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The Insurance Authority organizes a workshop for insurance companies on the Financial Regulations

: 4/22/2015

The Insurance Authority organizes a workshop for insurance companies on the Financial Regulations



Abu Dhabi 20 April 2015

The Insurance Authority (IA) has organized a workshop for the national and foreign insurance companies operating in the UAE on the requirements of the Financial Regulations for Traditional and Takaful Insurance Companies, which were issued by the IA by the end of 2014.


The workshop which was held at the IA’s Headquarters in Abu Dhabi targeted the staff of the financial and internal audit departments in insurance companies to inform the companies on the financial, technical, investment and accounting aspects implied in the regulations in order to upgrade the financial and technical knowledge of insurance professionals.


Conducted by the specialized experts of the IA’s Oversight Department, the workshop addressed the general framework and features of the Financial Regulations, the actuarial requirements and the legal framework of the Financial Regulations.


The instructors explained that the objective of Financial Regulations is to protect the insurance policyholders and shareholders of insurance companies, as well as to protect the companies from the risks they may encounter by proactively ensuring the solvency of insurance companies and the integrity of their financial procedures. 


The Financial Regulations also aim at setting the legislative terms required to protect the rights of policyholders and beneficiaries, setting the sound technical and financial principles for the operations of insurance companies, limiting the underwriting and investment upsurges of insurance companies, maintaining continuity of solvency  of insurance companies, enabling the insurance companies to pay up their liabilities in a manner that avoids obstruction of their financial position, meeting the requirements of supervisory reports, disclosure, transparency, and governance, and enabling the market in general and insurance companies in particular to achieve highly competitive ratings and valuation rates.


They indicated that the Regulations are in line with the best practices applicable in the insurance industry worldwide, whether in terms of solvency, technical provisions, investment policy, or financial and accounting procedures of insurance companies.


The general rules of Financial Regulations are represented in many pillars, most importantly, the compliance with the international financial reporting standards in preparation of the financial data, improving the disclosure level in the financial reports, enhancing the type and quality of information and reports prepared by the companies, empowering the role of Board of Directors in all aspects that generate risks at the overall company level, empowering the committees emanated from the Board of Directors and authorizing them with the powers required to perform their oversight role on the risks generated from the various policies of the companies, and making necessary information available to the supervisory authorities, investors, and all related parties.


Further, these rules are represented in building a long-term vision for the IA where the Regulations provide the foundation needed for ongoing improvement by enabling the companies to implement the Financial Regulations and preparing the supervisory requirements and financial and technical reports on the overall risks of the financial positions of companies, and enabling the IA to supervise and control the Insurance Sector in accordance with a risk-based approach.


The instructors indicated that the risk-based precautionary Financial Regulations would have results and impacts closer to reality than adopting fixed rates or indicators not associated with the risks facing the insurance companies. Accordingly, they will contribute in protecting the best interest of all parties and insurance beneficiaries. Further, empowering the Boards of Directors of companies and accreditation of the actuary will contribute in promoting transparency and governance in the insurance industry.


The Financial Regulations enable valid competition among the companies and adoption of sound investment policies, consequently, enabling the role of IA in regulating the UAE insurance market and enhancing its competitiveness.


The uniqueness of the Financial Regulations compared to the applications effective in other countries are manifested in adopting the most flexible indicator; namely the total funds invested to calculate concentrations rather than equity, consideration of the private status of the investment market through the relative rising of maximum limits of investments especially the real estate and foreign investment, consideration of investments with the related parties, allowing appropriate period for status adjustment, the multiplicity of adjustment options, expansion of the base of assets accepted to handle the underwriting liabilities, and the multiplicity and flexibility of solvency valuation indicators and not limiting them to a single rate or indicator. 


The general investment requirements are represented in the Regulations related to the principles of investment of policyholder's rights, namely the diversity, non-concentration, adaptation, safety, marketability, and liquidity. The portfolio efficiency warrants achieving the maximum return at a satisfactory level of risk or exposure to the lowest risk level possible at a certain rate of returns, concentrating regulations on evaluation of the investment portfolio management performance at the diversity measure, forming an investment committee, preparing an investment policy approved by the Board of Directors which matches the nature of company's operations, and providing a clear vision of the company to provide the suitable alternatives to handle market fluctuations.


With regard to investing abroad the instructors said that the company may maintain, for investment purposes, assets of its portfolio of insurance policies issued in the UAE in another countries that enjoys a stronger sovereign rating or at least a rating equal to the UAE sovereign rating, provided that the total assets invested which are maintained abroad do not exceed (50%) of total assets invested or (100%) of total technical provisions of the insurance policies issued abroad, whichever is higher. Further, the company should at all times invest in the UAE the assets required to cover requirements for maintaining total technical provisions of the insurance policies issued in the UAE.

Regarding the requirements of Solvency Margin Regulations, the core private funds should meet at least the rate of (100%) of minimum capital requirements. Moreover, the private funds should meet at least (100%) of capital adequacy and the minimum guarantee amount.


The company shall provide the IA with a realistic adjustment plan to meet the capital adequacy and minimum guarantee amount requirements within (30) days from the date of reporting to the IA.  In this plan the company should declare commitment to increase private funds enough to meet the capital adequacy requirements within six (6) months approximately and enough to meet the requirements of minimum guarantee amount within three (3) months from the date of filing the report to the IA.


The workshop addressed the legal framework of Financial Regulations of the insurance companies and periods of status adjustment, the effectiveness of such regulations, and liabilities of companies during the status adjustment periods.


In the end of the session the instructors answered the questions of participants about different issues related to the Financial Regulations.


The participants extended thanks and appreciation for the IA's initiative to organize this induction workshop which contributes to promoting awareness and experience on the Financial Regulations in line with the optimum application of the Regulations to best serve the interest of the Insurance Sector in the UAE.


The IA will organize a similar workshop in its headquarters in Dubai to provide the opportunity to more specialized professionals in the companies to know the financial, technical, investment, and accounting aspects of the Financial Regulations.


The End



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