Friends Provident International has undertaken a detailed rules mapping exercise to help us interpret the updated broker regulations, and how they are likely to apply to both insurance companies and brokerages. These include a large number of rules detailing obligations between the Insurance Authority, the customer and the insurance company, with which brokers must comply.
Record keeping
Brokers will be required to maintain detailed financial records, documents, accounts and other data for a period of 10 years. Originals of all documentation need to be maintained for the same period. The broker is required to allow the Insurance Authority access to any documents or other records at any time.
Licensing
In addition to existing requirements, applicants for new broker licenses will have to submit evidence of the management’s good character as well as a description of the technical systems and work procedures they have in place, as well as a plan for the recruitment and training of UAE nationals in the business.
Advertising
All new broker advertising campaigns will have to be pre-approved by the Insurance Authority. It is not yet known how this will work in practice, but in reality it will mean further checks by brokers to ensure that any proposed advertising campaigns meet the standards laid down by the authority. All advertising will have to follow best practice in terms of client advice, adequate disclosure and fair treatment of customers, before it is submitted to the Insurance Authority for approval.
Inspections
The new regulations give the UAE Insurance Authority the right to inspect brokers without notice, to examine their records and to verify their compliance with any laws, regulations and circulars then current. A broker licence could be suspended if there has been a violation of any law or regulation for up to one year. In the worst case, a license can be terminated for failure to comply with the regulations.
There are also detailed rules around the opening of new branches and mergers and acquisitions, too detailed to cover in this short piece. As an example, a broker can only open a new branch if it has written business with premiums in excess of AED3m in the previous year.
In summary, the new regulations are sufficiently detailed to cover each and every aspect of a brokerage’s operations. It would take a whole edition of International Adviser magazine to look at each of the articles within the broker regulations in more detail.
At Friends Provident International we welcome the introduction of these new regulations as they articulate the determination of the UAE Insurance Authority to build a robust regulatory framework that is appropriate for the needs of the regulator, the insurance broker, the insurance company and most importantly the customer.
We are keen to work with our distribution partners to help them interpret the regulations. It may seem a long way off but November is just seven months away, and I cannot stress enough the importance of appropriate and detailed planning to ensure compliance with the new broker regulations.
Taher Fakhri is regional compliance and risk officer for FPI’s Middle East operations
