Wherever possible, the Company must use ‘mark-to-market' to measure the value of the investments.
- When using ‘mark-to-market', the Company must use the more prudent side of bid/offer unless the Company is a significant market maker in a particular position type and it can close out at the mid-market price.
- When calculating the current exposure value of a credit risk or exposure for counterparty credit risk purposes:
- The Company must use the more prudent side of bid/offer or the mid-market price and the Company must be consistent in applying the basis it chooses; and
- If the difference between the more prudent side of bid/offer and the midmarket price is material, the Company must consider making adjustments or establishing reserves.
- The Company must use the more prudent side of bid/offer or the mid-market price and the Company must be consistent in applying the basis it chooses; and
- When using ‘mark-to-market', the Company must use the more prudent side of bid/offer unless the Company is a significant market maker in a particular position type and it can close out at the mid-market price.
- When ‘mark-to-market' is not possible, the Company must use ‘mark-to-model' to measure the value of the investments. Marking to model is any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input as follows:
- When the model used is developed by the Company, that model must be:
- Based on appropriate assumptions which have been assessed and challenged by suitably qualified parties independent of the development process;
- Independently tested, including validation of the mathematics, assumptions, and software implementation;
- Independently certified by an Actuary; and
- Developed or approved independently by the Investment Committee.
- Based on appropriate assumptions which have been assessed and challenged by suitably qualified parties independent of the development process;
- The Company's senior management must ensure that the Investment Committee, or its equivalent in the governance structure of Foreign Insurance Companies, is aware of the positions which are subject to the ‘mark-to-model' valuation and understand the materiality of the uncertainty this creates in the reporting of the performance of the business of the Company and the risks to which it is subject.
- The Company must source market inputs in line with market prices as far as possible and assess the appropriateness of the market inputs for the position being valued and the parameters of the model on a frequent basis.
- The Company must use generally accepted valuation methodologies for particular products where these are available.
- The Company must establish formal change control procedures, hold a secure copy of the model, and periodically use that model to check valuations.
- The Company must ensure that its risk management function personnel are aware of the weaknesses of the models used and how best to reflect those in the valuation output.
- The Company must periodically review the model to determine the accuracy of its performance. Examples of periodic review include assessing the continued appropriateness of the assumptions, analysis of profit and loss versus risk factors and comparison of actual close out values to model outputs.
- The market valuation of the investment in real estate shall be performed as follows for the calculation of Admissible Assets:
- One independent real estate firm shall perform the revaluation of the investment in real estate for investments worth less than AED 30 million.
- Two independent real estate firms shall perform the revaluation of the investment in real estate for investment worth more than AED 30 million; the average of both valuations will be accounted for. If needed a third firm could be employed to perform the valuation in case the difference between the first two firms was more than 20% of the lowest valuation. Accordingly, the valuation will be calculated based on the average of the two firms negating the valuation with the largest of the three excluded.
- The independent real estate firms should be a technical expert for valuation of investment in real estate.
- The valuation of the real estate shall be performed by the Company at least annually or as required by the Authority.
- The same independent real estate firm shall not be appointed for two consecutive periods to perform the valuation of the same estate. This restriction doesn't apply to the government-based Land Department.
- For real estate valuation purposes, the Company shall hire real estate firms accredited by at least two banks operating in the State or real estate experts licensed for this matter or the government-based Land Department.
- One independent real estate firm shall perform the revaluation of the investment in real estate for investments worth less than AED 30 million.
- The discounted cash flow valuation of the investment in real estate shall be performed as follows for the purpose of calculating the Solvency Margin requirements:
- Estimate the value of annual rental income over the expected life of the property, not to exceed thirty (30) years.
- The total rental income per year shall be reduced to account for a reasonable vacancy rate for similar properties.
- The total rental income per year shall not be increased in future years for inflation.
- The annual rental income shall be discounted at the current risk free rate to determine the total cash flow valuation.
- Estimate the value of annual rental income over the expected life of the property, not to exceed thirty (30) years.
- When the model used is developed by the Company, that model must be:
- The investment portfolio shall consider the type of business carried out by the Company, in particular the nature, amount and duration of expected claim payments, in such a way as to secure the sufficiency, liquidity, security, quality, profitability and matching of its assets.
Addendum (2)
- The policy on overall investment strategy shall cover, at least, the following elements:
- The investment objectives, both at Company and fund-specific levels;
- The risk and liability profiles of the Company;
- The strategic asset allocation, i.e., the long-term asset mix for the main investment categories, and their respective limits;
- The extent to which the holding of certain types of assets is restricted or disallowed, such as illiquid or highly volatile assets; and
- An overall policy on the usage of derivatives and structured products.
- The Company should have in place a Board of Directors (BOD) level Investment Committee. The Investment Committee should have its own charter, investment policy and guidelines approved by the BOD. The Investment Committee can act as a management committee with members of the Investment Committee being elected by the Board of Directors. Members can be executive directors, executive management or members of any of the committees established by the Board of Directors. At a minimum, the Investment Committee shall be responsible for:
- Establishing the investment strategy and policy for approval by the Board of Directors;
- Setting the investment guidelines;
- Reviewing / monitoring the investments;
- In conjunction with the Audit Committee, determining the scope of the rigorous audit procedures that include full coverage of the investment activities to ensure timely identification of internal control weaknesses and operating system deficiencies; and
- Assisting the Board of Directors in its evaluation of the adequacy and efficiency of the investment policies, procedures, practices and controls applied in the day-today management of its business through an audit report (either independent internal or external) that is to be submitted to the Audit Committee.
- Senior management is responsible for managing and reviewing the investment policies of the Company and reporting the same to the Investment Committee. The function of senior management with the responsibility of executing the investment policy is to:
- Manage and review the investment policies of the Company and reporting the same to the Investment Committee;
- Ensure proper implementation of investment policies, procedures, practices and controls approved by the Investment Committee are applied in the day-to-day management of its business in accordance with the established levels of risk appetite;
- Provide timely and regular reporting to the Investment Committee of the Company's investment activities;
- Establish adequate internal controls to ensure that assets are managed in accordance with approved investment policies, and in compliance with legal, accounting and relevant risk management requirements. These controls shall ensure that investment procedures are documented and subject to effective oversight; and
- Ensure adequate segregation of duties between execution, recording, authorization, reconciliation and related assurance activities.
- The Company shall establish adequate internal controls to ensure that assets are managed in accordance with approved investment policies, and in compliance with legal, accounting and relevant risk management requirements. These controls shall ensure that investment procedures are documented and subject to effective oversight. There shall be in place adequate segregation of duties between execution, recording, authorization, reconciliation and related assurance.
- The Company shall have in place audit procedures that include full coverage of the investment activities to ensure timely identification of internal control weaknesses and operating system deficiencies. If the audit is performed internally, it shall be independent and shall report to the Audit Committee, or its equivalent in the governance structure of Foreign Insurance Companies.
- The Company shall consider the following, along with the supporting policies, procedures and infrastructure, when adopting internal controls:
- Identification of personnel who are responsible and accountable for all transactions involving sales and purchase of assets;
- Observations of restrictions on the empowerment of all parties to enter into any particular transaction. This will require close and regular communication with those responsible for compliance, legal and documentation issues in the Company;
- Agreement from all parties of a given transaction with the terms of the deal. Procedures for sending, receiving and matching confirmations shall be independent from the issuance and marketing functions of the insurance policies;
- Formal documentation is completed promptly;
- Positions are properly settled and reported, and any late payments or late receipts are identified;
- All transactions are carried out in conformity with prevailing market terms and conditions;
- Authority limits are strictly enforced and all breaches are reported and remedial actions are taken promptly;
- Independent checking of rates or prices and choice of rates shall not solely rely on dealers for rate/price information;
- Set out the process for recommending, approving, and implementing decisions; and
- Prescribe the frequency and format of reporting to relevant internal and external authorities.
- Appropriate procedures shall be in place to enable the Company to monitor the interaction of its assets and liabilities to ensure that exposure to asset classes is contained within limits approved by the Company. The Company must define the exposure limits. The Company must ensure that the exposure limits are within the limits defined in paragraph (1) of Article (3). Procedures shall include testing of sensitivity to realistic scenarios that are relevant to the circumstances of the Company.
- Appropriate procedures shall be in place to enable the Company to monitor the location of its assets and liabilities, so as to ensure that risk of localization mismatch is contained within limits approved by the Company. Procedures shall include testing of sensitivity to realistic scenarios, including political risk scenarios that are relevant to the circumstances of the Company.
- The Company shall consider asset and liability risks on an integrated basis. Systems shall not consider only risks taken in isolation, but shall consider how even when individual risks are addressed, combinations of circumstances may still expose the Company to loss. This is of particular relevance where a single outcome is exposed to more than one risk.
- The policy on overall investment strategy shall cover, at least, the following elements:
Addendum (3)
- Liquidity Risk
- The Company shall have access to sufficient liquidity to meet all cash outflow commitments to policyholders (and other creditors) as and when they fall due.
- The risk management system for liquidity risk will normally include at least the following:
- Procedures to identify and control the level of mismatch between expected asset and liability cash flows under normal and stressed operating conditions (using realistic scenarios relevant to the circumstances of the Company);
- Procedures to monitor the liquidity of assets;
- Procedures to identify and monitor commitments to meet liabilities including Insurance liabilities;
- Procedures to monitor the uncertainty of incidence, timing and magnitude of Insurance liabilities;
- Procedures to identify and monitor the level of liquid assets held by the Company; and
- Procedures to identify and monitor other sources of funding including reinsurance, borrowing capacity, lines of credit and the availability of intragroup funding, and to identify the need for such sources to be made available.
- When assessing its liquidity requirements the Company shall also consider the currency in which the assets and liabilities are denominated, and the locations in which those assets and liabilities are situated or payable.
- For the purposes of determining the adequacy of its overall financial resources, the Company must carry out appropriate stress testing and scenario analysis, including taking reasonable steps to identify an appropriate range of realistic adverse circumstances and events in which liquidity risk might occur or crystallize.
- The choice of scenarios that the Company uses will depend on the nature of its activities. For the purposes of testing liquidity risk, however, the Company shall normally consider scenarios based on varying degrees of stress and both Company-specific and market-wide difficulties.
- The Company shall review frequently the assumptions used in stress testing scenarios to gain assurance that they continue to be relevant.
Credit Risk
The Company faces Credit risk whenever it is exposed to loss if another party fails to perform its financial obligations to the Company, including failing to perform them in a timely manner. This also includes the impact on investments of credit rating downgrades and widening of credit spreads. Credit exposures can increase the risk profile of a Company and adversely affect financial viability. Credit exposure includes both on-balance sheet and off-balance sheet exposures (including guarantees, derivative financial instruments and performance related obligations) to single and related counterparties.
The risk management system for credit risk will normally include at least the following:
- Credit Risk Limits (at the minimum as defined in Article (3) for credit exposures to:
- Single counterparties and groups of related counterparties;
- Entities to which the Company is related;
- Single industries; and
- Single geographic locations.
- Processes to monitor and control credit exposures against pre-approved limits.
- Processes for identifying breaches of limits and for ensuring that breaches of limits are brought within the pre-approved limits within a set timeframe.
- Processes for reducing or cancelling limits to a particular counterparty where the counterparty is known to be experiencing problems.
- Processes for approving requests for temporary increases in limits.
- Processes to review credit risk exposures (at least annually but more frequently in cases where there is evidence of deterioration in credit quality).
- A management information system that is capable of aggregating exposures to any one counterparty (or group of Related counterparties), asset class, industry or region in a timely manner.
- A process for reporting to the Board of Directors and senior management:
- Significant breaches of limits; and
- Large exposures and other credit risk concentrations.
- Credit Risk Limits (at the minimum as defined in Article (3) for credit exposures to:
- Market Risk
- Market risk includes equity risk, foreign exchange (FX) risk, commodity risk and interest rate risk.
- The risk management system for market risk will normally include at least the following:
- Procedures to document its policy for market risk, including its risk appetite and how it identifies, measures, monitors and controls that risk;
- Procedures to document its asset and liability recognition policy. Documentation shall describe the systems and controls that it intends to use to comply with the policy; and
- Procedures to establish and maintain risk management systems to identify, measure, monitor and control market risk (in accordance with its market risk policy), and to take reasonable steps to establish systems adequate for that purpose.
- Procedures to document its policy for market risk, including its risk appetite and how it identifies, measures, monitors and controls that risk;
- Market risk includes equity risk, foreign exchange (FX) risk, commodity risk and interest rate risk.
- Liquidity Risk
Addendum (4)
- Investment in derivatives must contribute to a reduction of investment risks or facilitate efficient portfolio management and such investments must be valued on a prudent basis, taking into account the underlying assets, and included in the valuation of the Company's assets. Investments in derivatives should be restricted to hedging purposes only. The Company must avoid excessive risk exposure to a single counterparty and to other derivative operations.
- Prior to undertaking any derivative transactions, the Board of Directors of the Company is expected to ensure that:
- It understands the scope and nature of derivative activities to be undertaken;
- The derivative transactions are consistent with the investment and risk management policies of the Company;
- Approved policies, systems and procedures that are commensurate with the level and nature of derivative activities to be undertaken by the Company are in place and have been clearly communicated to all levels of staff concerned; and
- The Company has appropriate resources (e.g., competent, capable and qualified personnel), capacity and adequate infrastructure to effectively manage and monitor derivative positions.
- It understands the scope and nature of derivative activities to be undertaken;
- The Company shall ensure that controls over derivatives and other investment instruments have been implemented and are adequate to ensure that risks are properly assessed, regularly reviewed in the light of changing market conditions and experience, and consistent with the overall investment strategy decided upon and approved by the Company.
- The senior management of the Company shall put in place a written risk management policy, approved by the Board of Directors. In respect of derivative activities, the risk management policy shall cover the following primary components of risk management practices:
- The purpose for which derivatives may be used;
- The scope and types of permitted derivatives, including the risk tolerance level in respect of its derivative activities;
- Procedures for the proper authorization of any change in significant risk management policies or procedures;
- Procedures on authorization of new derivative products for use by the Company;
- Restrictions on counterparties with whom derivative transactions may be executed;
- Details on persons authorized to enter into derivative transactions and limits of authority;
- Clear lines of responsibility for the monitoring and management of the Company's derivative positions;
- Procedures for regular reporting to senior management and the Board of Directors on derivative activities; and
- A provision for periodic review by the Board of Directors and senior management of the Company's risk management policy to gauge its effectiveness in managing risk exposures and to ensure that the policy remains consistent with the Company's corporate strategies and financial and management capabilities, particularly in the light of changing circumstances.
- The purpose for which derivatives may be used;
- Investment in derivatives must contribute to a reduction of investment risks or facilitate efficient portfolio management and such investments must be valued on a prudent basis, taking into account the underlying assets, and included in the valuation of the Company's assets. Investments in derivatives should be restricted to hedging purposes only. The Company must avoid excessive risk exposure to a single counterparty and to other derivative operations.
Addendum (5)
- The Company must establish comprehensive policies and procedures to govern the strategic investment policy of any outsourced insurance funds, establish an effective risk management system to monitor and continuously assess material risks, and for the insurance funds to be segregated and not co-mingled with other funds managed by the outsourced entity. The Company must regularly monitor the performance of the outsourced entity, at least quarterly, and take appropriate actions if the investment performance of the outsourced entity would adversely affect the investment returns to policyholders or their reasonable expectations cannot be achieved.
- For this purpose, the Company must ensure that adequate expertise and resources are retained in-house to support the monitoring function of the outsourced entity. The Company must ensure that, under the terms of the contract, they regularly receive sufficient information to evaluate the compliance of the outsourced entity with the investment mandate. The Board of Directors of the Company shall continue to be accountable to manage the risks arising from the outsourcing arrangements. The Company shall also remain responsible for the fiduciary duty and professional aspects of the outsourced activity.
- The Company must establish comprehensive policies and procedures to govern the strategic investment policy of any outsourced insurance funds, establish an effective risk management system to monitor and continuously assess material risks, and for the insurance funds to be segregated and not co-mingled with other funds managed by the outsourced entity. The Company must regularly monitor the performance of the outsourced entity, at least quarterly, and take appropriate actions if the investment performance of the outsourced entity would adversely affect the investment returns to policyholders or their reasonable expectations cannot be achieved.
Section (2) Regulations Pertinent to the Solvency Margin and Minimum Guarantee Fund
Article (1) - Minimum Capital Requirement
The Minimum Subscribed and Paid Up Capital of each Company should not be less than the following:
- AED 100 million for an insurance Company.
- AED 250 million for a reinsurance Company.
Article (2) - Minimum Guarantee Fund
- The Minimum Guarantee Fund shall not be at any point in time less than (1/3) of the Solvency Capital Requirement.
- The Minimum Guarantee Fund shall be calculated based on a minimum amount of funds required to support each type of business written by the Company. The minimum funds for each type of business shall include an absolute minimum and a percentage of net earned premium or similar measure, whichever is greater, as determined by the Authority.
- The Minimum Guarantee Fund shall not be at any point in time less than (1/3) of the Solvency Capital Requirement.
Article (3) - Group Capital Adequacy
- A Group consists of insurance or reinsurance companies and any other regulated entities where the Group owns 100% of the companies' shares or a controlling interest (as per IFRS) of the companies' shares.
- The Group capital requirement is the sum of the capital requirements calculated on the consolidated insurance Companies/branches and capital requirements of other regulated entities.
- A Group consists of insurance or reinsurance companies and any other regulated entities where the Group owns 100% of the companies' shares or a controlling interest (as per IFRS) of the companies' shares.
Article (4) - Solvency Margin
- The solvency template developed by the Authority shall be based on the following principles:
- The Solvency Capital Requirement shall be calculated on the presumption that the Company will pursue its business as a going concern.
- The Solvency Capital Requirement shall be calibrated so as to ensure that all quantifiable risks to which each Company is exposed are taken into account. It shall cover existing business, as well as the new business expected to be written over the following twelve (12) months. It shall correspond to the Value-at-Risk of the Basic Own Funds of a Company subject to a confidence level of 99.5% over a one year period.
- The Solvency Capital Requirement should cover the following risks:
- Underwriting risk;
- Market and Liquidity (Investment) risk
- Credit risk; and
- Operational risk.
- Underwriting risk;
- The Solvency Capital Requirement shall be calculated on the presumption that the Company will pursue its business as a going concern.
- The Company is required to calculate their Solvency Margin based on the solvency template developed, and amended from time to time, by the Authority.
- The Solvency Capital Requirement shall be calculated as follows:
- At the UAE level only for branches of foreign insurance and reinsurance Companies;
- At the group level for local insurance and reinsurance Companies having branches or subsidiaries outside the UAE; and
- At the UAE level only for all other insurance and reinsurance Companies.
- At the UAE level only for branches of foreign insurance and reinsurance Companies;
- For the purpose of solvency reporting, the Authority may:
- Determine the nature, scope and format of the information required for solvency, based on certain frequencies as follows:
- On an annual basis;
- On a quarterly basis;
- Upon occurrence of predefined events; and
- During enquiries regarding the situation of the Company.
- On an annual basis;
- Obtain any information regarding contracts which are held by intermediaries or regarding contracts which are entered into with third parties; and
- Require information from external experts.
- Determine the nature, scope and format of the information required for solvency, based on certain frequencies as follows:
- The solvency template developed by the Authority shall be based on the following principles:
Article (5) - Risk Assessment and Evaluation of Solvency in Main Areas of Risk
- When assessing risks and solvency, the Company needs to take into account mainly the following risks: Underwriting Risk, Market and Liquidity (Investment) Risk, Credit Risk and Operational Risk.
- Further guidance on risk assessment and evaluation of solvency in main risk areas in Addendum (1) of the regulations herein shall be applied.
- When assessing risks and solvency, the Company needs to take into account mainly the following risks: Underwriting Risk, Market and Liquidity (Investment) Risk, Credit Risk and Operational Risk.
Article (6) - Risk Management System
- The Company shall have in place a documented risk management framework and strategy, risk management policies and procedures, and allocated responsibilities and controls.
- The Company shall establish a stress testing framework and policy.
- Further guidance on the risk management system and framework in Addendum (2) of the regulations herein shall be applied.
- The Company shall have in place a documented risk management framework and strategy, risk management policies and procedures, and allocated responsibilities and controls.
Article (7) - Own Funds
- Own Funds shall consist of the sum of Basic Own Funds and Ancillary Own Funds.
- Basic Own Funds shall consist of the following items:
- The excess of Admissible Assets over liabilities (surplus), which shall be reduced by the amount of Treasury shares held by the Company.
- Subordinated liabilities (group level debt in a holding company with the prior approval of the Authority).
- The excess of Admissible Assets over liabilities (surplus), which shall be reduced by the amount of Treasury shares held by the Company.
- Ancillary Own Funds shall consist of items other than Basic Own Funds which can be called up to absorb losses, with the prior approval of the Authority. Ancillary Own Funds may comprise the following items to the extent that they are not Basic Own Funds items:
- Unpaid share capital or initial fund that has not been called up;
- Letters of credit and guarantees; and
- Any other legally binding commitments receivable by the Company.
- Unpaid share capital or initial fund that has not been called up;
- In case of a Company with variable contributions, Ancillary Own Funds may also comprise any future claims which that Company may have against its members by way of a right to call for supplementary contribution, within the following twelve (12) months.
- Where an Ancillary Own Funds item has been paid in or called up, it shall be treated as an asset and cease to form part of Ancillary Own Funds items.
- At least 100% of the Minimum Capital Requirement should be met by the Basic Own Funds.
- At least 100% of the Solvency Capital Requirement and Minimum Guarantee Fund should be met by the Own Funds, which is calculated as the Basic Own Funds plus only 50% of the Ancillary Own Funds.
- Own Funds shall consist of the sum of Basic Own Funds and Ancillary Own Funds.
Article (8) - Maintenance of Solvency Margin
- The Company shall at all times comply with the requirements of the Solvency Margin, which means maintaining Own Funds as per Article (7) above for the largest of the following:
- Minimum Capital Requirement;
- Minimum Guarantee Fund; and
- Solvency Capital Requirement.
- Minimum Capital Requirement;
- The Company shall immediately report to the Authority the event of non-compliance with maintaining the Minimum Capital Requirement or Solvency Capital Requirement. In this case, the Company shall submit a realistic recovery plan to re-establish the level of Own Funds covering the Minimum Capital Requirement or Solvency Capital Requirement for approval by the Authority within thirty (30) days from the date of submitting the report. The recovery plan must achieve compliance with the Minimum Capital Requirement or Solvency Capital Requirement within six (6) months of the date of observation of non-compliance with the Minimum Capital Requirement or Solvency Capital Requirement.
- The Company shall immediately report to the Authority the event of non-compliance with maintaining the Minimum Guarantee Fund. In this case, the Company shall submit a realistic recovery plan to re-establish the level of Own Funds covering the Minimum Guarantee Fund for approval by the Authority within thirty (30) days from the date of submitting the report. The recovery plan must achieve compliance with the Minimum Guarantee Fund within three (3) months of the date of observation of non-compliance with the Minimum Guarantee Fund.
- In the event of non-compliance with either the Minimum Guarantee Fund or Solvency Capital Requirement, the Company shall submit a progress report to the Authority every thirty (30) days following the approval of the recovery plan and until such time that the recovery plan has been realized.
- In the event of non-compliance with the Minimum Capital Requirement, the Company shall submit progress reports based on the timing approved by the Authority until such time that the recovery plan has been realized.
- In the event of exceptional circumstances, the Authority may extend the recovery period by three (3) months, if appropriate.
- In the event that the Company is unable to re-establish the level of Own Funds or fails to show significant progress in re-establishing the level of Own Funds to meet the Solvency Margin within the period identified by the Authority, or in other exceptional circumstances at the discretion of the Authority, the Director General will raise the concern to the Board of the Authority to take the necessary actions in that regard as per the Law's stipulations.
- The Company shall at all times comply with the requirements of the Solvency Margin, which means maintaining Own Funds as per Article (7) above for the largest of the following:
Article (9) - Reporting Requirements for Solvency
- The Company shall submit to the Authority the solvency template and related information on an annual basis in relation to solvency, including the validation certification of the solvency template by the Actuary and the External Auditor and endorsed by the Chairman of the Board of Directors and submit it to the Authority within a period not exceeding (4) months from the fiscal year end. The report should arrive at the Authority no later than (30) days prior to the invitation to the General Assembly.
- The Company shall submit to the Authority a report regarding the Solvency Capital Requirement certified by the Actuary on a quarterly basis, within a period of (45) days from the quarter end.
- The Company shall submit to the Authority the solvency template and related information on an annual basis in relation to solvency, including the validation certification of the solvency template by the Actuary and the External Auditor and endorsed by the Chairman of the Board of Directors and submit it to the Authority within a period not exceeding (4) months from the fiscal year end. The report should arrive at the Authority no later than (30) days prior to the invitation to the General Assembly.
Article (10) - Reporting Requirements for Financial Condition Report
- When required by the Authority, the Company shall submit to the Authority a Financial Condition Report (FCR) which is certified by the Actuary and endorsed by the Chairman of the Board of Directors. The requirements of the FCR should include, but is not limited to, the following which could be required separately or as a single complete report:
- An actuarial certification of the Technical Provisions as per Section (3), Article (5) (Regulations Pertinent to the Basis of Calculating the Technical Provisions);
- A risk-based analysis of its investment portfolio, strategy and management process as per Section (1), Article (10) (Regulations Pertinent to the Basis of Investing the Rights of Policyholders);
- An analysis of the Solvency Capital Requirement as per paragraph (1), Article (9) above;
- Evaluation of its reinsurance structure and management process;
- A risk-based analysis of the underwriting policies and procedures of the Company;
- Evaluation of the pricing policies and procedures of the Company; and
- Evaluation of the Enterprise Risk Management policies and procedures of the Company.
- An actuarial certification of the Technical Provisions as per Section (3), Article (5) (Regulations Pertinent to the Basis of Calculating the Technical Provisions);
- When required by the Authority, the Company shall submit to the Authority a Financial Condition Report (FCR) which is certified by the Actuary and endorsed by the Chairman of the Board of Directors. The requirements of the FCR should include, but is not limited to, the following which could be required separately or as a single complete report:
Article (11) - Limits for Assets to be Considered for Solvency
The Admissible Assets to be considered towards the calculation of solvency shall be valued as follows:
- The admissible value of all the invested assets shall be restricted as per the limits defined in the Regulations Pertinent to the Basis of Investing the Rights of the Policyholders.
- The admissible value of all other assets shall be as required by the Authority.
- The admissible value of all the invested assets shall be restricted as per the limits defined in the Regulations Pertinent to the Basis of Investing the Rights of the Policyholders.
Article (12) - Addendums
The Addendums attached to these regulations are an integral part of the regulations and are to be read along with the regulations.
Addendums to Section 2 Solvency Margin and Minimum Guarantee Fund
Addendum (1)
Risk Assessment and Evaluation of Solvency in Main Areas of Risk
- Underwriting Risk
- The Life underwriting risk module in the solvency template reflects the risk arising from life insurance and fund accumulation obligations, in relation to the perils covered and the processes used in the conduct of business. The module calculates the Solvency Capital Requirement for underwriting risks based on a factor of capital at risk and technical provisions adjusted for reinsurance.
- The Non-Life underwriting risk reflects the risk arising from property and liability insurance obligations, in relation to the perils covered and the processes used in the conduct of business. The module calculates the Solvency Capital Requirement in the template based on a higher factor of gross premium or technical provisions adjusted for reinsurance.
- The Life underwriting risk module in the solvency template reflects the risk arising from life insurance and fund accumulation obligations, in relation to the perils covered and the processes used in the conduct of business. The module calculates the Solvency Capital Requirement for underwriting risks based on a factor of capital at risk and technical provisions adjusted for reinsurance.
Market and Liquidity Risk (Investment) Risk
The market risk shall reflect the risk arising from the level or volatility of market prices of financial instruments which have an impact upon the value of the assets and liabilities of the Company. It shall properly reflect the structural mismatch between assets and liabilities, in particular with respect to the duration thereof. In the template, the Solvency Capital Requirement for this module is calculated as a combination of the capital requirements for the following sub-modules:
- The sensitivity of the values of assets, liabilities and financial instruments to changes in the term structure of interest rates, or in the volatility of interest rates (interest rate risk);
- The sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of market prices of equities (equity risk);
- The sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of market prices of real estate (real estate risk);
- The sensitivity of the values of assets, liabilities and financial instruments to changes in the level or in the volatility of credit spreads over the risk-free interest rate term structure (spread risk); and
- Additional risks to a Company, either stemming from lack of diversification in the asset portfolio, or from large exposure to default risk by a single issuer of securities or a group of related issuers (concentration risk)
- The sensitivity of the values of assets, liabilities and financial instruments to changes in the term structure of interest rates, or in the volatility of interest rates (interest rate risk);
Credit Risk
The counterparty default risk module in the template reflects possible losses due to unexpected default, or deterioration in the credit standing of the counter-parties and debtors of the Company. The counterparty default risk covers reinsurance arrangements, securitizations and derivatives, cash at bank, cash equivalent, other deposits, unpaid but called up capital, guarantees, letter of credit and receivables from intermediaries and policyholder loans.
Operational Risk
The capital requirement for operational risk shall reflect operational risks to the extent they are not already reflected in other risk components. That requirement shall be calibrated to ensure that all quantifiable risks to which a Company is exposed are taken into account. The template calculates the capital based on a higher factor of earned premium or technical provisions.
- Underwriting Risk
Addendum (2)
- Risk Management is defined as the process of identification, evaluation and economically effective mitigation of past, present or future events or their impact that cause a Company to deviate from its stated objectives whether positively or negatively. These events can impact both the asset and liability side of the Company's balance sheet, the Company's profit and loss account, its cash flows, its earning capacity, profitability, ability to continue as a going concern, reputation and its intellectual and technological capital.
- Risk management should be well integrated into the organizational structure and decision making processes and should include the following:
- A clear Risk Appetite set by the Board of Directors;
- An entity-wide assessment of risks across all risk types, including emerging risks; and
- Management information that is timely, consistent and accurate and used for internal and external reporting.
- A clear Risk Appetite set by the Board of Directors;
- The nature and extent of the systems and controls which a Company needs to maintain will depend upon a variety of factors including:
- The nature, size and complexity of its business;
- The diversity of its operations, including geographical diversity;
- Past experience and historical performance;
- The volume and size of its transactions; and
- The degree of risk associated with each area of its operations.
- The nature, size and complexity of its business;
- The Company shall regularly review its management of risk in the context of relevant internal and external factors and changes in these factors.
- The risk management strategy shall cover not only the identification, assessment, control and monitoring of risks but also contingency plans to deal with risks should they materialize, or adverse developments in important areas of risk. This will be augmented by stress and scenario testing tailored to the risk characteristics of the Company including:
- The Company shall have in place an effective risk management framework consisting of strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report the risks on a continuous basis, at an individual and at an aggregated level, to which they are or could be exposed, as well as their interdependencies. The risk management system shall be effective and well integrated into the organizational structure and in the decisionmaking processes of the Company with proper consideration of the persons who effectively run the Company or have other key functions.
- The risk management system shall cover the risks to be included in the calculation of the Solvency Capital Requirement, namely:
- Underwriting Risk;
- Market and Liquidity (Investment) Risk;
- Credit Risk; and
- Operational Risk.
- Underwriting Risk;
- Moreover it shall cover the risks which are not or not fully included in the calculation thereof. The risk management system shall cover at least the following areas:
- Underwriting and reserving;
- Asset-liability management;
- Investment, in particular derivatives and similar commitments;
- Liquidity and concentration risk management;
- Operational risk management; and
- Reinsurance and other risk-mitigation techniques.
- Underwriting and reserving;
- With regard to investment risk, the Company shall demonstrate that it complies with the “prudent person” principle in addition to adherence to Section (4) of these regulations (Determining the Company's assets that meet the accrued insurance liabilities).
- The Company shall establish a risk management function which shall be structured in such a way as to facilitate the implementation of the risk management system.
- The Company shall have in place an effective risk management framework consisting of strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report the risks on a continuous basis, at an individual and at an aggregated level, to which they are or could be exposed, as well as their interdependencies. The risk management system shall be effective and well integrated into the organizational structure and in the decisionmaking processes of the Company with proper consideration of the persons who effectively run the Company or have other key functions.
- Risk Management is defined as the process of identification, evaluation and economically effective mitigation of past, present or future events or their impact that cause a Company to deviate from its stated objectives whether positively or negatively. These events can impact both the asset and liability side of the Company's balance sheet, the Company's profit and loss account, its cash flows, its earning capacity, profitability, ability to continue as a going concern, reputation and its intellectual and technological capital.
Section (3) Regulations Pertinent to the Basis of Calculating the Technical Provisions
Article (1) - Types of Technical Provisions
The Company shall establish the required technical provisions to meet its obligations towards policyholders and their beneficiaries, including:
- Unearned Premium Reserves
- Unexpired Risk Reserves
- Outstanding Loss Reserves
- Incurred But Not Reported Reserves
- Allocated Loss Adjustment Expense and Unallocated Loss Adjustment Expense Reserves
- Mathematical Reserves
- Unearned Premium Reserves
Article (2) - Technical Provisions
With regard to Article (6) of Section (1) in these Regulations Pertinent to the Basis of Investing the Rights of the Policyholders, investments equivalent to the total technical provisions for all policies issued inside the UAE shall be maintained as follows:
- Investments equivalent to the sub-total of the Technical Provisions in paragraphs (1), (2) and (6) of Article (1) above (excluding unit-linked funds' related technical provisions), gross of reinsurance, shall be maintained in the UAE.
- Investments equivalent to the sub-total of the Technical Provisions in paragraphs (3), (4) and (5) of Article (1) above (excluding unit-linked funds' related technical provisions), net of reinsurance, shall be maintained in the UAE.
- Investments equivalent to the sub-total of the Technical Provisions in paragraphs (1), (2) and (6) of Article (1) above (excluding unit-linked funds' related technical provisions), gross of reinsurance, shall be maintained in the UAE.
Article (3) - Calculation of Technical Provisions
- Unearned Premium Reserve (UPR) / Unearned Risk Reserve (URR)
- The Unearned Premium Reserve (UPR) shall be calculated linearly (Pro rata basis calendar year from the date of risk inception). Taking into consideration the UPR for Marine Insurance (Cargo - Individual Shipment Only) to be calculated separately as per subparagraph (e) of this Article below.
- Where the pattern of the risk over the policy period is clearly non-uniform (e.g., in the case of Engineering Business where the risk usually increases with time) and where reflection of such un-uniformity in the Unearned Premium Reserve calculation would result in a larger reserve, then a larger reserve should be provided. The Actuary should determine which Unearned Premium Reserve method to use in this instance, with reference to the risk profile of the business.
- If a Company considers its UPR as inadequate to cover the future liabilities, it should create an Unexpired Risk Reserve (URR) at the line of business level to cover the shortfall in the unearned premium reserve in each line of business. The Unearned Premium Reserve is mandatory but any URR shall be created as needed by line of business. The calculation of the URR should include consideration of the cost of capital or other profit loadings.
- In case of the date of initiation of a policy being different from the date of initiation of risk, the UPR should be calculated on a pro-rata basis from the date of initiation of risk.
- The UPR is to be provided as a minimum of 25% of the total premium for the year for Marine Insurance (Cargo) (Individual Shipment only). However, should the Actuary be able to justify to the Authority that a lower percentage is more appropriate given the risk profile of the marine polices, then the lower percentage can be used supported by Authority approval.
- Actuarial certification shall be required in case of UPR and URR on an annual basis at the minimum.
- The Unearned Premium Reserve (UPR) shall be calculated linearly (Pro rata basis calendar year from the date of risk inception). Taking into consideration the UPR for Marine Insurance (Cargo - Individual Shipment Only) to be calculated separately as per subparagraph (e) of this Article below.
- The Outstanding Loss Reserve (OSLR or case reserves) shall be calculated for each claim reported but outstanding as on the reporting date by the Company. The Actuary shall assess the OSLR based on the overall portfolio by each Line of Business.
- Incurred But Not Reported (IBNR)
- IBNR shall be provided for all short term products (all Property and Liability insurance products and one year Insurance of person and Fund Accumulation products).
- The Actuary shall certify the adequacy of the aggregate Outstanding Loss Reserve (OSLR) and IBNR. In doing so the Actuary shall consider the requirement of providing for any loss adjustment expenses as noted in paragraph (4) of this Article. Such certification shall be carried out on an annual basis at the minimum.
- IBNR should be calculated according to the Addendum (1) of the herein regulations.
- IBNR shall be provided for all short term products (all Property and Liability insurance products and one year Insurance of person and Fund Accumulation products).
- Allocated Loss Adjustment Expense (ALAE) & Unallocated Loss Adjustment Expense (ULAE) Reserves
- ALAE shall be provided for Property and Liability insurance short term products as well as Insurance of Persons and Fund Accumulation short term products. The ALAE reserves can be grouped with the loss reserves (OSLR and IBNR) or accounted separately.
- ULAE shall be provided for Property and Liability insurance short term products as well as Insurance of Persons and Fund Accumulation short term products. The ULAE reserves must accrue for all claims handling expenses not included in ALAE.
- The Actuary shall certify the adequacy of the aggregate ALAE and ULAE as part of the certification of the overall technical provisions. Such certification shall be carried out on an annual basis at the minimum.
- ALAE shall be provided for Property and Liability insurance short term products as well as Insurance of Persons and Fund Accumulation short term products. The ALAE reserves can be grouped with the loss reserves (OSLR and IBNR) or accounted separately.
- Mathematical Reserve
- Mathematical Reserve shall be provided for all operations related to insurance of persons and Fund Accumulation. An actuarial certification on Mathematical Reserve is required at least annually to be submitted to the Authority.
- Mathematical Reserve should be calculated according to the Addendum (2) of the herein regulations.
- Mathematical Reserve shall be provided for all operations related to insurance of persons and Fund Accumulation. An actuarial certification on Mathematical Reserve is required at least annually to be submitted to the Authority.
- Appropriate credit for reinsurance should be computed for all the above reserves, so that the Technical Provisions are calculated both gross and net of all applicable reinsurance.
- Unearned Premium Reserve (UPR) / Unearned Risk Reserve (URR)
Article (4) - Actuarial Requirements for Technical Provisions
The following provisions apply to the actuarial requirements for technical provision:
- The Board of Directors shall appoint an Actuary who is registered by the Authority. The Company should inform the Insurance Authority of the Actuary appointed and any subsequent change to the Actuary with reasons for change to be notified to the Authority.
- The Actuary shall review and approve the Company’s Technical Provisions, both gross and net of reinsurance.
- The Actuary shall assess the quality of the data which is used for the calculation of the Technical Provisions to ensure it is appropriate for the purpose of calculating the Technical Provisions. The responsibility for ensuring the accuracy of the data lies with the management of the Company.
- The Actuary shall be professionally liable for the advice and technical services provided to the Company.
- The Actuary shall provide the Insurance Authority with an annual report that presents the immediate or future risks facing the Company. The Actuary's report can cover any aspect, which in the Actuary's opinion constitutes a contravention of the insurer's ability or prejudices the insurer's ability to meet its liabilities and capital adequacy currently or in the future.
- An External Auditor shall review the actuarial reports that present immediate or future risks facing the Company, and provide their opinion on the risks mentioned in the actuarial report to the Authority.
- The Board of Directors shall appoint an Actuary who is registered by the Authority. The Company should inform the Insurance Authority of the Actuary appointed and any subsequent change to the Actuary with reasons for change to be notified to the Authority.
Article (5) - Reporting Requirements to the Authority
- The Company shall report quarterly to the Authority the details of the Technical Provisions which is certified by the Actuary within a period of forty-five (45) days from the quarter end; and
- The Company shall submit annually to the Authority a report on the details of the Technical Provisions which is certified by the Actuary, authenticated by the External Auditor and endorsed by the Chairman of the Board of Directors. The timeline for the annual submission of the Technical Provisions will be at the same time as the submission of the audited annual financial results.
- The Company shall report quarterly to the Authority the details of the Technical Provisions which is certified by the Actuary within a period of forty-five (45) days from the quarter end; and
Article (6) - Addendums
The Addendums attached to these regulations are an integral part of the regulations and are to be read along with the regulations.
Addendums to Section 3 Basis of Calculating the Technical Provisions
Addendum (1)
When calculating the Incurred But Not Reported (IBNR) provisions the following should be considered:
- There shall be sufficient data available with the Company to facilitate the IBNR calculation. The Company's management shall be responsible to certify the completeness, appropriateness and accuracy of the insurance data to be used for the calculation of the IBNR.
- The Company will use actuarial methods that are applicable depending on size, scale and complexity of business. The Actuary shall provide adequate explanation to the methods adopted and the methods should be consistent from year to year. In case the Actuary decides to change the methods previously adopted and this methodology change has a material impact on results, sufficient explanation on the reason and impact needs to be provided to the Authority. The Authority reserves the right to ask for additional explanation and information for the change in methods adopted.
Estimation of Incurred But Not Reported provisions (IBNR)
- These instructions are relevant to determination of IBNR provisions for direct insurance and facultative reinsurance accepted business. Estimation of IBNR provisions on treaty accepted and Excess of Loss accepted business may require other methods more appropriate to the nature of the portfolio and its claims development pattern. Likewise, estimation of IBNR provisions for specialized business such as credit guarantee insurance may require other methods more appropriate to the nature of the business.
- In these instructions, the term IBNR covers both provisions for claims not yet reported (Incurred But Not Yet Reported or IBNYR) as well as incomplete provisions for reported claims (Incurred But Not Enough Reported or IBNER). It is not necessary to establish separate provisions for IBNYR and for IBNER so long as the method(s) used will take into account both elements.
- The method stated in these instructions is the “preferred method” and is generally suitable to estimate the IBNR provision. If the Actuary considers the method stated in these instructions to be not suitable, he should set out the reasons for such conclusion and provide justification for the alternative method(s) proposed to be used, being considered more appropriate. Where the method(s) used is not one of the well-known methods, the Actuary should also describe the method(s) and the underlying assumptions in that method(s).
- All mathematical methods of estimation are based on a set of assumptions. So, the validity of the assumptions underlying the method proposed to be used should be fully set out and validated sufficiently to lend credibility to the exercise.
- Calculation of the provision for IBNR should be done separately for each year of occurrence or year of underwriting and the figures should be aggregated to arrive at the total amount to be provided.
- The calculation of the ALAE provision can be included with the loss provision, but when calculated separately the same level of detail in terms of method(s) used, validation of assumptions, estimation by year, etc. as described above for loss provisions should be done for the ALAE provisions. The calculation of the ULAE provision is generally done with simpler, yet actuarially sound, methods.
Examination and validation of basic data
- The Actuary should apply such checks as practically possible to assess the quality and completeness of the data to improve the accuracy of the IBNR provision estimates.
- Data should be examined separately for each of the classes set out in the instruction notes. If data of any class is aggregated with data for another class, care should be taken to see that the two classes are homogeneous in nature.
- The Actuary should examine the changes in underwriting policy over the period of observation and in particular, the changes made in current underwriting policy. The impact of such changes on the claims development pattern and claims ratio should be estimated if appropriate.
- The Actuary should examine the development of premium written over recent years. If the average level of deductible has undergone material change over the recent years, its impact on the claims development pattern should be taken into account.
- The compilation of data on an underwriting period basis instead of a period of occurrence (accident period) basis may be proposed in some cases. Where this basis is followed the Actuary should support the reason for change of basis on objective reasons.
Claims handling
- A detailed review of the claims handling practices should be conducted. Where material changes are identified, their impact on the claims development pattern should be taken into account.
- Each claim is to be recognized upon occurrence of the insured event. The way this is implemented in practice may differ from one company to another, but it should include various claim transactions and reserves for the estimated liability on a case by case basis (case reserves). The impact of inadequate provision for claims on claims development can be significant and should be taken into account.
- In addition to recognition of claims, which the Company follow to determine the provision to be made and the mechanism to review such provision, the Company has the responsibility toward having prompt and fair settlement related to the claims. The Company may sell or accept the collectable returns as a part of the settlement and include the practice of downsizing the claims provision in cases where there has been no movement in the claim over a certain period, which may be important factors in claims development.
- The Company should consider that claim development patterns can be materially affected by the occurrence of unusual events over the period of observation such as:
- Individual large claims;
- Catastrophic events causing a large number of claims;
- Changes in Law affecting the incidence and size of claims;
- Impact of external factors on the average size of claims; and
- Judicial changes related to accrued compensation
- Individual large claims;
- When estimating IBNR after adjustment for reinsurers' share, note should be taken of any changes in reinsurance protections and changes in size of retentions over recent years.
Claims cost trends
- In order to make adequate adjustment for trends, the following aspects should be studied:
- Composition of portfolio;
- External factors such as economic environment, inflation, changes in legal, political or social conditions;
- The underwriting policy of the Company; and
- Changes in the Company's claim settlement practices.
- Composition of portfolio;
- A significant indicator of claims experience trends is the frequency of claims occurrence and the average size per claim paid and per claim outstanding. These should be studied and any variations observed should be looked into.
Test of credibility
- To ensure completeness of IBNR provision estimation, tests of credibility for the results produced should be applied including, evaluating the frequency of claims occurrence, ultimate incurred loss ratios, average cost per claim paid and per claim outstanding, etc.
- It is generally inappropriate to accept any negative values for the IBNR provision in total. To avoid such a situation, estimation of IBNR should be made separately for each year of occurrence. Negative values of IBNR for any year can be allowed where it is actuarially justified based on the nature of the risk, claims practices and historic development trends. The actuary must include a detailed description of the reasons for including negative IBNR in total for any type of business. While negative IBNR in total for a type of business may be appropriate if actuarially justified and documented, the negative IBNR shall not be an Admissible Asset.
- An essential check on the credibility of the estimation exercise is to see how the claims developed during the preceding twelve months as compared to the projection and estimation made last year. The outstanding claims provision and provision for IBNR made at the last Balance Sheet date should be compared with the aggregate of claims paid during the year, claims outstanding and the provision for IBNR at the end of the current year, for the years of occurrence up to and including the date of the last Balance Sheet.
- When estimation methods produce less reliable results for the most recent years, the results for the more recent years may need to be revised based on the Actuary's knowledge of the business and the Company's portfolio.
- There shall be sufficient data available with the Company to facilitate the IBNR calculation. The Company's management shall be responsible to certify the completeness, appropriateness and accuracy of the insurance data to be used for the calculation of the IBNR.
Addendum (2)
Calculation of the Mathematical Reserve
- The Mathematical Reserve is to be determined separately for each insurance contract by a prospective method of valuation in accordance with the instructions below.
- The valuation method shall take into account all prospective contingencies under which any premiums (by the policyholder) or benefits (to the policyholder/beneficiary) may be payable under the policy, as determined by the policy conditions. The level of benefits takes into account the reasonable expectations of policyholders (with regard to bonuses, including terminal bonuses, if any) and any established practices of the Company for payment of benefits.
- The estimated amount of liability under each policy shall be determined based on prudent assumptions of all relevant parameters and in line with global actuarial standards. The value of each such parameter shall be based on the Company's expected experience and shall include an appropriate margin for adverse deviations that may result in an increase in the amount of the mathematical reserve.
- In case of a negative reserve, the Actuary shall set the amount of such mathematical reserve at zero, or to the guaranteed surrender value in case of such guaranteed surrender value deficiency reserve, as the case may be. For unit-linked business, the mathematical reserve may be negative, but the Actuary shall set the mathematical reserve to a level so that the sum of the mathematical reserve and the unit reserve is at least as large as the guaranteed surrender value.
- The Actuary shall not make allowance for any future lapse, surrender, making paid-up or revival of a contract where such an allowance would result in a decrease in the liability in respect of that contract.
- The Actuary shall take into account vested, declared or allotted bonuses or other forms of participation to which policyholders are already either collectively or individually contractually entitled.
- The Actuary shall take into account discretionary charges and deductions from Policy Benefits, in so far as they do not exceed the reasonable expectations of policyholders.
- The Actuary shall take into account expenses, including commissions. The expenses shall take either implicit or explicit account of future increases considered likely in expenses for existing business based on prudent assumptions as to the future rates of changes in prices and earnings.
- Consideration shall be given to the impact of selective withdrawals in the allowance for future expenses, particularly where the allowance is not assessed on a per policy basis.
- Explicit allowance for future expenses is required for all contracts under which no future premiums are receivable where these are not provided by disclosed margins in the valuation rate of interest.
- Proper provision must be made for claims handling expenses, directly or indirectly. This is particularly relevant to classes of business such as permanent health insurance where these expenses are likely to be significant.
- Where a net premium method is used it is permissible to take credit for the difference between the gross premium and the valuation net premium in assessing the provision to be made for meeting the expenses likely to be incurred in the future in fulfilling the existing contracts, but only to the extent allowed by global actuarial standards.
- The Actuary shall take into account any rights under contracts of reinsurance.
- The Actuary shall take into account any other options that the policyholder has in respect of the policy, or by virtue of the contract, and that provision shall be made on prudent assumptions to cover any increase in liabilities caused by policyholders exercising options under their contracts. Treatment of options should be in line with global actuarial standards.
- The provisions for unit-linked funds should be the unit value and depends on what the guarantees are in the product. So the provisions should be provided keeping in mind guaranteed return if any in addition to basing it on the future expected unit value.
- The Actuary shall use one of the common methods which would be suitable for the size, nature and complexity of the business. Common methods like Gross Premium Method of valuation or retrospective method may be used if demonstrated to be at least as prudent. The Actuary shall give an explanation for the method adopted and the method shall be consistent from year to year. In case the Actuary decides to change the method being used from previous years, sufficient explanation to the same needs to be provided.
- The method of calculation of the amount of liabilities and the assumptions for the valuation parameters shall not be subject to arbitrary discontinuities from one year to the next. The calculation of the net present value of payments is to be based on a portfolio of (AAA) rated sovereign risk securities with a similar expected payment profile to the liability being measured. In case the market yields for longer term durations are not available within UAE, in such a case US$ market yield of a (AAA) rated sovereign risk securities should be considered as a measure for AED longer term durations.
- The determination of the amount of mathematical reserve shall take into account the nature and term of the assets representing those liabilities and the value placed upon them and shall include prudent provision against the effects of possible future changes in the value of assets on the ability of the Company to meet its obligations arising under policies as they arise.
- Technical Provisions (including Mathematical Reserves) considered for Solvency purposes should not include unit-linked funds' reserves to the extent that it does not include the guaranteed portion of the insurance policies with the unit-linked funds.
- Mortality Rates used must be conservative. The Actuary should provide reinsurance rates or refer to any published mortality table that is justifiable.
- Sensitivity to assumptions used should be provided.
- Persistency - Lapse analysis should be provided where applicable.
- In the event of lack of clarity on specific assumptions not defined above for calculating the Mathematical Reserves, the Actuary can apply actuarial best practices but must provide justification and quote relevant actuarial standards in the valuation report.
- The Mathematical Reserve is to be determined separately for each insurance contract by a prospective method of valuation in accordance with the instructions below.
Addendum (3)
Report of the Actuary on the Estimation of Reserves
The report of the Actuary should contain the following elements at a minimum. Some elements will be at an overall company level, and the others should be at the line of business or coverage level to document the analysis of the Actuary.
Name of Company:
Name of Actuary:
Insurance activity practiced by the company:
Section 1 - The Company and its business:
- The premium scale of the Company and the classes of business it writes. Has the growth of premium income been steady and reasonable? Fluctuations in growth rates or high or low growth rates may be indicative of a change in the composition of business or changes in underwriting policy.
- What is the underwriting policy of the Company in respect of:
- Selection of risks;
- Rates and deductibles; and
- Delegation of underwriting authority.
- Selection of risks;
- Has the underwriting policy remained stable over the past three years? Note any changes in key underwriting personnel and the impact on the underwriting policy of the Company
- What is the claims processing and settlement policy of the Company in the matter of:
- First recognition of claim;
- Provision for claims where no information or inadequate information on facts are available;
- Periodicity of review of the provision for a claim;
- Negotiation of bodily injury claims relating to motor accidents;
- Processing and settlement of claims; and
- Pursuit of recovery or sale of salvage.
- First recognition of claim;
- Has the claims processing and settlement policy remained the same over the past three years? Note any changes in key claims personnel and the impact on the claims settlement practice of the Company.
- Has the Company experienced any cash flow or financial problems over the observation period? Note any effects on the Company's underwriting or claims settlement practices as a result of these problems.
- Has the claims data been affected by catastrophic events such as earthquake, flood, windstorm, individual large claims, etc. or any significant changes in the business environment such as a severe economic recession that would have affected the business experience and impacted the claims figures?
- Any changes in the general business and insurance industry conditions in matters such as legislative environment, competition, consumerism, levels of court awards, etc.? Note the impact of these changes.
Section 2 - The data
- The data should be compiled separately for each class of insurance business as required by the insurance regulations. If not, comment on the reasons for variation.
- Comment on the source of data and steps taken to ensure that the data is consistent, reliable, complete and in agreement with the financials.
- Comment on the observed trends in the growth of premiums, frequency of loss occurrence, average cost per claim paid and per claim outstanding, speed of emergence of claims and speed of settlement. Also state how these have been taken into account in the selection process of assumptions used in the estimation of provisions.
- Note any individually large claims that affect the claims development figures and how the estimation process was adapted as a result of these claims.
- The estimation of provisions should be done pre- and post-adjusting for the reinsurance share (gross and net of reinsurance). A description of the process followed to determine the provisions post-adjusting for reinsurance share should be provided. Any material change in the reinsurance program, along with how the estimation process was adapted to adjust for the change should be provided. If data on a net of reinsurance basis is not readily available, it is up to the Actuary to work on the provision estimates on a gross basis and work on the estimate of provisions for the share of reinsurance ceded, if that is more easily possible.
Section 3 - The methods
- Describe the methods used for estimation of provisions. If the methods used now are different from the methods used previously, state the reason(s) for change.
- Document the assumptions underlying the methods and discuss to what extent the validity of the assumptions was verified.
- Where the method(s) used is not commonly understood, explain the methodology and provide adequate working sheets to understand the calculations and results.
- The review and the examination of the results should be executed using another method.
Section 4 - Evaluation of the results
- Compare the prior estimated claim provisions (that were pending at the end of the previous year's estimate), with the paid claims in the subsequent year for each claim in order to test the accuracy of the prior estimates.
- The difference between the claim reserves booked by the Company and the claim reserves estimated by the Actuary must be disclosed. If the Company estimates are lower than the estimates by the Actuary, then additional tests that were conducted to assess the accuracy of the estimates should be disclosed.
Section 5 - Overall results
Comment on calculated incurred claim ratios for the Company over the years. In particular, comment whether the claim ratios for the more recent years are logical and state how the estimation process was modified to achieve more credible results.
Section 6 - Attachments
The data collected from the database of the Company, the compiled cumulative figures, the calculation sheets and the final results should be attached to the report.
Section 7 - Certification
- The Actuary should not put forward or certify any figures, which lack credibility, with serious reservations.
- The Actuary should certify that he has checked the data to the best of his ability and is satisfied that they are consistent, reliable and complete and that the assumptions underlying the methods used for estimation of provisions are reasonable.
- The report should be signed with date by the Actuary.
- The premium scale of the Company and the classes of business it writes. Has the growth of premium income been steady and reasonable? Fluctuations in growth rates or high or low growth rates may be indicative of a change in the composition of business or changes in underwriting policy.
Section (4) Regulations Pertinent to Determining the Company's Assets that Meet the Accrued Insurance Liabilities
Article (1) - General Rules for Asset Valuation
The Company shall apply the following rules in the valuation of its assets:
- The Company shall invest all their assets in accordance with the “prudent person principle.
- With respect to the whole portfolio of assets, the Company shall only invest in assets and instruments, whose risks can be adequately identified, measured, monitored, managed, controlled and reported, and appropriately take into account in the assessment of their overall solvency needs by the Company.
- All assets, in particular those covering the Minimum Capital Requirement, Minimum Guarantee Fund and the Solvency Capital Requirement, shall be invested in such a manner to ensure the security, quality, liquidity and profitability of the portfolio as a whole. In addition the localization of those assets shall be such as to ensure their availability.
- Without prejudice to paragraph (2) above, and with respect to assets held in respect of Life insurance contracts where the investment risk is borne by the policyholders, the following shall apply:
- Where the benefits provided by a contract are directly linked to the value of unit- linked funds, or to the value of assets contained in an internal fund held by the Company, usually divided into units, the technical provisions with respect to those benefits must be represented as closely as possible by those units or, in the case where units are not established, by those assets.
- Where the benefits provided by a contract are directly linked to a share index or some other reference value other than those referred to in subparagraph (a) above, the technical provisions with respect to those benefits must be represented as closely as possible either by the units deemed to represent the reference value or, in the case where units are not established, by assets of appropriate security and marketability which correspond as closely as possible with those on which the particular reference value is based.
- Where the benefits referred to above include a guarantee of investment performance or some other guaranteed benefit, the assets held to cover the corresponding additional technical provisions shall be subject to paragraph (3) of this Article.
- Where the benefits provided by a contract are directly linked to the value of unit- linked funds, or to the value of assets contained in an internal fund held by the Company, usually divided into units, the technical provisions with respect to those benefits must be represented as closely as possible by those units or, in the case where units are not established, by those assets.
- With consideration to paragraph (2) and with respect to assets, Regulations Pertinent to the Basis of Investing the Rights of the Policyholders shall apply.
- Companies must comply with the detailed provisions regarding the general rules for asset valuation as prescribed in the Addendum of this Article attached to these regulations.
- The Company shall invest all their assets in accordance with the “prudent person principle.
Article (2) - Limits for Assets to be Considered for Solvency
The Admissible Assets to be considered towards the calculation of solvency shall be valued as follows:
- The value of all the invested assets shall be restricted as per the limits defined in the Regulations Pertinent to the Basis of Investing the Rights of the Policyholders.
- All other assets shall be valued as required by the Authority.
- The value of all the invested assets shall be restricted as per the limits defined in the Regulations Pertinent to the Basis of Investing the Rights of the Policyholders.
Article (3) - Addendum
The Addendum attached to these regulations is an integral part of the regulations and is to be read along with the regulations.
Addendum to Section 4 Determining the Company's Assets that Meet the Accrued Insurance Liabilities
Addendum
Measurement of Assets for the purpose of calculation of the solvency margin shall be as detailed below:
- Investments in Non-Insurance Subsidiaries and Associates
- Valuation of investments in Subsidiaries and Associates that are listed securities must be on the closing market quotation or the latest available market quotation (whichever is lower).
- Valuation of investments in Subsidiaries and Associates that are not listed securities must be at economic or market value. A suitable valuation may be used to arrive at this value, but undertakings shall also consider the risks that arise from holding a balance sheet item, using assumptions that market participants would use in valuing the asset or liability.
- The International Accounting Standards Board's (IASBs) International Financial Reporting Standards (IFRS) related to "Fair Value Measurement" accounting is considered a suitable measure for true economic value. This proposes a ‘mark- to-market' approach or, if not possible, a ‘mark-to-model' approach for all participations, listed and unlisted, taking into account the guidance given by the IASB related to "The valuation of assets and liabilities for solvency assessment purposes". Where the holding is not material however, a Net Asset Value (NAV) approach may be used.
- Valuation of investments in Subsidiaries and Associates that are listed securities must be on the closing market quotation or the latest available market quotation (whichever is lower).
- Real Estate Investments
- For Admissible Asset purposes, real estate assets such as land and buildings must be valued at market value as assessed by an independent qualified expert. The Company may elect to use book value where that value is less than market value, however where no proper valuation exists the Authority is to appoint an authorized independent real estate firm at the Company's expense and use the results of the valuation.
- The admissibility test is to be applied in total to both land and building in instances where the realizable value of the asset is dependent on both the land and the building.
- For solvency margin calculation purposes, real estate assets such as land and buildings must be valued on a ‘cash flow' basis.
- For Admissible Asset purposes, real estate assets such as land and buildings must be valued at market value as assessed by an independent qualified expert. The Company may elect to use book value where that value is less than market value, however where no proper valuation exists the Authority is to appoint an authorized independent real estate firm at the Company's expense and use the results of the valuation.
- Debt / Government Securities
- Government securities/bonds (both fixed and variable interest securities) must be valued at:
- In the case of listed securities, the closing market quotation or the latest available market quotation (whichever is lower);
- In the case of securities which are not transferable, the amount payable on surrender or redemption of such securities as at the date the security is being valued; and
- In any other case, the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.
- In the case of listed securities, the closing market quotation or the latest available market quotation (whichever is lower);
- Debt securities (both fixed and variable interest securities) not covered in subparagraph (a) above must be valued at:
- In the case of listed securities, the closing market quotation;
- In the case of securities which are not transferable, the amount payable on surrender or redemption of such securities as at the date the security is being valued; and
- In any other case, the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.
- In the case of listed securities, the closing market quotation;
- Government securities/bonds (both fixed and variable interest securities) must be valued at:
- Equity Shares
- Valuation of equity shares that are listed securities is based on the closing market quotation or the latest available market quotation (whichever is lower).
- Valuation of equity shares that are not listed securities must be valued at economic or market value. A suitable valuation may be used to arrive at this value, but undertakings shall also consider the risks that arise from holding such a balance sheet item, using assumptions that market participants would use in valuing the asset or liability.
- The IFRS related to "Fair Value Measurement" accounting is considered a suitable measure for true economic value. This proposes a ‘mark-to-market' or, if not possible, a ‘mark-to-model' approach for all participations, listed and unlisted, taking into account the guidance given by the IASB related to "The valuation of assets and liabilities for solvency assessment purposes". Where the holding is not material however, a Net Asset Value (NAV) approach may be used.
- Valuation of equity shares that are listed securities is based on the closing market quotation or the latest available market quotation (whichever is lower).
Traded Derivative Contract
A traded derivative contract that is a listed security, for a share or a debenture must be valued at the closing market quotation, and otherwise at the amount which would reasonably be paid by way of consideration for an immediate transfer or assignment thereof.
Loans Secured by Insurance Policies Issued by the Company
Valuation of a loan secured by an insurance policy issued by the Company must be as the amount of the loan but not exceeding the amount payable on a surrender of the policy as at the date the policy is being valued.
- Other Assets
- Valuation of deposits and current account balances with approved financial institutions must be at their carrying value. The admissible value of these assets is their carrying value.
- The admissible value of any cash holding is its carrying value.
- Amounts due under contracts of insurance and reinsurance, including salvage and subrogation rights, must be valued at the amounts that can be expected to be recovered. The exceptions being:
- Advance commission paid to intermediaries which must be valued at nil, except in case of long term life insurance contracts, where advance commission paid should be valued at carrying value in its first year; and
- Amounts that pertain to a subsidiary or associate of the Company must be valued in accordance with subparagraph (1) above.
- Any debt should be valued depending on the exact nature of the debt and its recoverability. In any event and for all debtors, International Financial Reporting Standards related to the “impairment of assets” should be considered.
- Advance commission paid to intermediaries which must be valued at nil, except in case of long term life insurance contracts, where advance commission paid should be valued at carrying value in its first year; and
- For investments that are not specifically covered above, if the investment is due, or will become due, within twelve months from the date at which the investment is being valued (or would become so due if the company exercised some right), valuation should be based on the amount which can reasonably be expected to be recovered in respect of the investment, taking due account of any security held in respect thereof.
- Valuation of deposits and current account balances with approved financial institutions must be at their carrying value. The admissible value of these assets is their carrying value.
- Total Invested Assets
- For the purposes of asset valuation regulations, 'Total Invested Assets' is defined as the sum of the assets in the categories listed in paragraph (1) of Article (3) of the Basis of Investing the Rights of the Policyholders in Section (1) of this regulation.
- The Total Invested Assets for the Property and Liability insurance business shall be segregated and maintained separately from the Total Invested Assets held for the Insurance of Persons and Fund Accumulation operations.
- For the purposes of asset valuation regulations, 'Total Invested Assets' is defined as the sum of the assets in the categories listed in paragraph (1) of Article (3) of the Basis of Investing the Rights of the Policyholders in Section (1) of this regulation.
- Investments in Non-Insurance Subsidiaries and Associates
Section (5) Regulations Pertinent to the Records Which the Company Shall be Obligated to Organize and Maintain as Well as the Data and Documents That Shall be Made Available to the Authority
Article (1) - General Requirements for Records
- The Company must maintain complete transaction records for all local and international operations for as long as they are deemed relevant for the purposes for which they were made. Records of completed transactions may be retained in either hard copy and/or electronic format, but must be kept in their original form. Completed transaction records for business booked in the UAE must be maintained in the UAE and be easily accessible to the Authority.
- Any Company that is licensed for both Insurance of Persons & Fund Accumulation operations and Property and Liability insurance operations, must maintain separate records in respect of both types of insurance operations. The transactions relating to each kind of business must be maintained separately. The Company must maintain such accounting and other records as necessary to identify all assets and liabilities in respect of each kind of business.
- The Company shall maintain backup for all records. The backup shall be maintained in a separate location from the original records.
- Regardless of any information mentioned in other regulations, the electronic information or information generated from the computer system, fax and e-mail are considered adequate and valid if the authoritative controls were adhered to.
- The Company must maintain complete transaction records for all local and international operations for as long as they are deemed relevant for the purposes for which they were made. Records of completed transactions may be retained in either hard copy and/or electronic format, but must be kept in their original form. Completed transaction records for business booked in the UAE must be maintained in the UAE and be easily accessible to the Authority.
Article (2) - Period of Retention for Records
- The retention period of the records and backups along with any other related documents and data, should be for ten (10) years or more, as of the end date of the activity or the working relation with insured.
- The Company will maintain records beyond the normal statute of limitation periods as stipulated in paragraph (1) above, when the records are subject to ongoing investigations or prosecution in court. In such cases, the retention period shall be two years from the date of final verdict or the resolution issuance.
- The retention period of the records and backups along with any other related documents and data, should be for ten (10) years or more, as of the end date of the activity or the working relation with insured.
Article (3) - Types of Records
- The Company must maintain adequate records for all lines of business and shall include:
- Underwriting, Policy Issuance and Policy Servicing records;
- Claim transaction records;
- Complaints records;
- Technical Provisions records;
- Financial Solvency records;
- Product related records;
- Reinsurance contracts and related records;
- Investment records;
- Records of Company's transactions with its subsidiaries and affiliates;
- Records for the policyholders' funds under management;
- Records for shareholders funds;
- Major agreements of the Company;
- Policies and Procedures for all the processes within the Company including Risk Management Policy and Procedures;
- Records of actuarial reports;
- Records for professionals related to insurance; and
- Any other records that the Authority may require.
- Underwriting, Policy Issuance and Policy Servicing records;
- Further guidance on types of records in Addendum (1) of the regulations herein shall be applied.
- The Company must maintain adequate records for all lines of business and shall include:
Article (4) - Examination of Records
- The Authority examiners or any person assigned by it shall have the right to conduct office and field examinations of all accounts, records, documents, and transactions related to the insurance affairs of the Company and the Insurance and Reinsurance Services Provider. The Company employees shall provide all information, particulars and documents required by the examiners.
- When appointing an Actuary, the Company shall waive any duty of confidentiality on the part of the Actuary, such that the Actuary may report to the Authority any concerns held regarding material failures by the Company to comply with Authority requirements.
- The Authority may from time to time inspect under conditions of secrecy the records of the Company and of any of its branch offices.
- The Authority has the right to submit a formal letter to any Company employee for the following reasons:
- Provide the Authority with any information; or
- Appear before the Authority to discuss any topic that the Authority may request.
- Provide the Authority with any information; or
- An examiner authorized by the Authority shall examine, without any prior notice, the documents related to:
- The Company, or its agent, inside or outside the UAE; or
- The Company in liquidation or an insurance company whose license has been suspended.
- The Company, or its agent, inside or outside the UAE; or
- The examiner may examine the Company or a person whom he believes to be acquainted with the facts and circumstances of the case, including the External Auditor or the Actuary of the Company, the Company or the person shall give such document or information as the examiner may require within such time as he may specify.
- An External Auditor or an Actuary shall not be liable for breach of a contract relating to, or duty of, confidentiality for giving a document or information to the examiner.
- In case it becomes evident to the Authority that the actuarial report does not reflect the correct financial status of the Company, the Authority may order a re-examination by an Actuary appointed by Authority and the expenses to be borne by the Company for re-examination ordered by the Authority.
- In the case of any material discrepancies in the data or the records provided by the Company, the Authority may request to amend them within a specified period.
- The Company should submit any documents or information requested by the Authority or any Company that has an ownership relationship with the Company, pertaining to the Company's records and within the time period set by the Authority.
- The Authority examiners or any person assigned by it shall have the right to conduct office and field examinations of all accounts, records, documents, and transactions related to the insurance affairs of the Company and the Insurance and Reinsurance Services Provider. The Company employees shall provide all information, particulars and documents required by the examiners.
Article (5) - Records for Agents
- The agent shall keep records for all the data, information and documents related to the insurance agency business he is practicing on behalf of the Company or any of its branches, as the case may be, including the following:
- Name and address of the Company or any of its branches he is practicing the insurance business for;
- A copy of the agency agreement concluded between him and the Company;
- Memos and correspondences related to his business;
- The proposals received on behalf of the Company or any of its branches;
- Name of the proposer of insurance, the insured and the beneficiary, as well as the date of issuance and the premium collected in respect thereof;
- Where the agent is entitled to underwrite and issue policies on behalf of the Company, the agent shall document insurance policies and their endorsements concluded by him on behalf of the Company or any of its branches;
- A copy of insurance policies that the policyholder concludes with the Company;
- Records with serial numbers related to collecting, paying, recording, settling claims and any financial transactions regarding the insurance agency business practiced; and
- Bank records regarding the insurance agency business practiced.
- Name and address of the Company or any of its branches he is practicing the insurance business for;
- The records referred to above shall be in the form of originals, or in any other form of electronic archiving systems.
- The agent shall keep the records along with the backups for a period of not less than those stated in the insurance agent's regulations.
- The agent shall maintain records beyond the normal statute of limitation periods as stipulated in the insurance agent's regulations, when the records are subject to ongoing investigations or prosecution in court, until such records are no longer needed.
- The Authority may assign an employee(s) or appoint an external party to inspect, at appropriate times, the records of the agent. The agent shall have all his records available and cooperate with the employee(s) or the external party so that they can fully perform their duties. The agent shall bear all the expenses for the external party as decided by the Authority, unless the Authority deems otherwise.
- The agent shall keep records for all the data, information and documents related to the insurance agency business he is practicing on behalf of the Company or any of its branches, as the case may be, including the following:
Article (6) - Records for Brokers
Brokers shall maintain records in accordance with terms and provisions identified in the insurance brokerage regulations in force, and decisions issued pursuant thereto.
Article (7) - Addendum
The Addendum attached to these regulations is an integral part of the regulations and is to be read along with the regulations.
Addendum to Section 5 Records Which the Company Shall be Obligated to Organize and Maintain as well as the Data and Documents that Shall be Made Available to the Authority
Addendum
- The Company shall maintain the following as a minimum for Policy Issuance, Underwriting and Policy Servicing records:
- a. Insurance application and proposal;
- b. Insurance policy;
- c. Agreement on any terms of reinsurance cover;
- d. Reinsurance contracts;
- e. The insured and beneficiary's proof of identification;
- f. Underwriting policy and procedures;
- g. The technical basis of the insurance policies and premium ratios;
- h. List of insured personnel for group policies;
- h. Medical declaration for Insurance of Persons;
- i. Policyholders register;
- j. Re-insurance registers for assumptions and cessions showing details of underwriting information by treaty, subscriptions, losses, commissions, etc., balances due to/from re-insurance companies, and supporting source documents; and
- k. Customer Complaints register.
- a. Insurance application and proposal;
- The Company shall maintain claim records pertaining to policyholders' claims and classify them into paid, unpaid, and rejected claims. Each record shall include the following:
- Insurance application and proposal, if available;
- Copy of the insurance policy and procedures;
- Claims policy and procedures;
- Policyholder's claim information;
- Claims register;
- Adjusters and assessor's report and any other documents pertaining to the claim and the direct reason leading to the covered loss;
- Proportional share of any other insurance and re-insurance policies in effect;
- Action taken by the Company and the status of the claim;
- A power-of-attorney from the insured to the Company to subrogate it in the following cases;
- Third party liability for the loss; and
- Defending the insured in disputed liability or in determining the indemnity amount.
- Third party liability for the loss; and
- Signed settlement agreement by a person for a paid claim except in the cases of electronic medical claims where the signed settlement agreement is waived.
- Insurance application and proposal, if available;
- The Company shall maintain the following records in relation to the calculations of Technical Provisions:
- The methods and assumptions used in establishing the Company's reserves, including the margins for adverse deviation, and the reasons for their use;
- The nature of, reasons for, and effect of, any change in approach, including the amount by which the change in approach increases or decreases its reserves;
- Stress testing and scenario analysis prepared as required;
- Reserve calculations performed for each period; and
- Claims developments within the preceding five (5) years to show the variances in building the technical provisions.
- The methods and assumptions used in establishing the Company's reserves, including the margins for adverse deviation, and the reasons for their use;
- The Company shall maintain records related to investment operations such as investment statements, summary of investment income, details of derivatives and pledged assets, supporting documentation including securities registers (including information regarding securities held by the Company outside the UAE).
- In support of the investment operations, the Company shall maintain the following records:
- Working papers, with properly referenced audit trails, to support the financial statements/ regulatory data required to be submitted to the Authority;
- Bank statements, cheque registers, monthly banks reconciliations, vouchers and receipts pertaining to the operations in the UAE, and adequate documentation to confirm that amounts due in respect of the insurance business of the Company flow to the bank accounts in the UAE;
- Records supporting amounts due to or from the head office and affiliated entities (if any);
- Policy movement reports and reserve amounts;
- Premium registers detailing premiums written, earned, and unearned;
- Listing of policy loans amounts on deposit by policy, related income or expense, and originals or copies of policy loan applications;
- A description of the accounting system;
- All agreements, including outsourcing agreements with third party and affiliates;
- All signed contracts, which are material to the Company, that relate to the administrative operation of the Company;
- Policies and practices governing the Company's operations in the UAE;
- Risk management policies and procedures;
- Details of Board of Directors minutes and other committee minutes;
- Details of any current litigation matters; and
- Actuarial reports, including valuation reports, external review reports, experience studies, etc., and supporting documentation.
- Working papers, with properly referenced audit trails, to support the financial statements/ regulatory data required to be submitted to the Authority;
- The Company shall maintain the following as a minimum for Policy Issuance, Underwriting and Policy Servicing records:
Section (6) Regulations Pertinent to the Principles of Organizing Accounting Books and Records of Each of the Companies, Agents and Brokers and Determining Data to be maintained in these Books and Records
Article (1) - Types of Accounting Books
- Following types of accounting books shall be maintained at minimum:
- Accounting Books including Technical accounting books;
- Ledgers and sub-ledgers;
- Journals;
- Adequate accounting and other books to identify and support the contracts and the assets, liabilities, revenues and expenses attributable to its operations; and
- Any other books as required by the Authority.
- Accounting Books including Technical accounting books;
- The Company which is carrying on both Insurance of Persons & Fund Accumulation operations and Property and Liability insurance operations must maintain separate books in respect of both operations. Transactions relating to each business operation must be maintained separately. The Company must maintain accounting and technical books needed to identify all assets and liabilities relating to the business operations.
- The Authority may from time to time inspect under conditions of secrecy the books, accounts and transactions of any Company and of any of its branch offices.
- The Company should submit any documents or information requested by the Authority on any Company that has an ownership relationship with the Company, pertaining to the Company's books and within the time period that is set by the Authority.
- The Company shall maintain backup for all records. The backup shall be maintained in a separate location from the original records.
- Regardless of any information mentioned in other instructions, the electronic information or information generated from the computer system, telefax, fax and email are considered adequate and valid if the authoritative controls were adhered to.
- The books referred to above shall be in the form of originals, or in any other form of electronic archiving systems.
- The Authority may assign an employee(s) from their end or appoint an external party to inspect, at appropriate times, the books of the Company. The Company shall have all its books available and cooperate with the employee(s) or the external party so that they can fully perform their duties. The Company shall bear all the expenses for the external party as decided by the Authority, unless the Authority deems otherwise.
- For inspection purposes, the Company shall allow the Authority access to its books, accounts and documents and shall give such information and facilities as may be required to conduct the inspection.
- The retention period of the books and backups along with any other related documents and data, should be for ten (10) years or more, as of the end of the financial year or as of the end date of the activity or the working relation with the insured.
- The Company will maintain books beyond the normal statute of limitation periods as in paragraph (10), when the books are subject to ongoing investigations or prosecution in court, until such books are no longer needed.
- Following types of accounting books shall be maintained at minimum:
Article (2) - Records for Agents
- Every insurance agent shall prepare for every accounting year the following:
- A financial position as at the end of each accounting period;
- An income statement for that period;
- A cash flow statement;
- A change in equity statement; and
- Additional statements and notes to accounts as may be required by the Authority.
- A financial position as at the end of each accounting period;
- Every insurance agent shall maintain separate ledger accounts for each of its clients.
- The retention period for records identified in this Article and their backup copies shall be in line with the applicable insurance agent's regulations.
- The agent shall maintain records beyond the normal statute of limitation periods as stipulated in the applicable insurance agent's regulations, when the records are subject to ongoing investigations or prosecution in court, until such records are no longer needed.
- The Authority may assign an employee(s) from their end or appoint an external party to inspect, at appropriate times, the records of the agent. The agent shall have all his records available and cooperate with the employee(s) or the external party so that they can fully perform their duties. The agent shall bear all the expenses for the external party as decided by the Authority, unless the Authority deems otherwise.
- Every insurance agent shall prepare for every accounting year the following:
Article (3) - Records for Brokers
Insurance brokers shall maintain accounting and technical books and prepare the financial statements in accordance with the terms and provisions identified in the insurance brokerage regulations and decisions issued pursuant thereto.
Article (4) - Auditing of Accounting Books
- The Company shall appoint one or more qualified and experienced External Auditors for its accounts for every financial year.
- If a Company fails to appoint an External Auditor within four months from the beginning of the financial year, the Authority shall appoint such External Auditor at the Company's expense.
- The External Auditor shall review actuarial reports that represent immediate or future risks facing the Company, and the Authority shall be provided with copies of these reports in a timely manner.
- The Actuary shall, in the presence of immediate or future risks facing the Company that would hinder the Company from fulfilling its short term and long term liabilities, submit a report on a timely basis directly to the Company's Board of Directors. The Board of Directors shall examine the report and recommend corrective actions, and forward all related information to the Authority, including the Board of Director's recommendations related to the report.
- The Company's Board of Directors shall form an Audit Committee consisting of at least three members from non-executive managers (a Chairman and two other members), of whom a member shall be an expert in financial and accounting affairs. The Board of Directors shall select the committee members among its members other than the members of the executive management or any of the committees established by the Board of Directors. One or more members from outside the Company may be appointed in case the number of non-executive Board of Directors members is not sufficient. The Audit Committee shall meet at least once every three months, or whenever necessary.
- The Company shall:
- Establish an Internal Audit department, which shall report directly to the Audit Committee. The Internal Audit Head in charge of this department must be a holder of a professional certificate in the related discipline and have relevant and adequate experience.
- Appoint a regulatory compliance officer. This officer shall verify compliance with all rules, regulations and instructions. This officer shall directly report to the Chief Executive Officer and shall contact the Authority directly and provide it with information according to the procedures that it specifies.
- Establish an Internal Audit department, which shall report directly to the Audit Committee. The Internal Audit Head in charge of this department must be a holder of a professional certificate in the related discipline and have relevant and adequate experience.
- The Company shall submit to the Authority the management letter issued by the External Auditor, on an annual basis, before publication of the financial statements.
- Further guidance on auditing of accounting books and other related guidelines in Addendums (1) and (2) of the regulations herein shall be applied.
- The Company shall appoint one or more qualified and experienced External Auditors for its accounts for every financial year.
Article (5) - Addendums
The Addendums attached to these regulations are an integral part of the regulations and are to be read along with the regulations.
Addendums to Section 6 Principles of Organizing Accounting Books and Records of Each of the Companies, Agents and Brokers and Determining Data to be maintained in these Books and Records
Addendum (1)
- Additional Tasks for the External Auditor:
- The Authority may request additional duties from the External Auditor, including:
- Submission of such additional information relating to the audited accounts as the Authority may specify;
- Enlarging the scope of the audit;
- Notifying the Authority of any financial violations discovered during the course of the audit;
- Notifying the Authority of any reservations regarding the accounts or the reserves of the Company;
- Notifying the Authority of any discrepancy in the financial systems, controls, and of any material inaccuracies or inconsistency in the Company's financial statements; and
- Preparing such financial reports and statements as required by the Authority. External Auditor's fees for such additional tasks shall be borne by the Company.
- Submission of such additional information relating to the audited accounts as the Authority may specify;
- While carrying out such additional duties, listed in paragraph (a), as requested by the Authority, the External Auditor shall not be in breach of any duties towards the Company, the Authority, the shareholders or any third parties.
- The Authority may request additional duties from the External Auditor, including:
- The External Auditor shall be independent and shall not be the Chairman or a director in the Company's Board of Directors or a managing director, agent, representative or taking up any administrative work therein, or supervising its accounts, or a next of kin to someone who is responsible for the administration or accounts of the Company, or having an extraordinary interest in the Company or any of its competitors.
- If any of the circumstances referred to in the paragraph (2) occurs after the appointment of the External Auditor, the Company must appoint another External Auditor.
- The Company shall provide the External Auditor with all information and assistance necessary for carrying out his duties.
- The duties of the External Auditor shall include the preparation of a report on the final and interim accounts. The report shall contain a statement on whether the Company's accounts are fairly stated and reflect materially, the actual state of affairs of the Company and whether the Company has provided the External Auditor with all required information and clarifications.
- If the Company is a foreign Company, its final audited accounts together with the External Auditor's report shall be sent to its main office abroad and a copy shall be sent to the Authority.
- External Auditor Access to Relevant Information: Outsourcing agreements must ensure that the Company's Internal and External Auditors have timely access to any relevant information they may require to fulfill their responsibilities.
- Additional Tasks for the External Auditor:
Addendum (2)
- Major Roles and Responsibilities of the Internal Auditor:
- Evaluates and provides reasonable assurance that risk management, control, and governance are functioning as intended for all required systems, processes and/or risks enabling the Company to meet its objectives and goals;
- Reports risk management issues and internal control deficiencies identified directly to the Audit Committee, or equivalent group-level governance structure for Foreign Companies, and provides recommendations for improving the Company's operations, in terms of both efficient and effective performance;
- Evaluating the risk exposures relating to the achievement of the Company's objectives;
- Evaluating the reliability and integrity of information and the means used to identify, measure, classify and report such information;
- Evaluating the information security and probabilities of exposure to its related risks;
- Evaluates regulatory compliance program with consultation from legal counsel;
- Evaluates the Company's readiness in case of business interruption; and
- Teams with other internal and external resources as appropriate.
- Evaluates and provides reasonable assurance that risk management, control, and governance are functioning as intended for all required systems, processes and/or risks enabling the Company to meet its objectives and goals;
- The Company shall have an annual audit plan and a risk assessment performed annually and aligned to the annual audit master plan
- Major Roles and Responsibilities of the Internal Auditor:
Section (7) Regulations Pertinent to Accounting Policies to be Adopted and the Necessary Forms Needed to Prepare and Present Reports and Financial Statements
Article (1) - Preparation of Financial Statements
- The Company shall prepare its financial statements in accordance with the International Financial Reporting Standards and the Authority accounting policies and forms stipulated herein, and shall provide the Authority with a detailed financial report in accordance with the applicable requirements of the Authority.
- The Company that is providing Insurance of Persons and Funds Accumulation operations in addition to Property and Liability insurance operations must generate separate financial statements for each type of business and consolidated financial statements according to the attached forms in Appendix (1).
- The Company shall submit its annual financial and closing statements including their notes to the Authority in both languages; Arabic and English.
- The Company shall submit its quarterly financial statements including notes to the Authority in Arabic. Submission in English is optional.
- Further guidance on preparation of financial reports in Addendum (1) of the regulations herein shall be applied.
- The Company shall prepare its financial statements in accordance with the International Financial Reporting Standards and the Authority accounting policies and forms stipulated herein, and shall provide the Authority with a detailed financial report in accordance with the applicable requirements of the Authority.
Article (2) - Amendments to Financial Statements
The Authority shall have the right to add any items to the forms required for the financial reports and statements, amend or cancel such forms, or to add any other forms.
Article (3) - Reporting Requirements
- The Company shall provide the Authority with the financial statements attached in Appendix (1) herein according to a deadline set by the Law for the Operations of the Company in the UAE, its foreign branches and other related companies if applicable.
- In case of errors noted in the submitted financial statements, the Authority will request the Company to rectify the identified mistakes and revert to the Authority within the period set by the Authority.
- The Company should provide the Authority with a copy of the financial statement as per the below instructions:
Quarterly financial statements:
The Company should provide the Authority with quarterly financial statements signed by the Company's General Manager and reviewed by the External Auditor. A limited review by the External Auditor is deemed to be sufficient for purposes of quarterly reporting. A forty-five (45) day period after the end of the quarter is the submission deadline.
Annual financial statements:
The Company should provide the Authority with annual financial statements audited by the External Auditor and signed by the Chairman of the Board of Directors and the General Manager. The submission date is determined based on the law governing the submission. The Annual report to be submitted to the Authority shall include the following:
- The External Auditor report for the Company on audited financial statements and Disclosures based on Appendix (1) of this regulation.
- The notes to the Financial Statements;
- The Report of the Board of Directors;
- The Report of the Actuary of the Company;
- A description of the roles of the Actuary and the External Auditor in the preparation and audit of the annual financial statements; and
- The Management Report (not applicable to branches of Foreign Insurance Companies).
- The External Auditor report for the Company on audited financial statements and Disclosures based on Appendix (1) of this regulation.
- Further guidance on reporting requirements in Addendum (2) of the regulations herein shall be applied.
- The Company shall provide the Authority with the financial statements attached in Appendix (1) herein according to a deadline set by the Law for the Operations of the Company in the UAE, its foreign branches and other related companies if applicable.
Article (4) - Addendums & Appendix
The Addendums and Appendix attached to these regulations are an integral part of the regulations and are to be read along with the regulations. The format of the reports in Appendix (1) are shown as a general guideline, but are intended to follow the International Financial Reporting Standards which are expected to be updated periodically.
Addendums To Section 7 Accounting Policies to be Adopted and the Necessary Forms Needed to Prepare and Present Reports and Financial Statements
Addendum (1)
- Any item required to be shown in a Company's financial statement may be shown in a greater detail than required by the Appendix or in the actual forms specified by the Authority.
- In the event that any item is added to the forms, adequate justification must be given in the notes regarding the reasons for the item being disclosed separately.
- The Company must not include a heading or sub-heading corresponding to an item in the financial statement format used if there is no amount to be shown for that item for the financial year to which the financial statement relates. Where an amount can be shown for the item in question for the immediately preceding financial year that amount must be shown under the heading or sub-heading required by the format for that item.
- For every item shown in the financial statement the corresponding amount for the immediately preceding financial year must also be shown.
- Where that corresponding amount is not comparable with the amount to be shown for the item in question in respect of the financial year to which the financial statement relates, the former amount shall be adjusted, and particulars of the non-comparability and of any adjustment must be disclosed in a note to the accounts.
- Any item required to be shown in a Company's financial statement may be shown in a greater detail than required by the Appendix or in the actual forms specified by the Authority.
Addendum (2)
The Management Report shall contain the following:
- Confirmation regarding the continued validity of the registration granted by the Authority;
- Certification that all the dues payable to the statutory authorities have been duly paid/accrued;
- Confirmation to the effect that the shareholding structure and any transfer of shares during the year are in accordance with the statutory or regulatory requirements;
- Confirmation that the required solvency margin has been maintained in compliance with the Regulations Pertinent to the Solvency Margin and Minimum Guarantee Fund issued by the Authority as per Section (2) herein;
- Confirmation that the assets have been valued in compliance with the Regulations Pertinent to Determining the Company's Assets that Meet the Accrued Insurance Liabilities issued by the Authority as per Section (4) herein;
- Confirmation to the effect that no part of the various funds maintained by the Company have been directly or indirectly applied in contravention of the Regulations Pertinent to the Basis of Investing the Rights of the Policyholders issued by the Authority as per Section (1) herein;
- The Company's risk management strategies and practices must include the following:
- A summary of the significant internal and external risks facing the Company;
- A summary of the Company's risk management policies (including, but not limited to, underwriting, credit, investment, reserving, legal, operational and group risks); and
- A summary of the Company's risk monitoring organization and processes, including details on the Company's risk management and internal audit functions; the use of reinsurance; and controls on underwriting, credit and investment risk.
- A summary of the significant internal and external risks facing the Company;
- Operations in other countries, if any, with a separate statement providing management's estimate of country risk, exposure risk and the hedging strategy adopted by country;
- Aging of claims indicating the trends in average claim settlement time and amount during the preceding five years;
- Review of asset quality and performance of investment portfolios relevant to real estate, loans, investments, etc.
- A responsibility statement from the management indicating therein that:
- In the preparation of financial statements, IFRS have been followed along with proper explanations relating to material departures, if any;
- The management has adopted accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the operating profit or loss and of the profit or loss of the Company for the year;
- The management has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the applicable provisions of the Authority, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
- The management has prepared the financial statements on a going concern basis; and
- The management has ensured that an internal audit system commensurate with the size and nature of the business exists and is operating effectively.
- In the preparation of financial statements, IFRS have been followed along with proper explanations relating to material departures, if any;
- Details of any shares in the company held by its Directors and Chief Executive Officer/General Manager shall be disclosed.
- The following information relating to corporate governance shall be included:
- Information on the corporate governance (including IT Governance) rules and framework adopted within the Company;
- Information about the Board of Directors and Board of Directors' Committees (if any). This must include details of Board of Directors membership (including a summary of each Board of Directors member's professional experience, qualifications, date of appointment, remuneration paid and other Directorships held); details of the membership and mandates of any Board of Directors' Committees; and the number of Board of Directors meetings and any Board of Directors' committee meetings held during the financial year in question;
- Information on the composition and role of various other Board of Directors and Management Committees;
- Information about the managerial structure. This must include a summary of the Chief Executive Officer's/General Manager's professional experience, qualifications and date of appointment; a summary of any management committees, their mandates and membership; and a summary of the senior management structure and reporting lines; and
- Information about the Company's basic organizational structure, including a clear description of the lines of business and legal entity structures.
- Information on the corporate governance (including IT Governance) rules and framework adopted within the Company;
- Confirmation regarding the continued validity of the registration granted by the Authority;
Appendix 1 Financial Statement Forms
Appendix 1 Financial Statement Forms
Appendix (1)
Insurance Company Financial Statement Forms (with Disclosures)
Consolidated Financial Position for Insurance Company as of (Day/Month/Year) Notes 20XX 20YY AED AED Assets
Property, machinery, and equipment
Investments in associates
Intangible assets
Investments at amortized cost
Investments carried at fair value through other comprehensive
income
Derivative financial instruments
Investments carried at fair value through profit and loss
Investment in Properties
Insurance balances receivable
Statutory deposits
Loans guaranteed by life insurance policies
Premiums and insurance balances receivable
Reinsurers' share of outstanding claims
Other receivables and prepayments Deposits
Cash and cash equivalentsTotal Assets
Shareholders' Equity and Liabilities
Shareholder Equity attributable to shareholders of the Parent
Treasury shares
Additional paid-in capital
Retained earnings/loss
Minority Interest
Foreign currency translation reserve
Total Shareholders' Equity
Issued and paid up share capital
Share premium
Treasury reserve
Employees Share option reserve
Revaluation reserves
Statutory reserve
General reserve
Cumulative change in Fair Value through other comprehensive income
Total Reserves
Total Shareholders' Equity
Liabilities
Borrowings
Retirement benefit obligation
Derivative financial instruments
Accounts Payable
Insurance Liabilities
Insurance contract liabilities
Premium collected in advance
Technical Provisions
Unearned premium reserve
Unexpired Risk Reserve
Claims under settlement reserve
Incurred but not reported reserve
Allocated loss adjustment expense reserve
Unallocated loss adjustment expense reserve
Mathematical reserve
Total technical provisions
Total Liabilities
Total Shareholders' Equity and Liabilities
Consolidated refers to a group of companies running Insurance of Persons and Fund Accumulation Operations on one hand, and Property and Liability Insurance on another.
The cash flow and change in shareholders' equity format under consolidated financial statements is applicable to individual financial statements to be prepared for Insurance of Persons, Fund Accumulation Operations, Property and Liability Insurance.
Consolidated Income Statement for Insurance Company for the period ended (Day/Month/Year) Notes 20XX 20YY AED AED Gross Premiums
Reinsurance Share of Gross Premiums
Reinsurance Share of Ceded Business Premiums
Net Premium
Net Transfer to Unearned Premium Reserve
Net Premium Earned
Commissions Earned
Commissions Paid
Others
Gross Underwriting Income
Gross Claims Paid
Commissions and deductions
Reinsurance Share of Insurance Claims and loss adjustment expenses recovered from reinsurers
Reinsurance Share of Ceded Business Claims
Net Claims Paid
Provisions for Outstanding Claims
Reinsurance Share of Outstanding Claims
Increase/ (Decrease) in Unearned Premium Reserves & URR
Increase/ (Decrease) in Incurred but Not Reported Claims Reserves
Increase/ (Decrease) in Allocated & Unallocated Loss Adjustment Expense Reserve
Increase/ (Decrease) in Mathematical Reserves
Net Claims
Incurred Net Underwriting Income
Income from Investments
Income from Investment Properties
Foreign Currency Exchange Fluctuation (Gain/Loss)
Other Gain/Loss
Total Income
General and Administrative Expenses
Bonuses and Rebates (Net of Reinsurance)
Other Operating Expenses
Net Profit/Loss for the Year
Net loss on revaluation of available-for-sale investments
Reclassification adjustment relating to available-for-sale investment impaired during the year
Transfer to profit or loss on investments for sale/ amortization/ provision/ impairment loss on financial assets carried at amortized cost
Board of Directors' remuneration
Total Comprehensive Profit/Loss for the Year
Earnings per share:
Basic
Diluted
Comprehensive Income Statement for Insurance Company for the period ended (Day/Month/Year) Notes 20XX 20YY AED AED Net Profit for the Year
Other Comprehensive Income
Other comprehensive income reclassified to profit and loss at later stages:Share of other comprehensive income of associates
Net unrealized gain/(loss) from investments through other comprehensive income
Net realized (gain)/loss transferred to profit and loss from the sale of investments through other comprehensive income
Transferred to profit and loss from impairment of investments through other comprehensive incomeForeign currency adjustments from translation of foreign operations
Other Comprehensive Income for the Year
Total Comprehensive Income for the Year
Attributable to:
Shareholders of the parent company
Non-controlling interests
Consolidated Cash Flow for Insurance Company for the period ended (Day/Month/Year) 20XX 20YY AED AED Income (Profit/Loss) for the Year
Adjustments:
Depreciation
Unrealized Gain /Loss on Investment Properties
Unrealized Gain /Loss on Derivative Financial Instruments
Unrealized Gain /Loss Foreign Currency Exchange Fluctuation
Unrealized Gain /Loss on Investment
Other Gain/Loss
Cash Flows from Operating Activities
Increase /(Decrease) in Insurance Receivables
(Increase) /Decrease in Other Receivables and Prepayments
(Decrease) /Increase in Accounts Payable
(Decrease) /Increase in Insurance Contract Liabilities
Retirement Benefit Obligations
Net Cash from Operating Activities
Cash Flows from Investing Activities
Purchase of Property, machinery, and equipment
Proceeds from Sale of Property, machinery, and equipment
Investments
Net Cash from Investing Activities
Cash flows from Financing Activities
Purchase of Treasury Shares
Dividends Paid to Company's Shareholders
Proceeds from Borrowings
Proceeds from Issuance of shares
Net Cash from Financing Activities
(Decrease) /Increase in cash and cash equivalents
Cash and Cash Equivalents at the End of the YearConsolidated Statement of Change in Equity for Insurance Company as of (Day/Month/Year)
Attributable to Equity Holders of the Parent
Other Reserves (AED) Notes Treasury share Additional paid-in capital Retained earnings Foreign currency translation
reserveIssued and paid up share capital Share premium Treasury shares reserve Employees share option reserve Revaluation reserve Statutory reserve General reserve Cumulative changes in reserve on
investments through other
comprehensive incomeTotal ordinary shareholders' equity Other equity instruments Minority interests Total equity Balance at December 31,20XX
Profit/Loss for the year
Other comprehensive income/loss for the year
Total comprehensive loss for the year
Dividends
Issue of bonus shares
Balance at December 31,20YY
Profit/Loss for the year
Other comprehensive income/loss for the year
Total comprehensive loss for the year Dividends
Issue of bonus shares
Balance at December 31, 20ZZFinancial Position for Insurance of Persons and Fund Accumulation Operations for Insurance Company as of (Day/Month/Year) Notes 20XX 20YY AED AED Assets
Property, machinery, and equipment
Investments in associates
Goodwill
Financial Instruments
Investment in Properties
Investments in financial securities
Investments at amortized cost
Investments through other comprehensive income
Derivative financial instruments
Investments carried at fair value through other comprehensive income
Available for sale Real Estate investments
Insurance balances receivable
Statutory deposits
Loans guaranteed by life insurance policies
Premiums and insurance balances receivable
Reinsurers share of outstanding claims
Other receivables and prepayments
Deposits
Cash and cash equivalents
Total AssetsShareholders' Equity and Liabilities
Shareholder Equity attributable to shareholders of the Parent
Treasury shares
Additional paid-in capital
Retained earnings/loss
Minority Interest
Foreign currency translation adjustmentsShareholders' Equity
Issued and paid up share capital
Treasury reserve
Employees share option reserve
Revaluation reserves
Statutory reserve
General reserve
Cumulative change in available for sale investments
Total Reserves
Total Shareholders' Equity
Liabilities
Borrowings
Retirement benefit obligation
Derivative financial instrumentsPayables
Insurance Liabilities
Insurance contract liabilities
Premiums received in advance
Technical provisions
Unearned Premium Reserve
Claims under settlement reserve
Claims Incurred but Not Reported
Allocated loss adjustment expenses
Unallocated loss adjustment expenses
Mathematical Reserve
Total Technical provisions
Total Liabilities
Total Shareholders' Equity and LiabilitiesIncome Statement for Insurance of Persons and Fund Accumulation Operations for Insurance Company as of Month, 20XX Notes 20XX 20YY AED AED Gross Premium
Reinsurance Share of Gross Premiums
Reinsurance Share of Ceded Business PremiumsNet Premium
Net Transfer to Unearned Premium Reserve
Net Transfer to Mathematical Reserve for Life Insurance
OperationsNet Premium Earned
Commissions Earned
Commissions Paid
Net earnings from Life Insurance Investments
OthersGross Underwriting Income
Gross Claims Paid
Reinsurance Share of Insurance Claims and loss adjustment
expenses recovered from reinsurers
Reinsurance Share of Ceded Business ClaimsNet Claims Paid
Provisions for Outstanding Claims
Reinsurance Share of Outstanding Claims
Earnings and Cancellations of Life Insurance Policies
Increase/ (Decrease) in Incurred But Not Reported Reserves (short-term products only)
Increase/ (Decrease) in Allocated Adjustment Expense Reserve
Increase/ (Decrease) Unallocated Loss Adjustment Expense Reserve
Increase/ (Decrease) in Mathematical ReservesNet Claims Incurred
Net Underwriting Income
Income from Investments
Income from Investments in Properties
Foreign Currency Exchange Fluctuation (Gain/Loss)
Other Gain/LossTotal Income
General and Administrative Expenses
Bonuses and Rebates (Net of Reinsurance)Other Operating Expenses
Net Profit/Loss for the Year
Net loss on revaluation of investments through other comprehensive income
Reclassification adjustment relating to investment through other comprehensive income impaired during the year
Transfer to profit or loss on investments for sale/ amortization/ provision/ impairment loss on financial assets carried at amortized cost
Board of Directors' remuneration
Total Comprehensive Profit/Loss for the Year
Earnings per share:
Basic
DilutedFinancial Position for Property and Liability Insurance Company as of (Day/Month/Year) Notes 20XX 20YY AED AED Assets
Property, machinery, and equipment
Investments in associates
Goodwill
Financial Instruments
Investments in Properties
Investments in financial securities
Investments at amortized cost
Investments designated at fair value through the other comprehensive income
Derivative financial instruments
Investments classified as fair value through income statement
Investments in properties
Insurance receivables
Statutory deposits
Premiums and insurance balances receivable
Reinsurers' share of outstanding claims
Other receivables and prepayments
Deposits
Cash and cash equivalents
Total AssetsShareholders' Equity and Liabilities
Shareholders' Equity attributable to Shareholders of the Parent:
Treasury shares
Additional paid-in capital
Retained earnings/loss
Minority Interest
Foreign currency translation adjustments
Issued share capital
Share premium
Treasury reserve
Employees share option reserve
Revaluation reserves
Statutory reserve
General reserve
Cumulative Fair Value through other comprehensive income
Total Reserves
Total Shareholders' Equity
Liabilities
Borrowings
Retirement benefit obligation
Derivative financial instruments
Accounts PayablesInsurance Liabilities
Insurance contract liabilities
Premiums received in advance
Technical provisionsUnearned Premium Reserve
Claims under settlement reserve
Incurred but Not Reported reserve
Allocated loss adjustment expense reserve
Unallocated loss adjustment expense reserve
Total Technical Reserves
Total Liabilities
Total Shareholders' Equity and LiabilitiesIncome Statement for Property and Liability Insurance Company for the period ended (Day/Month/Year) Notes 20XX 20YY AED AED Gross Premium
Reinsurance Share of Gross Premiums
Reinsurance Share of Ceded Business PremiumsNet Premium
Net Transfer to Unearned Premium ReserveNet Premium Earned
Commissions Earned
Commissions Paid OthersGross Underwriting Income
Gross Claims Paid
Reinsurance Share of Insurance Claims and loss adjustment
expenses recovered from reinsurers
Reinsurance Share of Ceded Business ClaimsNet Claims Paid
Provisions for Outstanding Claims
Reinsurance Share of Outstanding Claims
Increase/ (Decrease) in Incurred but Not Reported Claims Reserves
Increase/ (Decrease) in Allocated & Unallocated Loss Adjustment
Expense ReservesNet Claims Incurred
Net Underwriting Income
Income from Investments
Income from Investments in Properties
Foreign Currency Exchange Fluctuation (Gain/Loss)
Other Gain/LossTotal Income
General and Administrative Expenses
Bonuses and Rebates (Net of Reinsurance)
Other Operating ExpensesNet Profit/Loss for the Year
Net loss on revaluation of investments through other comprehensive income
Reclassification adjustment relating to investment through other
comprehensive income impaired during the year
Transfer to profit or loss on investments for sale/ amortization/
provision/ impairment loss on financial assets carried at amortized cost
Board of Directors' remunerationTotal Comprehensive Profit/Loss for the Year
Earnings per share:
Basic
DilutedNotes to the Financial Statements
- Disclosure over the financial statements is made in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and its interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and according to the templates identified by the Authority.
- Notes to financial statements include the following:
- 2.1 General information.
- 2.2 Adoption of new and revised International Financial Reporting Standards (IFRSs).
- 2.3 Summary of significant Accounting Policies which include:
- Statement of compliance.
- Basis of preparation.
- Basis of consolidation.
- Business combinations.
- Goodwill.
- Insurance contracts.
- Revenue recognition.
- General and administrative expenses.
- Foreign currencies.
- Property, machinery and equipment.
- Investment properties.
- Impairment of non-financial assets.
- Provisions.
- Financial instruments.
- Financial assets.
- Financial liabilities.
- Dividend distribution.
- Others.
- Statement of compliance.
2.5 Property, machinery and equipment.
2.6 Investment properties.
2.7 Financial investments.
2.8 Statutory deposits.
2.9 Insurance contract liabilities and reinsurance contract assets.
2.10 Insurance receivables.
2.11 Bank balances and cash.
2.12 Share Capital.
2.13 Reserves.
2.14 Bank borrowings.
2.15 Insurance payables and others.
2.16 Net investment income / loss.
2.17 Related party transactions.
2.18 Segment information.
2.19 Contingent liabilities.
2.20 Commitments.
2.21 Insurance risk.
2.22 Capital risk management.
2.23 Financial instruments.
2.24 Dividends.
2.25 Approval of financial statements.
2.26 Others.
- In addition to the above, the Company should disclose the following:
3.1 Gross Premium
This item is to comprise all amounts due during the financial year in respect of insurance contracts entered into regardless of the fact that such amounts may relate in whole or in part to a later financial year, and must include the following:
- Premiums yet to be determined, where the premium calculation can be done only at the end of the year;
- Single premiums, including annuity premiums, and, in long-term business, single premiums resulting from bonus and rebate provisions in so far as they must be considered as premiums under the terms of the contract;
- Additional premiums in the case of half-yearly, quarterly or monthly payments and additional payments from policyholders for expenses borne by the Company;
- In the case of co-insurance, the Company's portion of total premiums;
- Reinsurance premiums due from ceding and retroceding insurance undertakings, including portfolio entries, after deduction of cancellations and portfolio withdrawals credited to ceding and retroceding insurance undertakings.
- Premiums yet to be determined, where the premium calculation can be done only at the end of the year;
3.2 Statutory Deposit
In accordance with Federal Law No. (6) of 2007, the Company shall place a deposit at a Bank in the State as guarantee of fulfilling its liabilities and amounting to AED 4 million for Insurance of Persons and Fund Accumulation Operations, and AED 2 million per line of business for Property and Liability Insurance, not to exceed AED 6 million.
3.3 Insurance Receivables
This item consists of the following:
December 31, 20XX 20YY AED AED Due from Policyholders
Less: Allowance for Doubtful Debts
Due from insurance/ reinsurance companies
Due from brokers/ agents
Less: Allowance for Doubtful Debts
Insurance Receivable - Net
Inside UAE:
December 31, 20XX 20YY AED AED Due from Policyholders
Less: Allowance for Doubtful Debts
Due from insurance/ reinsurance companies
Due from brokers/ agents
Less: Allowance for Doubtful Debts
Insurance Receivable - Net
Note: The receivables ageing details to be disclosed separately for policyholders, reinsurance inward, reinsurance outward, brokers and agents in the below format:
Inside UAE
Less than 30 days
30 - 90 days
91 - 180 days
181 - 270 days
271 - 360 days
More than 360 days
Total
Outside UAE
Less than 30 days
30 - 90 days
91 - 180 days
181 - 270 days
271 - 360 days
More than 360 days
Total
Movement on the provision for doubtful debts during the year was as follows:
20XX 20YY AED AED Balance at the beginning of the year
Additions
Balance at year end
3.4 Other Receivables and Prepayments
December 31, 20XX 20YY AED AED Receivable from Employees
Refundable Deposits
Prepayments
Others
Other Receivables and Prepayments
3.5 Issued Share Capital
Subscribed and paid - up capital amounted to AED XX distributed over XX shares, the par value of each is AED 1 as of December 31, 20XX (against AED XX million shares of AED 1 each as of December 31,20YY).
3.6 Payables
This item consists of the following:
December 31, 20XX 20YY AED AED Payables - Inside UAE
Payables - Outside UAE
Other payables
Total
Inside UAE:
December 31, 20XX 20YY AED AED Accounts Payable -
Insurance Companies Receivable
Reinsurance Companies Receivable
Accounts Payable -
Receivable from Agents
Receivable from Brokers
Receivable from Employees
Other payables
Total
Outside UAE:
December 31, 20XX 20YY AED AED Accounts Payable - Article (1):
Insurance Companies Receivable
Reinsurance Companies Receivable
Accounts Payable - Article (2):
Receivable from Agents
Receivable from Brokers
Receivable from Employees
Other payables
Total
3.7 Technical Provisions
This item consists of the following:
December 31, 20XX 20YY AED AED Insurance of Persons and Fund Accumulation:
Unearned Premium Reserve
Incurred but Not Reported Reserve (Short-term life and Fund Accumulation products of one year)
Mathematical Reserve
Allocated Loss Adjustment Expense Reserve
Unallocated Loss Adjustment Expense Reserve
Total Insurance of Person and Fund Accumulation Operations
Note: Technical provisions details in the above format to be provided for each class of insurance as defined by the Authority.
Property and Liability Insurance:
Unearned Premium Reserve
Incurred but Not Reported Reserve
Unallocated Loss Adjustment Expense Reserve
Total Property and Liability insurance Technical Provisions
Total Technical Provisions
Note: Technical provisions details in the above format to be provided for each class of insurance as defined by the Authority.
Adequate explanation for the method adopted should be given and the method should be consistent from year to year for technical provisions. In case the Actuary decides to change the method being used from previous years, sufficient explanation to the same n
- Disclosure over the financial statements is made in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and its interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and according to the templates identified by the Authority.