The insurance sector will remain under the supervision of the ministry although “adjustments will be made in line with developments in the industry”, reported Unity News.
Kuwait has been looking to tighten government spending in recent year as its struggles to cope the region’s oil price slump.
The rebuff comes despite a number of changes being made since 2011 to the existing insurance law, introduced in 1961, including plans to create an independent regulator for the industry.
A new draft insurance law is currently being prepared to incorporate the amendments made in recent years as well as a section that will cater to takaful - a type of insurance system devised to comply with the sharia law, in which money is pooled and invested.
The law will include measures such as an increase to minimum capital requirements for Kuwaiti-owned entities, first announced in 2011, which would see it rise from KWD150,000 (£404,140, $495,000, €453,871) as set out in the 1961 law to KWD5m for life and general insurance companies.