We reported last month on the new broker regulations (the Principal Regulations) introduced by the Insurance Authority (IA) which considerably increase the capital and guarantees requirements in addition to introducing higher standards of governance across the board. One area where the new regulations lacked detail was that of the qualifications required for entry into, and participation in the profession in the UAE. That omission has been rectified by the recent appearance of Resolution No 58 of 2013 of the IA (the Additional Regulations), described below. However the Additional Regulations also contain a surprise new addition to the solvency requirements for brokers.
Additional solvency requirement
The Additional Regulations impose an additional solvency requirement, in addition to the requirements as to share capital, guarantees and indemnity insurance in the Principal Regulations. Paid up share capital of a minimum of AED 3 million is imposed under the Principal Regulations. However the Additional Regulations go further in requiring the broker maintains ‘available capital’ at all times no less than ‘the required minimum’ - presumably the AED 3 million minimum. ‘Available capital’ represents the difference between assets and liabilities. The effect is to impose a tough solvency margin on brokers, similar to that which applies to risk carrying insurance companies. Given that brokers will have to put up a bank guarantee of AED 3 million with an additional AED 1 million for each branch, in addition to a PI policy to the value of AED 2 million, this may seem like overkill, particularly bearing in mind that customer’s money has to be kept in a segregated broker account. On the other hand, the UAE does not have a financial services bail-out fund on the EU model, financed by the industry. At any rate, it looks as if broker customers will be well protected in future, even if the cost of that protection will be smaller brokers having to quit the market.
New educational and experience requirements
On broker educational and practical experience requirements, the Additional Regulations supersede the 2006 standards which specified a degree qualified ‘partner’ (ie shareholder) and a ‘responsible manager’ with a degree and practical experience. An insurance broker must now have a ‘technical cadre’ consisting of a Director General or CEO; an Operations Manager/Internal Controller; and a ‘competent employee’ for each licensed insurance type.
The Director General/CEO must have an ‘academic’ degree, (subjects apparently unspecified) or ACII certified by the Insurance Law Institute of London, have passed three insurance or insurance brokerage training courses and also have a minimum of 10 years practical insurance experience (5 if he holds a higher educational qualification). UAE nationals require 2 years’ experience if they have an educational qualification or 5 years if they have no such qualification.
The Operations Manager requires “an academic degree or its equivalent in financial sciences, accountancy, administrative sciences, banking or law”. Non-graduates require 6 years’ experience; graduates, 3 years. The equivalent requirements for UAE nationals are 2 and 1 years respectively. An Internal Controller requires practical experience in internal and external audit of insurance brokers or companies and a degree.
Finally, the ‘competent employees’ for each insurance type (life or general) require a degree and practical of the relevant insurance type for 5 years or 3 if they are a UAE national. Branch Officers require a degree or ACII and 7 years practical experience, or 3 if he has a degree. For UAE nationals, the equivalent experience must be 4 or 2. No doubling up of the above jobs is permitted, other than as between internal controller/auditor.