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The UAE Cabinet has issued Cabinet Resolution No. (42) of 2009,
which came into force on 31 January 2010, increasing the minimum
required paid up share capital of an insurance company to AED 100
million. The Resolution also acts to increase the minimum required
paid up share capital of reinsurance companies to AED 250
million.
Although this Resolution is a recent development in the
regulation of the UAE insurance industry, the main source of law
regulating the industry is Federal Law No. (6) of 2007 concerning
the Insurance Authority (Law). This Law however,
does not specify any minimum percentage UAE shareholding required
for insurance companies established in the UAE. The Resolution now
provides us with guidance on this matter as it prescribes that UAE
or GCC national individuals, or wholly owned UAE or GCC national
legal entities, must hold at least 75% of the share capital of an
insurance company which is established in the UAE. While this does
not differ from what was previously required in practice, it does
formalise the unwritten rule imposed by local authorities in the
past.
As is the case with the Law, the provisions of the Resolution
are applicable to all national and foreign insurance companies
licensed to operate in the UAE, including companies undertaking the
business of cooperative insurance, Takaful and reinsurance, except
for those companies operating in any of the UAE free zones.
The Resolution allows all insurance companies a period of 3
years from the date of its publication in the official Gazette,
being 31 January 2010, to increase its paid up share capital to
comply with the terms of the Resolution. The Resolution does not
specify penalties for non-compliance; however, the Insurance
Authority has the power to issue various types of penalties
including bans and fines.
While the issuance of the Resolution is one of the latest
developments in the UAE insurance industry, the recent activities
of the Insurance Authority, which was formed last year to regulate
the insurance industry in the UAE, should also be considered in
this context. For instance, the Insurance Authority's recent
activities, which may have an indirect effect on insurance
companies, include de-registering a substantial number of brokerage
firms that failed to comply with changes to the laws regulating the
insurance industry.
Of further importance, the Insurance Authority acknowledges that
various regulations are in the process of being drafted and it has
recently been reported in the media that the Minister of Economy
and Chairman of the Insurance Authority, has issued a resolution
bringing the executive regulations of the Law into force. We
understand from the Authority that the regulations will be applied
to various types of entities operating in the insurance industry
including national and foreign insurance companies. However,
further and specific details will only become available once the
regulations are published.
Please let us know if we can assist you in respect of compliance
with the Resolution or if you would like to arrange a meeting to
discuss this matter.
First published in International Law Office
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