UAE Insurers must not combine the operations of persons insurance and fund formation lines of business with property and liability insurance business.
The promulgated provisions of Article 25 of the Federal Law No (6) of 2007, concerning the Establishment of the Insurance Authority and Regulation of Insurance Business (Insurance Law) enforces this obligation on licenced and authorised insurers in the UAE.
The UAE Insurance Authority announced on Sunday 30 August 2015, pursuant to a recent Cabinet Resolution that all the insurance companies operating in the UAE and carrying out the business of both life and general insurance are required to regularise their position by no later than 28 August 2016 in accordance with Article 25.
Any insurance company registered and authorised by the UAE Insurance Authority can practice either property and liability insurance or insurance of persons and fund formation but not both i.e. life business and general business needs to be separated for all insurance companies carrying out such business from and within the same entity.
The Insurance Law prescribed that the separation of these business lines of risk must be completed and finalised within five years from the commencement of Insurance Law unless specified otherwise. This period was further extended by another three years starting from 28 August 2012 pursuant to Cabinet Resolution No 15 of 2012, issued on 9 May 2012. The said extension provided under Cabinet Resolution No 15 of 2012 expired on 28 August 2015 and the recent Cabinet Resolution further extends this by a period of another year up to and including 28 August 2016.
The purpose of these extensions is to ensure that the insurance companies are given opportunities to regularise their business and to strengthen the competitive environment for the UAE insurance sector.
UAE Insurers of combined lines of business will need to look at corporate restructure options should they wish to retain all lines of business in order to separate these risks and regulate them pursuant to the provisions of Article 25. There are a number of legal options open to UAE insurers to facilitate compliance with the legal provisions, which Kennedys Dubai LLP can advise on and assist with.
Kennedys Dubai LLP have not seen copy of the Cabinet Resolution and make no comment as to the completeness and/or accuracy of the press release published on Insurance Authority’s website.