Welcome to DhanGuard. Can I help you?
/ Blogs / Mainland Licence / Laws Policies Governing Insurance Broker In Uae

Laws & Policies Governing Insurance Broker in UAE

By Shivangi - 12 Aug 2021 Last Updated: 29 Apr 2022
Laws & Policies Governing Insurance Broker in UAE

Table of Contents 

  1. 1. Legal definition of Insurance Broker License
  2. 2. What are the requirements for insurance broker licencing?
  3. 3. Insurance Broker's Responsibilities
  4. 4. Penalties
  5. 5. Conclusion

Without a license from the Insurance Authority, a company cannot perform insurance brokerage in the UAE. A license is valid for one year and can be renewed every year. Each year, it expires at the end of December. Companies who want to get a license from the Insurance Authority must meet the Regulations' conditions. The applicant must be a company incorporated in the UAE under the Commercial Companies Law, or a branch of a company incorporated in a foreign country or a financial freezone in the UAE, as long as it is authorized to conduct the same types of insurance brokerage.

It should also be governed by the same degree of regulatory authority and have been in use for at least five years. The Insurance Authority has the authority, under the regulations, to impose additional conditions in addition to those set forth in the regulations.

The insurance broker's technical team must also meet certain qualifications established by the Regulations. For each form of insurance, the insurance broker must have at least a general manager, operations manager, Internal Auditor, and at least one specialized employee.

The Execution Rules also include particular requirements for each of the aforementioned personnel as well as the person in charge of the branch.

The insurance broker must provide the Insurance Authority chairman of the board of directors with an unequivocal Bank guarantee payable on demand. This may be liquidated in whole or in part at any time to ensure the settlement of the broker's transactions and obligations stemming from his work with insurance companies and consumers.

The insurance broker must get a professional liability insurance coverage in the name of the Insurance Authority chairman of the board of directors. For enterprises incorporated in the UAE, the insurance must be worth at least AED 2 million, and for a branch of a company incorporated in a foreign nation or in a financial free zone in the UAE, the policy must be worth at least AED 3 million.

The Regulations impose specific requirements on insurance brokers in their dealings with the Insurance Authority, insurance firms, and their clients.

Except for life insurance and funds accumulation operations, group health insurance, marine and air transport insurance, vessels hull and petroleum insurances, the insurance broker should follow up and collect premiums on behalf of the insurance companies.

Legal definition of Insurance Broker License

Under Federal Law Number 6 of 2007 (Establishment of the Insurance Authority and Regulation of the Insurance Practice), an insurance broker is defined as follows:

?A person who acts as an independent intermediary in insurance or reinsurance transactions between the insurance/reinsurance applicant and the insurance/reinsurance company, charging a commission from the insurance/reinsurance company with which the insurance/reinsurance policy is concluded.?

The Insurance Authority Board of Directors Resolution Number 15 of 2013 (the "Regulations") regulates the insurance broker profession in the United Arab Emirates (UAE), including revisions from time to time. The Insurance Authority (IA) was established as a separate legal personality under Federal Law Number 6 of 2007 for the regulation and supervision of the UAE's insurance sector.

It is necessary to obtain a License to Practice Insurance Activities in the UAE as a Company, a Branch, or an Insurance Agent of a Foreign Company before engaging in the profession of insurance broking.

The License is issued by the Insurance Authority (IA) and is valid for one year from the date of issuance and is renewed on a yearly basis. Each year, the License expires at the end of December.

Companies that want to get a licence from the IA must meet the Regulations' specific conditions.

Read More:

What are the requirements for insurance broker licencing?

The following conditions must be met by the businesses:

  • The firm must be founded in the UAE and registered under the Commercial Companies Law with a paid-up capital of AED three million or more, with the goal of conducting insurance brokerage business.
  • A branch of a foreign company or a financial freezone that has paid-up capital of AED ten million or more must be registered under UAE commercial law.
  • The company must provide to the IA chairman of the board of directors an unconditional Letter of Guarantee issued by a bank that is receivable on demand. This may be liquidated in part or in whole to ensure the settlement of the broker's transactions and liabilities emanating from his business practises with his customers and the general public.
  • It is required of the insurance broker to secure a professional liability insurance policy in behalf of the IA chairman of the board of directors. For enterprises incorporated in the UAE, the policy must be worth at least AED two million, and for a branch of a foreign company or in a financial free zone in the UAE, it must be worth at least AED three million.
  • The insurance broker must continue to appoint the technical and administrative personnel needed to carry out the activity.
  • Provision of an appropriate headquarters, as well as the necessary technical systems and software to carry out the operation.
  • Internal control mechanism to ensure appropriate application of the IA's regulations, statutes, circulars, and resolutions when they are released.
  • The agreement between the licence applicant and a UAE-based bank about the account earmarked for the practise of insurance brokerage must be supplied.
  • The required fees must be paid in full, and the corporation must adhere to any extra IA requirements or conditions.

The IA provides a decision on whether to approve or deny the application for a licence within a maximum of twenty working days after the application for approval to practise the Insurance Brokerage business is submitted to the IA in the specified Form together with the requisite documents. When the application is approved, the Insurance Broker will be added to the IA's Insurance Brokers Register. A licence, registration, cancellation, or write-off application may be appealed after twenty working days of being notified of the relevant decision.

The appeal must be filed to the IA Board of Directors within twenty working days of the date of receipt of the complete appeal for a decision. The decision of the Board on the grievance is final.

Personnel in the technical and administrative fields

Certain conditions established by the Regulations must be met by the insurance broker's technical team. For each form of insurance, the Insurance Broker must designate at least one Internal Auditor, General Manager, Operations Manager, and at least one specialist employee with the necessary qualifications and expertise.

Resolution No. 58 of 2015, relating to the implementation of the Regulations (the "Execution Regulations"), establishes additional obligations for employees and the person in charge of the branch.

Who can be appointed to the insurance brokerage firm's technical and administrative staff?

Any person who meets the following requirements:

  • A natural being operating at full capacity.
  • The person must be of good character, having never been convicted of a moral turpitude offence and condemned to a freedom-restricting term without being rehabilitated.
  • Has not stopped paying his commercial bills, even if it is not related to bankruptcy, or has been declared bankrupt without being rehabilitated.

Any appointment, transfer, modification, or termination by the Insurance Broker must be reported to the IA within sixty days.

Insurance Broker's Responsibilities

  • Within three months of receiving the licence, the insurance broker must create written internal bylaws and submit a copy to IA.
  • The insurance broker must examine and update the internal control system on a regular basis to ensure correct application of the IA's regulations, statutes, circulars, and resolutions.
  • The insurance broker must produce a risk management operational guide and update and review it on a regular basis in accordance with the applicable requirements.
  • Develop a professional code of behaviour for employees, and manage and coordinate their work to guarantee that the Regulations and Execution Regulations are followed.
  • Cooperate and coordinate with the internal controller to enable them to complete the responsibilities allocated to them and to notify the IA if any violations occur.
  • The internal controller may only be fired by the insurance broker's board of directors or management board, provided that the IA and the internal controller are notified of the dismissal decision at least thirty working days prior to the dismissal, along with an explanation of the reasons for the dismissal.
  • The insurance broker must adhere to the Regulations' obligations toward the IA, consumers, and insurance companies.

Penalties

In the event that an Insurance Broker violates the legislation, regulations, instructions, resolutions, or circulars issued thereunder, the IA may impose the following penalties:

  • A warning to the Insurance Broker, requiring them to remove the breach's causes and take the required steps to prevent it from happening again; or
  • A one-year suspension of the Insurance Broker's ability to practise the activity.

In any of the following situations, the IA may revoke the Insurance Broker's licence:

  • Any of the licence criteria mentioned in the Regulations being violated.
  • Any of the commitments and duties have been breached egregiously.
  • Failure to renew the licence, pay the annual renewal costs, or pay the prescribed late fees.
  • The Insurance Broker is declared bankrupt by a final court judgement.
  • The Insurance Broker's liquidation and dissolution.
  • When an Insurance Broker does not engage in the regulated activity within six months after receiving the licence.
  • After a time of suspension, the Insurance Broker fails to practise the activity.
  • When it is discovered that the licence was issued on the basis of false or misleading information or data, or on the basis of an undertaking that has not been carried out as the IA determined.

Penalties imposed by the IA if an insurance broker's workers break the law, regulations, instructions, resolutions, or circulars published under it:

the IA may give a warning, suspend the activity for up to two months, or cancel the accreditation.

Conclusion

The Dubai Courts' decisions in this case are unexpected. It's possible that the court used general contract standards and didn't consider the nature of the brokers' reinsurance operation, where cover is provided through a cover note. Because this is the first instance of its kind in the UAE, its conclusions cannot be regarded to be particularly authoritative. Several such cases must be heard in UAE courts in order to establish a rule on the accountability of insurance brokers for reinsurance claims if reinsurance cover is obtained by issuing two separate cover notes. Future decisions, it is hoped, would deviate from the findings in this case and uphold the industry. To know more connect with Dhanguard!!

Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.

Dhanguard provides faster and hassle-free Trade License with minimum paper work. With the guidance of our professional team of consultants you will get General trading license, Freelance license, Etrader license, Event Management License, Travel Agency license in Mainland and Freezone in UAE.

Get Instant Advice