H.E. Ebrahim Al Zaabi, The Director General of the Insurance Authority, emphasized that the results of the application of the provisions of Financial Regulations for Insurance Companies and Takaful Insurance Companies are going well since they entered into force in early 2018.
He pointed out, during the Insurance Authority Briefing on this subject, that the Authority issued the Financial in 2014 to establish the financial and technical regulatory rules for insurance companies and Takaful insurance companies. The regulations became operational in early 2018, after a three-year regularisation period, which was granted to enable companies to comply with the provisions of the Regulations, especially in relation to investment limits and capital adequacy requirements.
He explained that the regulations are considered a quantum leap in the regulation of the UAE insurance market for their comprehensiveness by addressing all the financial and technical aspects of the assets and investments of the insurance companies and methodology of measuring solvency as per the best international practices.
He added that through the Insurance Authority's follow-up of the results of insurance companies and in the course of maximizing the use of the financial regulations and achieving their objectives, the Authority has issued an amendment on the application of the investment limits stipulated in the financial regulations for insurance companies and Takaful insurance , pursuant to the Board's Decision No. (22) of 2017.The amendment was issued because of the Authority's belief that the full application of the regulations will achieve the balance in the insurance market, increase the solvency of insurance companies and withstand any future challenges.
In the same context, the Director General of the Insurance Authority clarified that the Financial Regulations are characterized by many advantages and positive impacts that will be reflected on all beneficiaries of the insurance market in the State. This will be initiated by reviewing the policies and financial and technical procedures followed by the insurance companies to raise the efficiency of the performance of employees in insurance companies and protect the rights of the policyholders and beneficiaries. Eventually, this will improve the UAE insurance market, increase its competitiveness and contribute to raising the credit ratings of companies operating in this sector.
The Financial Regulations have significantly changed the criteria for measuring the solvency requirements of companies.Thisaims to strengthen the financial positions of companies and their ability to address the negative changes they may encounter by expanding the measurement of solvency of these companies to include additional criteria in accordance with international criteria, after it was restricted to the Minimum capital.
Al Zaabi highlighted that the regulations aimed to directing the investment of companies to various investment instruments that have certain high limits for low risk investment instruments with short-term cash flows and rapid liquidity, including government bonds issued inside the State. While the acceptable investment caps are low for the high-risk investment instruments, which are characterized by instability in rates and investment returns. These investments instruments include equity instruments not listed in the financial markets.
Responding to a question about the future of the sector in light of the application of these Regulations, Al Zaabi, stressed that the Financial Regulations for the Insurance Companies aimed to regulate the financial and technical aspects of this sector. This would lay the financial and technical foundations for organizing the work of these companies on the one hand and the rates of insurance products issued by these entities on the other hand.
While answering another question about the comprehensiveness of the Financial Regulation, in light of the new IFRS 17 for insurance contracts, H.E. has confirmed the comprehensiveness of these instructions. The instructions included the companies' compliance with all the issued international accounting standards and being issued in respect of the preparation of the financial statements and the compliance with the new international standard IFRS 17.
He concluded that the issuance of these regulations were a result of great efforts in preparation and coordination with all parties affected by the insurance industry inside and outside the State.
He anticipated that the application of these Regulations would introduce a short-term and long-term qualitative leap in the domestic insurance market, because of complying with the provisions of these Regulations. This will in turn increase the efficiency of the insurance industry inside the State at the level of each insurance company operating in the State or at the level of the whole sector.