The UAE Insurance Authority (IA) will require reinsurers to be public shareholding companies with at least 51% of the capital to be owned by UAE nationals, GCC nationals or by legal persons fully owned by UAE nationals or GCC nationals, according to draft regulations on reinsurers promulgated by the regulator.
The draft regulations provide for the establishment and licensing of reinsurers in the UAE; the registration and licensing of branches of foreign reinsurers in the UAE; and the endorsement of IA-licensed insurers, to carry on reinsurance business.
The subscribed and paid-up capital of a reinsurer shall not be less than AED250 million (US$68 million) and the IA may determine a minimum capital for the company greater than AED250 million, according to the draft regulations.
The regulations, when effected, will have other far-reaching provisions.
Among them, a local insurer cannot cede a risk to another “unless the other company is licensed by the competent regulatory and supervisory authority to practise the type and class of insurance entrusted to it to reinsure”.
Takaful insurers can obtain reinsurance from reinsurers that also offer takaful/non-takaful provided their reinsurance is only funded from the takaful operations of the reinsurer.
Applicants for a reinsurance licence need to provide comprehensive information as part of their application, including a five-year feasibility study, details as to their retrocession coverage, as well as general fit and proper eligibility of founders/key management.
Foreign company branches must supply similar information albeit in respect of parent/wider group operations. They must also provide a three-year work plan, actuarial certification of the applicant’s compliance with technical provisions, solvency margin and minimum capital requirements and the proposed funds to be held in the UAE to meet local obligations.
Foreign reinsurers need to maintain a rating at least equivalent to Standard & Poor’s – BBB, Moody’s – Baa, A.M. Best – B+, or Fitch Ratings – BBB. Importantly, the rating must be granted on the basis of the internal information of the company, not on its published financials alone, and the company cannot be incorporated in a state that has a lower rating than the above minimum ratings.
The draft regulations state that insurers and reinsurers must reconcile their positions with the provisions stipulated in the regulations within 12 months from the date they come into effect. M
AED1 = US$0.27