Originally published in International Law Office
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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