UAE: Number of insurance brokerages down 15% to 136
Source: Middle East Insurance Review | Jul 2015
The number of brokerage firms operating in the UAE market currently stands at 136, compared with 161 at the end of December 2014, following the exit of 25 firms during the first few months of this year, according to the Insurance Authority (IA).
The exodus followed regulations for brokers which require an increase in minimum capital, financial guarantees and professional indemnity insurance, among other conditions. The minimum paid-up capital requirement was raised from AED1 million (US$272,246) to AED3 million for UAE companies, and to AED10 million for branches in a free zone, or branches of a foreign company.
In addition, brokers must furnish unconditional on-demand bank guarantees of AED3 million per company and AED1 million for each regional branch or AED5 million and AED3 million for foreign companies. The new rules also require a broker to appoint technical staff of specified professional experience and qualifications.
The regulations were gazetted in November 2013 but provided a one-year grace period for implementation and compliance, which expired on 27 November 2014. The IA has no plans to extend the deadline. The number of insurance brokers stood at 168 at the end of 2013.
Insurance companies said that the withdrawal of the brokers from the market would have a positive impact because the sector had been overcrowded, reported The Emirates Today.
One industry observer expects up to half of all insurance brokerage companies to eventually close down. He said that most of those who work in insurance brokerages lack both qualifications and experience, while the new capital requirements are beyond the capacity of several companies operating in the sector.
AED1 = US$0.27