UAE first out of the blocks with other GCC countries not far behind
Although risk-based capital models have been in place for some time in the Middle East’s international financial centres, such as the DIFC in Dubai, most jurisdictions in the region apply a simple minimum capital requirement for insurers which is supplemented by the requirements to hold technical reserves.
In January 2018, the United Arab Emirates (UAE) will be the first country to fully implement a model based on Solvency II, when the final phase of the Insurance Authority’s Financial Regulations come into effect.
It is likely that other countries in the Gulf Cooperation Council will follow suit shortly. Saudi Arabia, for example, has already introduced requirements in relation to disclosure and risk management for insurers which will readily provide the underpinnings for a Solvency II model.
One slight concern in the development of prudential regulation in the region is the trend towards requiring branches of foreign companies to hold capital locally. If continued into the insurance sector, this will lessen the distinction between a locally incorporated company and a branch of a foreign company and may result in some insurers exiting local markets.