The UAE Insurance Authority has issued new rules for conventional and Islamic insurance firms, clarifying policyholders’ rights and setting investment limits for the sector, the regulator said.
Insurers will have between two and three years to comply with the new rules, which align the UAE with European solvency requirements, it said in a statement.
The new regulations cover seven key areas addressing financial, technical, investment, and accounting aspects:
• Investment rules to protect the rights of policyholders and companies against risk;
• The solvency margin and minimum guarantee fund;
• The basis of calculating technical provisions;
• The determination of a company’s assets that meet accrued insuring obligations;
• The records which the insurance company shall be obligated to maintain as well as the data that shall be made available to the Authority;
• The principles of organising accounts and company records determining the data to be maintained in them; and
• Accounting policies to be adopted and the necessary forms needed to prepare reports and financial statements and presentations.
Among investment limits, firms will have to keep aggregate exposure to real estate to a maximum of 30% of invested funds, and have a minimum 5% exposure to cash and deposits.
Separate regulations have been developed for Islamic insurance companies operating in the UAE. The regulations identify the policies that should be adopted in such companies in terms of the wakala model or wakala & mudaraba model, in addition to provisions pertaining to the distribution of surplus to participants, and the importance of separating the assets of participants’ accounts and shareholders’ accounts in the company. The UAE issued its first set of takaful rules in 2010.
Mr Sultan bin Saeed Al Mansouri, UAE Minister of Economy and Chairman of the Insurance Authority, said 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 best international legislative practices were followed in drafting the financial regulations for traditional and takaful insurance companies in a manner that facilitates their application and supervision,” he added.
Rating agency Moody’s said that the new regulations are credit positive for all UAE insurers “because they will strengthen several credit characteristics of insurers, including capital, asset quality (by reducing risk-taking) and reserve adequacy”.