Monday, December 23, 2013
Press Release issued by the IA
IA issues new advanced Regulations as to Insurance Brokerage
· Al-Mansouri: the Regulations is an advanced step to develop the profession by handling the gaps and finding solutions for the problems facing all parties in accordance with the best international practices
· Rising minimum limit of paid up capital to (3) million Dirhams for local brokers and (10) million Dirhams for foreign brokers or brokers in the free zone
· Rising minimum limit of banking guarantee amount to (3) million Dirhams for local brokers and (5) million Dirhams for foreign brokers or brokers in the free zone.
· Enforcing the brokers to follow-up collection of insurance premiums and transfer them to the company within (20) business days.
· A training and nationalization plan for the UAE citizens and new requirements for technical staff in terms of certificate and technical experience.
· The Regulations promote merger of brokers that failed to regularize their positions and do not have the technical and financial capabilities.
· Obliging the broker with an organizational structure that defines the actual responsibilities and powers of managers and staff.
· Broker license term is one year to expire in the end of December every year
H. E. Eng. Sultan Bin Saeed Al-Mansouri, Minister of Economy and Chairman of the Insurance Authority (IA), issued a decision on the insurance brokerage Regulations and organization of the insurance brokers business.
He said in a press release issued by the IA that the new insurance brokerage Regulations, which were issued following extensive studies and discussions by the IA Board of Directors, is an advanced step to organize the insurance brokerage profession in the UAE and develop its performance and business as per the best competitive standards.
He pointed out that the new Regulations aim at reorganizing the market as per the professional practice control standards in order to promote the insurance brokerage profession as per the best internal practices in place, and improve the work environment of the brokers in a manner that ensures having qualifies brokers and protecting the best interests of all relevant parties.
He noted the integration and comprehensiveness of the insurance brokerage Regulations as they include the new principles and provisions that handle the voids and gaps seen in the insurance brokerage area during the past years and contribute to finding appropriate solutions for the problems facing the relevant parties, namely brokers' clients, insurance companies, and insurance brokers.
He indicated that the new Regulations set new controls and rules that govern the relationship between the insurance company and insurance broker, and organize the financial and technical matters between both parties. They also include some rules that govern the relationship between the brokers and clients, contributing to developing the performance of the insurance brokerage profession and ensuring the protection of the best interests of policyholders.
He added that new and advanced provisions were introduced in the new Regulations, in terms of the legal structure of insurance brokerage, capital of the company, banking guarantee, sums insured, indemnities, and the rules governing the relationship between the insurance broker and clients on one hand, and the between the broker and insurance company on the other hand, with the objective of protecting the best interest of the relevant parties.
He said: "the insurance broker should be a legal personality in the form of a company incorporated within the UAE in accordance with the Commercial Companies Law, with the purpose of practicing the insurance brokerage business, a branch of a company incorporated in a financial free zone in the UAE, or a branch of a foreign company, provided that it is licensed to practice such business in the financial free zone or the mother country in the same insurance types and classes, and it should be subject to a counterpart supervisory authority, and the term of practicing of insurance brokerage should not be less than five years, in addition to compliance with any other controls or requirements set by the IA"
He added that minimum limit for paid up capital was increased to (3) million Dirhams for a company incorporated within the UAE and to (10) million Dirhams for a branch of a company incorporated in a financial free zone or a foreign company branch. The minimum limit for banking guarantee was increased to (3) million Dirhams for a company incorporated within the UAE, to (1) million Dirhams for each affiliate thereof, to (5) million Dirhams for the foreign company branch or branch of company incorporated in a financial free zone per branch, and (3) million Dirhams for every additional branch in the UAE. The minimum limit of sum insured in the professional liability insurance policy was increased to (2) million Dirhams for a company incorporated in the UAE, provided that the deductibles do not exceed (30,000) Dirhams per accident, and to (3) million Dirhams for the foreign company branch or a branch of the company incorporated in a financial free zone, provided that the deductibles do not exceed (50,000) Dirhams per accident.
He noted that the Regulations set new requirements to open insurance brokerage branches, including the IA approval and that the amount of premiums achieved by the insurance broker in the financial year preceding the application for approval shall be not less than (3) million Dirhams.
He indicated that the new Regulations focus on the technical staff working in the insurance brokerage company, especially the manager in charge and specialists working for the broker. New requirements have been set whether in terms of the certificate or technical experience, while emphasizing the importance of passing the tests presented by the IA on the legal, technical, and financial aspects of insurance and brokerage activities in the insurance business.
As a minimum, the insurance broker should appoint a general manager or a chief executive officer and an operations manager, internal controller, and one specialized employee at least for each licensed insurance class.
He added that insurance brokers should specialize in such profession, therefore, it may not combine the capacity of a broker with any other profession related to insurance, except for reinsurance brokerage, as long as it does not practice both professions in the same transaction and for the same entity it works for. Further, the insurance broker may not be a partner or agent for any other insurance broker.
He noted that introducing a new organization in the Regulations related to the rules that govern the relationship between the insurance broker with the clients and insurance company by emphasizing the importance of having a written agreement in place that defines the broker's powers, and organizes the financial and technical matters between both parties, as well as defines the technical and legal liabilities of the insurance broker toward the IA.
He said the new Regulations address the aspects that influence the rights of insurance applicants without addressing the amount of commission payable to the broker from the insurance company for its services which is subject to the agreement of both parties.
He indicated that according to the new Regulations, the insurance broker should follow-up collection of insurance premiums of all the licensed insurance types and classes and receive insurance premiums from clients, except for the insurance premiums related to the types and classes of life insurance, fund accumulation business, group health insurance, insurance against the risks of maritime and air transport, hull insurance, and petroleum insurance.
He added that the broker should deposit the received insurance premiums, in the cases where it is allowed to receive insurance premiums, in the account dedicated to practice the insurance brokerage business and transfer them to the company in no less than (20) business days from the date of receipt, without deducting any sums, interest, or commissions due from such premiums and the broker should provide the company with a detailed report thereon.
He continued that the new Regulations set some rules that govern the relationship between the broker and client, whereas in order to start brokerage procedures, the broker is obliged to have a written authorization from the insurance applicant to be approved by the IA in order to protect the interest of insurance applicants.
He indicated that the new Regulations set some provisions for cases of merger of insurance brokers licensed to work in the UAE, including the merger of insurance broker by means of annexation or combination, and the merger decision may not be executed without the approval of the IA and the competent authority stated in the Commercial Companies Law in accordance with the form resulting from merger.
He asserted that a period of one year was granted to the insurance brokers currently registered in the IA records to regularize their positions in accordance with the provisions stated in the new Regulations. He indicated that one year is enough and appropriate to regularize the position and it promotes the brokers that do not have the required technical and financial capabilities to merge by annexation or combination.
He indicated that during the Regulations completion stages, the IA was keen to discuss their items with the insurance companies and brokers operating in the UAE, studying their notes and adopting their suggestions in a manner that serves the best interest of the national economy and local market and leads to boosting the competitiveness of the sector, developing local market attractiveness, and improving the insurance business environment in the UAE at all levels.
He affirmed that the Regulations as to Insurance Brokerage are issued as part of a series of integrated laws and regulations which will be issued by the IA soon to reestablish the UAE insurance market on modern legal, technical, and financial foundations.
Below are the details of the IA Board decision number (15) of 2013 concerning the Regulations as to Insurance Brokerage
Article (2) of the decision of the IA Board number (15) concerning the Regulations as to Insurance Brokerage state that the provisions of these Regulations shall apply on all insurance brokers working in the UAE and that no person may practice insurance brokerage in the state without a license from the IA that is renewed annually in accordance with the provisions of such Regulations.
Article (3) states that an insurance broker may practice brokerage in insurance of persons and fund accumulation operations on one hand, and brokerage in property and liability insurance on the other hand, provided that both types are fully separated whether in terms of the books and records or the persons working in both insurance types.
Further, the insurance broker may be specialized in one insurance type or one or more insurance class. The insurance broker may combine insurance brokerage business as per the provisions of these Regulations, and reinsurance brokerage, provided that both capacities (insurance broker and reinsurance broker) are not combined for the same transaction and the same entity the broker works for.
On the other hand, an insurance broker may not combine its capacity as an insurance broker from one hand and an insurance agent, insurance consultant, loss adjusters and surveyor, or actuary from the other hand. The insurance broker may not act as a partner or agent for any other insurance broker.
Licensing and Registration Requirements
Article (4) states in the first part concerning the requirements of insurance brokerage profession practice licensing that the applicant must be a legal personality taking one of the following forms:
- A company incorporated in the UAE as per the provisions of Commercial Companies Law with the purpose of practicing the insurance brokerage business.
- A branch of a company incorporated in a financial free zone in the UAE or a branch of a foreign company, provided that such company is licensed to practice such activity in the financial free zone or the mother country in the same insurance types and classes and the company must be subject to a counterpart supervisory authority, and it has practiced insurance brokerage for five years at least, in addition to compliance to any other controls or conditions set by the IA.
The Regulations stipulate that paid up capital may not be less than (3) million Dirhams for the company incorporated in the UAE, and (10) million Dirhams for a branch of a company incorporated in a financial free zone or a foreign company branch.
The Regulations oblige the insurance broker to submit a letter of banking guarantee in favor of the IA in accordance with the conditions and provisions stated in these Regulations and a professional liability insurance policy in favor or the IA in accordance with the conditions and provisions stated in these Regulations. The Regulations oblige the insurance broker to appoint the technical and administrative staff required to practice the activity pursuant to the provisions of these Regulations as well as provide the appropriate place, electronic programs, and technical systems needed to practice the activity.
The Regulations stipulate having an internal control system in place that guarantees valid application of the law, regulations, decisions, and circulars issued thereunder. The Regulations also stipulate submitted a true copy of the agreement concluded between the license applicant and a bank operating in the UAE, concerning the account dedicated to practice insurance brokerage and payment of the prescribed fees as well as comply with any other conditions or requirements set by the IA.
In the second part of this article, the Regulations state that the insurance broker should meet all licensing conditions all the time.
Technical and administrative staff
Article (5) states that whoever is appointed in the technical and administrative staff of the insurance broker should be a natural person with full capacity, has a good standing, never have been sentenced for a freedom restricting penalty in a crime involving moral turpitude and has not been rehabilitated, has not stopped payment of his commercial debts even if it not associated with declaration of his bankruptcy, and has not been judged to declare bankruptcy and has not been rehabilitated.
Under the new Regulations, the insurance broker is obliged to notify the IA of the appointment of certified employees and any amendment or alteration on their transfer or termination of service, stating the reasons thereof. It is also obliged to notify the IA once anyof the approved jobs becomes vacant and an alternative is appointed until such vacant job is permanently filled within a maximum period of (60) business days from the date of vacancy.
Article (6) of the Regulations as to Insurance Brokerage state that an insurance broker must continuously have the technical staff required to practice the licensed activity and must at least appoint a general manager or chief executive officer, operations manager, internal controller, and at least one specialized employee for each licensed insurance type or class.
The Manager, under a decision issued by him in this regard, shall determine the qualifications, experience, duties and restrictions for each one of the jobs listed above. No one may combine two jobs of the jobs approved by the IA at the same time.
Application for License
Article (7) states that application for license to practice the insurance brokerage activity shall be submitted to the IA as per the designated form and it shall be enclosed with the information, data, and documents supporting the application, in particular:
§ The legal form of license applicant, stating the names of partners, members of the Board of Directors or Management Board and Executive Management.
§ An acknowledgment that both the partners and general manager or chief executive officer have never been declared bankrupt and presentation of a good standing certificate affirming that none of them have been sentenced for a freedom restricting penalty.
§ A statement showing any legal or judicial obligations or liabilities related of the license applicant.
§ A statement describing the technical systems used and the work procedures proposed for practicing the activity of insurance brokerage.
§ The insurance types and classes related to the insurance type requested to be licensed.
§ Training and nationalization plan for UAE nationals.
§ In addition to the above, a branch of a foreign company, or a branch of a company incorporated in a financial free zone shall submit the following:
§ An official certificate issued by a competent authority indicating the company’s incorporation, registration and licensing to practice the activity of insurance brokerage in the types and classes of insurance to exercise in the UAE.
§ A copy of the financial statements for the last two years; audited, approved and prepared in the UAE Dirhams.
§ A true copy of the decision of the Board of Directors or Management Board approving the opening of a branch in the UAE.
§ An undertaking to meet all license requirements upon the approving the application for license within the period determined by the IA, otherwise the approval shall be null and void, as well as undertaking not to start practicing the activity before the IA ensures that the applicant has met all license conditions and IA’s approval in this regard is issued.
§ Any other documents or statements required by the IA.
Considering the Application for License
Article (8) of the Regulations state that the IA shall issue a decision approving or disapproving the application for license within no less than (20) business days from the date of submitting of complete application. The IA may associate its approval to issue license with the conditions and restrictions it may set or it may suspend issue of license according to the requirements of public good and during the period it sees fit.
In case the application for license is approved, the insurance broker shall be registered in the register of insurance brokers in the IA.
The Regulations allow the insurance broker to add a new insurance class or type to the license granted based on an application to be submitted to the IA using the designated form after satisfaction of the relevant conditions and requirements.
License Term and Renewal
Article (9) states that license term is one year that expires in end of December every year. The term of first license shall start from the day of its issue until the end of December in the same year.
The license shall be renewed under an application submitted to the IA at least one month before expiry of the license term, after verification that the insurance broker continues to adhere with the provisions of these Regulations and after payment of the prescribed annual renewal fees. The IA shall issue a decision regarding the application within (10) business days from date of submission of full application.
The Regulations allow the IA to suspend the insurance broker from practicing the activity in case of failure to submit the complete application for license renewal.
Temporary Suspension and Cancellation of the License
Article (10) states that an insurance broker wishes to temporarily suspend the activity practice, or an insurance broker having a contingent cause preventing it from practicing the activity, must submit an application to the IA to temporarily suspend the activity practice and to continue practicing the activity until the IA's decision is issued. The IA may disapprove or approve the application for suspension after meeting all the requirements deemed appropriate by the IA in a manner achieving the interests of companies, clients and beneficiaries, provided that the suspension period may not exceed (3) months from the date of approval thereon. Such period may be extended for another similar period, subject to the insurance broker continuing to abide by the conditions and requirements deemed necessary by the IA for the term and requirement of its license. The insurance broker shall maintain the letter of guarantee and insurance policy during such period.
The insurance broker may not practice its activity during the suspension period. In all cases, the insurance broker may request resuming the practice before the end of the suspension period whether the suspension was optional or after the removal of the obstacle.
An insurance broker wishes to suspend the practice permanently shall submit an application to the IA, and shall continue to practice the activity until it has met all requirements for the cancellation of the license as determined by the IA and the issuance of the IA's decision in this regard.
The cancellation decision shall be issued by the IA and immediately published at the cost of the insurance broker in two widely circulated daily newspapers in the UAE, one in Arabic language and the other in English language. The letter of guarantee shall be recovered and the professional liability insurance policy shall be terminated after the elapse of (3) months from the date of publication in case the IA approved the same after the settlement of all the insurance broker's transactions and ensuring that there are no liabilities thereon towards the IA or towards other companies, clients or beneficiaries, arising from its practice of the insurance brokerage activity.
Provisions of letter of guarantee and professional liabilitypolicy
Conditions for issuing the letter of guarantee
Article (11) states the conditions of issuing a letter of guarantee as follows:
§ It must be issued from a bank operating the UAE, in favor of the Chairman of the IA in his capacity and according to the form prepared by the IA.
§ It must be unconditional, unrestricted, and payable on demand, by the IA, at any time, and it may not be revoked without the IA's written approval.
§ It must be issued for the purposes of guaranteeing settlement of insurance broker's transactions and meeting of its liabilities arising from practice of its activity toward the company, clients, or beneficiaries, or in implementation of the IA's decisions.
§ Its value may not be less than (3) million Dirhams for companies incorporated in the UAE and (1) million Dirhams for any branch thereof. For the branch of a foreign company or companies incorporated in any financial free zone, its value may not be less than (5) million Dirhams for the branch and (3) million Dirhams for any additional branch thereof in the UAE.
§ The Regulations granted the IA the right to liquidate the letter of guarantee submitted by the insurance broker, in full or in part, to ensure fulfillment of its obligations arising from practicing its activity towards the companies, clients or beneficiaries, or in implementation of the IA's decisions.
Conditions for issuing the professional liability insurance policy
Article (12) states that conditions that must be fulfilled in the professional liability insurance policy which are:
o It must be issued by a company licensed by and registered with the IA, after the IA's approval of the conditions of such policy.
o It must be issued in the name of the insurance broker in favor of the Chairman of the IA Board of Directors in his capacity.
o It must be issued for the purpose of guaranteeing any liability arising from damages resulting from practicing insurance brokerage, unintentional error, omission and unintentional negligence.
o It must be valid throughout the license term and applicable to the annual renewal of the license. The Insurance Brokerage activity may not be practiced unless such policy is available and valid.
o The sum insured under the policy may not be less than (2) million Dirhams for companies incorporated in the UAE, provided that the deductible amount may not exceed (30,000) Dirhams for each accident. As for the branch of a foreign company or companies incorporated in any financial free zone, the sum insured under the policy may not be less than (3) million Dirhams, provided that the deductible amount may not exceed (AED 50,000) Dirhams per accident.
o Any amendment or alternation to the insurance policy may only be made under the written approval of the IA.
Obligations of the insurance broker
Internal regulations of the Insurance Broker
Article (13) obliges the insurance broker with the following obligations when practicing the activity:
§ Development of written internal regulations within (3) months from the date of obtaining the license, and providing the IA with a copy thereof, subject to amendment of such regulations in accordance with any amendments made to the law, regulations, instructions, decisionsor circulars issued by the IA and notifying the IA thereof. Such internal regulations shall include the following data:
- The documentary cycle to be followed as of the beginning of dealing with a company and client, until the full completion of the insurance transaction.
- The organizational structure of the insurance broker showing the actual functions, responsibilities and powers of managers and other employees working for the insurance broker.
- The relationship between the headquarters of the insurance broker and its branches; and determining the powers that the branch is authorized to practice.
- Correspondences recording system.
- Internal record-keeping system.
- Clients' complaints recording system.
§ Periodical review and continuous update of the internal control system in a manner to ensure the sound application of the law, regulations, instructions, decisions and circulars issued by the IA.
§ Development of an operational guide for risk management to include the listing and definition of the specific risks that could be encountered and how to address them once realized. The guide shall be updated and reviewed periodically as appropriate to the nature of the insurance broker business and according to the applicable rules in this regard.
§ Development of a professional code of conduct for the insurance broker employees; and supervising and organizing their works to ensure compliance with the law, regulations, instructions, decisions and circulars issued by the IA, especially those related to trust, integrity and conflict of interests.
§ When practicing the activity of insurance brokerage, the insurance broker and its branches shall be independent from any other party in terms of place, or organizational, technical or administrative aspects.
§ Cooperation and coordination with the internal controller and enabling it to practice its duties. Informing the IA of any violation of the law, regulations, instructions, decisions, or controls issued thereunder, or the applicable internal regulations.
§ Not to dismiss the internal controller except by a decision of the board of directors or management board of the insurance broker, provided that the IA and the internal controller are notified of the dismissal decision at least (30)business days before such dismissal, explaining the causes and justifications of the dismissal.
Obligations of the insurance broker toward the IA
Article (14) states the obligations of the insurance broker toward the IA as follows:
Ø Open a separate account in a bank operating in the UAE to be designated to the financial transactions related to the insurance brokerage activities only. Such account shall be audited by the IA.
Ø Full separation between its own accounts and those related to the practicing of insurance brokerage activity.
Ø Refrain from obtaining any interests on the funds deposited in the account of the insurance brokerage business, or from holding such funds in the form of time deposits, or to obtain credit facilities or bank loans secured by such funds.
Ø Maintain the financial solvency required to practice the profession, and in a manner to guarantee continuous fulfillment of its obligations as per the rules set by the IA.
Ø Abide by the limits of insurance types and classes licensed to be practiced.
Ø Not to manage or bear any insurance risks.
Ø Conclude insurance brokerage agreements with the companies and provide the IA with a true copy of such agreements within one week maximum from the date of conclusion thereof. Inform the IA of any amendment or alterations to such agreements once it occurs.
Ø Conclude at least two insurance brokerage agreements with the companies within (60) business days from license date.
Ø Not to depend on one company only at any time to practice the activity in the UAE.
Ø Keep the records, documents, accounts, and financial statements which show its financial position, transactions, and insurance brokerage agreements with the companies and the authorizations issued for it by the clients as well as the information of clients, copies of insurance policies issued for them, and any documents or statements related to the exercise of the activity for (10) years. Keep backup copies of the same statements and documents for the same period to maintain the clients' data and transactions and to preserve them from any cause of damage. The IA shall be allowed access to obtain and review such documents upon request.
Ø The financial year shall commence on the first of January and end on the thirty-first of December every year, provided that the budget and closing accounts are drafted in the UAE Dirham.
Ø Provide the IA with the following reports:
- A quarterly report signed by the Chairman, General Manager, or Chief Executive Officer, and audited by the external auditor on the insurance brokerage business and related accounts, within a period not exceeding (20) business days from the expiry of quarterly period.
- An annual report signed by the Chairman, General Manager, or Chief Executive Officer, and audited by the external auditor, including all the insurance brokerage activities practiced during the year, the accounts related thereto, and the closing accounts and annual budget, enclosed with a copy of the brokerage agreements concluded with the companies within a period not exceeding (60) business day from the end of the financial year.
- Any other reports or statements requested by the IA.
Ø Notify the IA immediately of any change to the statements or documents based on which the license was granted within (5) business days from the date of occurrence of such change, and of any deficit affecting its financial position.
Ø Inform the IA of the content of its advertising campaigns to promote its services before they are presented to the public.
Ø Not to publish or promote any incorrect data, information, or transactions.
Ø List its name and registration number with the IA on all its papers, correspondence, and documents in Arabic and English.
Ø Not to transfer the business where it acted as a broker to another insurance broker or brokers without the approval of the IA, companies, clients, and beneficiaries, while informing the IA of the details of the transfer operation in case of temporary suspension or cancellation of license, voluntarily or mandatorily.
Ø Abide by the laws, and any decisions or instructions concerning anti-money laundering and combating of terrorist financing.
Ø Abide by all the rules, procedures, and regulatory requirements set by the IA concerning internal control and activities of the internal controller.
Ø Practice the licensed activity with due diligence in accordance with the provisions of the law and regulations and the conditions and controls based on which the license was issued; observe commercial norms; cater to clients' interests and abide by the rules of professional conduct and integrity in practicing its activity with the clients, companies and third parties.
Obligations of the Insurance Broker toward the company
Article (15) states the obligations of insurance broker toward the company as follows:
v Conclude an insurance brokerage agreement with every company it deals with, provided it is made in Arabic language, signed by both parties, and notarized before the official authorities. Such agreement must be effective throughout the period of dealing with the company and it must include the rights and liabilities of each party in a manner that does not conflict with the provisions of these Regulations, in particular the following:
- The term of the agreement and the method and causes for its termination;
- Types and classes of insurance subject of brokerage;
- Geographical territory;
- A provision authorizing the insurance broker to receive the premiums in favor of the company in cases where the insurance broker is permitted to collect the premiums. However, the insurance broker may not use the collected premiums for any other purpose.
- The agreed commission for the insurance broker, how it is calculated, its due date for payment and its collection procedures.
v The agreement shall not include the following:
- Authorization of the insurance broker to issue insurance policies or endorsements thereto, or enter amendments thereto, except for the certificate of auto insurance if both parties wish so.
- Authorization of the insurance broker to receive indemnities payable to the clients or beneficiaries to be paid to the entitled recipients
- Preventing the insurance broker from practicing its activity with any other company.
v Provide all the information and data related to the clients which may influence the decision made by the company concerning insurance coverage, rates, and conditions thereof, in order to be able to assess the risks that need to be insured or to renew its insurance.
v Follow-up collection of insurance premiums in all licensed types and classes of insurance.
v Receive the insurance premiums from the clients, except the insurance premiums related to the insurance types or classes shown below, which should be paid by clients directly to the company and deposited in its account:
- Life insurance and fund accumulation operations;
- Group health insurance;
- Marine and cargo insurance;
- Hull insurance;
- Petroleum insurance.
v Deposit the insurance premiums it received, in the cases where it is permitted to receive insurance premiums, in the account designated to practice the insurance brokerage business.
v Transfer the insurance premiums received to the company within a period not more than (20) business days from the date of receiving such premiums, without deducting any amounts, interests, or commissions payable from such premiums and provide the company with a detailed report thereon.
v Not to use the letterhead of the company it works for in its own correspondence or correspondence with its clients.
v The insurance broker may not seek, directly or indirectly, revoking the insurance policy issued by the company through another insurance broker with the purpose of re-issuing it through it. In this case the new policy shall not be counted when calculating its entitlements.
v The insurance broker shall maintain the confidentiality of conditions, rates, information and data obtained from the company and not to disclose such information to other companies.
Obligations of the insurance broker toward the clients
Article (16) determines the obligations of insurance broker toward its clients as follows:
Ø Sign a written authorization with all of its clients to authorize it to carry out the insurance brokerage activities as per the form prepared and approved by the IA, provided that the form includes the following in particular:
- The powers of the insurance broker in making contacts with any company licensed by the IA or any licensed company specified by the client.
- The insurance broker's responsibilities and powers concerning submitting a claim for indemnity which may be due to the client when it is informed with the insured accident.
Ø Not to restrict the client's freedom to withdraw or cancel the authorization and not to charge the client for any financial costs as a result thereof.
Ø To provide advice and technical guidance, to inform the client of the best conditions and rates of the companies, and to maintain the documents proving that it does so and register them in duly organized records. Further, it shall negotiate in favor of the client and represent him before the company and not to receive any commission for such negotiation.
Ø Observe the best interest of the client whether when comparing the conditions, rates, and range of insurance coverage or in terms of preferring to deal with a particular company rather than the others; and not to recommend or prefer any company only because it offers a higher commission to the insurance broker.
Ø Ensure that the client realizes and understands the type of service provided, the nature of relationship with the broker, and that the insurance policy meets the client's needs.
Ø Inform the client of all the details of the insurance policy in terms of the range of insurance service, and deductible rate, if any, as well as the amount of liquidation prior to the scheduled maturity or before the insured risk is realized, or any other conditions, exclusions, or restrictions of the insurance policy.
Ø Explain the importance of disclosing key and material information when submitting the insurance application and the results of the concealing, inaccuracy, or incorrectness of any statements or documents submitted by the client, as well as explaining the client's full responsibility for such data and information.
Ø Explain the importance of disclosing any future changes that may impact the insurance coverage during the term of the insurance policy.
Ø Explain the mechanism for payment of insurance premiums and the importance of paying them on the set dates, as well as the consequences of failure to observe such dates.
Ø Send the insurance policy to clients without unjustified delay, enclosed with a notice advising the importance of reading the policy carefully.
Ø Explain the procedures which the client should carry out in case the insured risk occurs, and assist in the negotiations held with the company concerning the claims arising from the occurrence of such risk, as well as informing the client immediately of the company's decision accepting or refusing provision of insurance coverage related to such claims.
Ø Not to allow other insurance brokers to perform the insurance brokerage activities of the client without the written approval of the client and the insurance company.
Ø Notify the client in writing (20) business days before the expiry of the insurance policy of the expiration date of the policy so that the client declares his desire in writing regarding:
- Whether to renew the insurance policy with the same insurance broker or not.
- Whether to renew the insurance policy with the same company and under the same conditions, or with the same company under different conditions, or with another company according to other offers presented by the insurance broker.
Ø Deal in accordance with good well, transparency, and rules and ethics of professional practice, while observing the confidentiality of data and information related to the clients.
Rights of Insurance Brokers
Article (17) states that the company may not make direct contacts with the client who authorized the insurance broker, unless it is based on the client's written desire.
Further, the company is not entitled to present different conditions or rates to another insurance broker for the same insurance transaction unless such other insurance broker has presented different information that influences the company's decision as to the conditions and rate of insurance.
Branches of the insurance brokers
Article (18) states that the insurance broker may not open branches within the state without the IA's approval for each branch, and in accordance with many conditions, namely obtaining a decision from the Board of Directors or Management Board of the insurance broker to open a branch thereof. Other conditions include appointing a branch officer that meets the conditions set in the rules issued by the manager, the branch officer presents an acknowledgement of his full responsibility for the actual management of the branch, the new branch should be operated under the direct supervision of the general manager or chief executive officer in the headquarter of the insurance broker, presenting the ownership title or lease contract of the branch office approved by the competent authorities, presenting a list showing the technical supplies in the branch and a list with the names and job titles of the branch employees, a minimum period of two years has elapsed since the insurance broker was licensed during which the insurance broker must have actually practiced the activity and have not been subject to any administrative fines or penalties, obtaining the approval of the competent authority in the relevant Emirate, and the premiums achieved by the insurance broker in the financial year preceding the application for approval are not less than (3) million Dirhams.
The Regulations stated that the application to open a branch must be submitted by the legal representative of the insurance broker using the designated form and enclosed with the information, statements, and documents supporting the application and evidence on payment of prescribed fees. The IA issues its decision accepting or rejecting branch opening within (20) business days from the date of submitting complete application to the IA. The branch registration is renewed under an application submitted to the IA and after verifying that the insurance broker continues abiding by the provisions of these Regulations and payment of the prescribed renewal fees.
All the provisions stated in these Regulations shall apply on the branch activity. The insurance broker may request closing of the branch and the IA shall issue its decision approving closure of the branch within (20) business days from the date of submitting a complete application to the IA.
Without prejudice to the penalties stated in these Regulations, the IA may cancel the approval issued to the branch if it lost any of the conditions under which it was approved, or if it violated any provision of the law, regulations, instructions, decisions, or circulars issued in implementation thereof.
Merger and Settlement of Disputes
Merger of Insurance Brokers
Article (19) states that the following provisions shall apply in the cases of merger of insurance brokers licensed to work in the UAE, subject to the merger provisions stated in the Commercial Companies Law.
§ The merger of insurance brokers shall be by annexation or combination. The merger decision may only be implemented after obtaining the approval of the IA and the competent authority as stipulated in the Commercial Companies Law according to the form resulted from the merger.
§ If merger between two or more insurance brokers is by annexation, the insurance broker shall submit the application to the IA supported with the following documents:
- A resolution approved by the Board of Directors or Management Board of both the merging and the merged insurance brokers, affirming their wish to merge;
- A copy of the merger contract;
- A statement signed by the internal auditor and external auditor of the insurance broker showing the obligations of each insurance broker and their clients' rights;
- The financial statements of each insurance broker duly audited to nearest date to submitting the application;
- Assessment of the net assets of the merged insurance broker in accordance with the provisions of assessment of in kind shares stated in the Commercial Companies Law;
- Undertaking by the merging insurance broker to increase its capital once the merger is approved in accordance with the result of the assessment of the merged insurance broker;
- Undertaking by each party to the merger to comply with all the rights of the clients, beneficiaries and companies as well as the outstanding obligations of the merged insurance broker in accordance with its final report.
§ In case the merger between two or more insurance brokers by combination, the insurance brokers applying for the merger shall comply with all obligations and procedures set forth in clauses (2) and (7) of this article, provided that each of the merging insurance broker shall issue a resolution to dissolve itself. The new insurance broker shall be incorporated under the provisions of the Commercial Companies Law. Its capital shall be the net assessment results of the merging insurance brokers and all obligations and rights, as per the final report submitted to the IA immediately before the merger, shall be transferred to the new insurance broker.
§ Any party with interest may object to the merger process within three months from the date of its publication in the Commercial Register. Such objection shall be submitted to both competent authority and the IA stating the reasons thereof and including all data and rights owed by the insurance broker. The merger may only be approved after the objection has ended, whether amicably or by court order.
§ The merging and merged insurance brokers shall be inspected to verify all the data, information, obligations, and rights related to each broker and a report thereon shall be drafted.
§ The application for merger shall be submitted including all complete documents and requirements to the Board to make a decision.
§ The merged insurance broker shall:
- Execute the merger decision and issue a decision dissolving the insurance broker three months after the date of its registration in the commercial register, provided that the actual date of insurance broker’s dissolution and merger shall be published in two widely distributed daily newspapers, at least one of them in Arabic language.
- The merged insurance broker shall not dispose of any of its assets after they are assessed by the committee formed for such purpose. In case of disposing of any of them for any urgent cause, the merged insurance broker shall notify the IA of such disposal once it occurs.
- Notify the IA of any changes to its financial liability, and submit a statement of the rights of companies, clients, and beneficiaries and their obligations toward the broker, duly audited since the date of submitting of the application and until the day preceding the actual dissolution of the insurance broker and execution of the merger decision, provided that it is signed by the Board of Directors or Management Board of the insurance broker and its auditor.
- The merging and merged insurance brokers shall continue practicing their activities normally until the issue of decision approving merger by the IA and the competent authority.
Settlement of Disputes
Article (20) of the Regulations allows the companies, clients, beneficiaries, and insurance brokers to file their complaints to the IA to take appropriate action in accordance with the procedures applicable in the IA.
Control and penalties, control and inspection
Article (21) states that the IA shall conduct regular and unannounced control and inspection without prior notice of insurance brokers in order to ensure their compliance with the law, regulations, instructions, decisions, controls, or circulars issued by the IA, and to investigate any violations revealed by such inspections or contained in the complaints received by the IA.
The IA may request all the information and documents it sees necessary for the purposes of control and investigation, from the insurance broker or any of its employees, or from the companies, clients, or beneficiaries.
The Regulations oblige the insurance broker to put all the brokerage records, documents, and entries at the disposal of the IA and its employees; and to cooperate with them and respond to their requests to fully perform their duties, and to present any data or information requested by the IA and within the period it determines.
Article (22) of the new Regulations allows the IA to impose any of the following penalties in case the insurance broker violates the provisions of the law, regulations, instructions, decisions, or circulars issued thereunder:
- Serve a warning to the insurance broker and enforce it to terminate causes of violation and take the necessary actions to prevent reoccurrence of the violation in the future.
- Suspend the insurance broker from practicing of the activity for a period not more than one year.
The same Article allows the IA to cancel the insurance broker license in any of the following cases:
- Losing any of the license conditions stipulated herein;
- Gross breach of any of the duties and obligations;
- Failure to renew the license, or to pay the prescribed annual renewal fees or delay fines;
- Issuance of an irrevocable court order declaring the insurance broker as bankrupt;
- The dissolution and liquidation of the insurance broker;
- If the insurance broker fails to practice the licensed activity within (6) months from the date of granting the license.
- If the insurance broker fails to practice the activity after the temporary suspension period.
- If it is found out that the license was granted on the basis of invalid information or data, or based on an undertaking that has not been implemented as determined by the IA.
Cancelation of license shall entail the following:
- Publishing the decision to cancel the insurance broker’s license and removing its name from the insurance brokers register as soon as the decision is published in two widely distributed daily newspapers in the UAE, one of them in Arabic language, at the insurance broker’s own expense. The IA may pay such expenses from the insurance broker’s letter of guarantee.
- Recover the letter of guarantee and terminate the professional liability insurance policy after (3) months from the publication date once the IA approved the same; and after the settlement of all transactions of the insurance broker and ensuring there are no obligations towards the IA, clients, companies or any beneficiaries arising from practicing the insurance brokerage business.
- No application for license may be submitted before the lapse of (3) years from the date of issuing the license cancelation decision.
Article (23) allows the IA, in case the insurance broker's employees violate the law, regulations, instructions, decisions, or circulars issued thereunder, to impose any of the following penalties:
- Suspension from practicing the activity for a maximum period of two months;
- Cancellation of the accreditation in case of serious breach of the law, regulations, instructions, decisions or circulars issued by the IA.
Article (25) allows complaining from the issued decision rejecting the application for license, registration, cancellation, or deregistration from the register within (20) business days from the date of notification of the decision. The complaint shall be filed to the Board of the IA for decision within (20) business days from filing complete application and its decision shall be deemed conclusive.
Article Nine: Final Provisions
Article (26) of the new Regulations obliges whoever exercises the insurance brokerage business to regularize its position in accordance with such rules within a period not exceeding one year from the date of their effectiveness.
The IA shall collect the prescribed fees for any procedures or services provided by the IA according to the provisions of the law, regulations or decisions issued thereunder.
Without prejudice to the procedures stipulated in the Commercial Companies Law, in case of a voluntary or mandatory liquidation of an insurance broker, such liquidation shall be under the supervision of the IA.
It is forbidden to deal with any person practicing insurance brokerage business without a license from the IA pursuant to the provisions of these Regulations.
Article (27) states that the IA's General Director shall issue the decisions and circulars needed to implement the provisions of these Regulations.
Article (28) also cancels the decision of the Minister of Economy number (543) of 2006 concerning organization of the practice of insurance broker profession.
Article (29) states that the Regulations shall be published in the Official Gazette, and shall come into effect on the following day to its publication