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Jun 2020

UAE: New reinsurance regulations stipulate retakaful requirements

Source: Middle East Insurance Review | Jul 2019

The UAE Insurance Authority (IA) has set out instructions stating the conditions under which a reinsurer has the right to accept retakaful business.
The instructions are part of new regulations for reinsurance business, including the licensing and registration of reinsurance and retakaful companies. In this connection, Sultan Bin Saeed Al Mansouri, Minister of Economy, and chairman of the IA, issued a resolution in early May on the regulations.
The five conditions that are to be met for a reinsurer to accept retakaful business are:
  • The practice of takaful reinsurance, in addition to reinsurance business, shall be among the purposes of the reinsurance company’s articles of association.
  • All its operations related to takaful reinsurance shall be compliant with the shariah provisions.
  • It shall comply with the provisions of the Authority’s board of directors resolution dated 2010 concerning Takaful Insurance Regulations issued by the Authority to the extent consistent with takaful reinsurance business.
  • It shall adopt complete technical and financial separation between the reinsurance and retakaful business.
  • It shall comply with the provisions of IA board of directors’ resolution dated 2016 concerning the complete separation between the two types of reinsurance.
The terms of an insurance company and reinsurance company, wherever stated in the regulations, include the takaful insurance company and the takaful reinsurance company. 
The terms of insurance and reinsurance operations wherever stated in the regulations shall also include takaful insurance and takaful reinsurance unless a special provision is stipulated or unless the context indicates otherwise. For instance, in general, the subscribed and paid-up capital of the reinsurance or retakaful company shall not be less than AED250m ($68m). The capital of the parent company in its home country should consequently not be less than AED250m.
Some provisions regarding takaful and retakaful companies include:
  • The takaful insurance company, when ceding its business to a reinsurer, that practises both reinsurance and takaful reinsurance, shall request the reinsurer to set aside provisions which have to be shariah-compliant in all parts of its funds to meet the payments that may be required to pay to the company.
  • The takaful insurance company licensed and registered with the Authority may practise the ceded and accepted takaful reinsurance business (treaty, facultative and facultative obligatory) within and outside the State pursuant to the provisions and terms contained in the instructions, and in particularly the following:
  • Ceding reinsurance operations (treaty, facultative and facultative obligatory) to takaful insurance companies or takaful reinsurance companies or to insurance companies or reinsurance companies.
  • Accepting the takaful reinsurance businesses (treaty, facultative and facultative obligatory) provided that takaful reinsurance operations shall be among the purposes set forth in its articles of association.
Treaty retakaful
The takaful insurance company that wants to accept treaty takaful reinsurance is required to obtain approval from the Director General. In order to attain the approval, the company shall satisfy requisites that include:
  • The company’s Articles of Association should contain a condition authorising the company to accept such business.
  • The minimum subscribed and paid-up capital of the company should not be less than AED350m. M 
AED1 = $0.27
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