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In January 2010 the Qatar Financial Centre Regulatory Authority
("QFCRA") issued Consultation Paper 2010/01
("Paper") inviting comments in relation to possibly
allowing general insurers to offer certain short-term life
insurance policies in or from the Qatar Financial Centre
("QFC").
The QFC Financial Services Regulations ("FSR")
categorise certain types of insurance as either "general
insurance" or "long term insurance" (ie life
insurance). The QFC, as with many regulated jurisdictions,
prohibits insurers from offering both general and life insurance
products from the same entity ("composite insurers")
except in limited circumstances. The exception to this general
prohibition relates to a life insurer's ability to offer 2
categories of general insurance: accident and sickness. An insurer
that wants to offer both general and life insurance is required to
establish two separate entities for the two different categories of
products.
However, the QFC has acknowledged that such a prohibition has
created some issues where general insurers have sought approval to
offer certain short term life policies. The FSR categorizations do
not differentiate between "short term" and "long
term" life insurance and accordingly any life insurance policy
will be considered as a "long term insurance policy",
regardless of the policy's term.
In order to address these concerns, the QFCRA is currently
considering an alternative approach consisting of the following
options:
Where a general insurer wants to offer short-term life
insurance policies, the insurer would be required to establish a
life insurance subsidiary in order to do so;
restrict the scope of authorization of the life insurance
subsidiary to short term group life contracts (but not annuities);
and
in recognition of the limited business that the subsidiary
would be authorized to undertake in or from the QFC, provide
certain conditional waivers and modifications to the requirements
that would normally apply to a life insurer established in the
QFC.
The QFCRA's approach to short-term life insurance differs
significantly from the approaches adopted by the Central Bank of
Bahrain ("CBB") and the Dubai Financial Services
Authority ("DFSA"). Both the CBB and the DFSA definitions
of "long-term insurance business" identify them as
contracts for a period of more than one year, and do not
automatically categorise life insurance written on an annually
renewable basis as requiring the additional protections associated
with "long term" life insurance. On the basis of these
definitions, general insurance companies in these jurisdictions are
able to offer short-term life insurance, provided the policy period
is no longer than one year, without the need for a new subsidiary.
Annually renewable group life insurance business is a popular and
necessary product for most Middle East companies. Given the
complexities associated with the establishment of an entity in a
regulated environment, the requirement for a general insurer to
establish a new subsidiary in order to offer such policies may put
the QFC at a comparative disadvantage where this type of insurance
is concerned.
In proposing this alternative approach, the QFCRA has posed a
further few questions relating to the identification of potential
barriers to the implementation of such a structure, appropriate
levels of base capital for short-term life insurance subsidiaries,
whether a common management structure would be feasible, and
practical issues regarding the segregation of assets and
liabilities between the two entities. The deadline for receiving
comments was 24 February 2010.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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