While insurance law and regulation in the Middle East may not be keeping pace with the emerging distribution models, developments in recent years have been positive.

Levels of insurance penetration in the Middle East are low, but gradually increasing. As a consequence, and also in response to the geographically expanding needs of existing insured clients, international insurance companies are increasingly looking to the region to grow, and build upon, existing books of business. They face various challenges in achieving that aim, from the regulatory environment to the relative absence of distribution models.

Compared with other, more mature, jurisdictions, the development of distribution models in the Middle East, and specifically the Gulf Cooperation Countries, remains in its infancy. This presents opportunities for the London insurance market, but it is important to choose the right distribution model, tailored to the individual business.

As the regulation of the insurance and reinsurance sectors is also a developing area, there is a tendency for insurers and reinsurers to look to the local markets to create distribution models that present a workable solution, while mitigating any potential risks to its larger global portfolio of risk business.


A common (and low risk) form of entry into the region, involves “fronting” with primary (locally licenced) insurance companies, where the underlying risks are then reinsured out of the local markets, normally back to the reinsurer’s home jurisdiction. This model of distribution is popular for medical and life business in the United Arab Emirates, Oman, Bahrain, Kuwait, Qatar and Jordan. There is a commonly held view that these “fronting” arrangements are not legal, but this is incorrect. Locally licenced insurers are permitted to write and distribute overseas products in their markets within the parameters of the regulatory and legal systems in place. For example, while the United Arab Emirates has promulgated “anti-fronting” laws, these are not enforced, partly to encourage foreign investment into, and the development of, the local economy, including the insurance market. Such arrangements are low risk, but they may also limit the international insurer’s branding and marketing capabilities.

Another method of distribution is through the insurance-intermediaries, which is major player in terms of local distribution. They include local and international brokers, underwriting agents, tied insurance agents, independent financial advisors and to a limited extent banks. One issue faced by this method is the fact that locally licenced intermediaries are not permitted to deal directly with non-admitted insurers or reinsurers; they are restricted to dealing with the locally admitted insurers. This often presents a practical barrier for the international insurers. This restricted approach is seen in the Dubai market with the recently enacted Dubai Health Insurance Law (Health Insurance Law (No 11 of 2013) of the Emirates of Dubai). This prevents non- admitted Insurers (which have “fronting” arrangements) from dealing with the locally licenced intermediary market, and directs that they instruct their cedant to deal with these entities, while making sure that proper contracts are put in place between all of the parties, to mitigate any risks associated with these arrangements. Although individual “insurance agents” are recognised as a class of insurance intermediary, there are strict regulations around eligibility criteria, with the result that only a very small proportion of insurance business is sourced through individual agents in the Middle East region.

As with other regions, the use of e-commerce to sell insurance is becoming increasingly popular - especially for motor, travel, personal accident and other retail lines of business. While e-commerce and the use of the internet is a very cost-effective and convenient method of selling or soliciting insurance, it also involves a high risk of “miss-selling”. One of the tradition roles of an insurance intermediary has been to understand the insurance requirement of the prospective insured, and to then recommend the product that best suits such requirement. Using the e-commerce route, and directly selling, increases the chances of the insured purchasing a product, which does not fit its requirements. Unlike other jurisdictions, there is currently no regulation of comparison websites in the Middle East, and there are several non-licensed entities providing insurance comparison services.


Bancassurance is a popular method of selling insurance in mature insurance markets. To date its impact in the GCC has been limited, but insurers and banks across the region are now realising its potential, especially for life and health insurance. For example, all local banks, which have an insurance company in their group, have started distributing that insurance company’s products through the bank’s branches. While regulation is still developing in the Middle East insurance markets, we have seen some recent positive changes, which are leading towards the implementation of a “western-style” prudential and regulatory landscape. This is true of the United Arab Emirates, which are promoting new regulations for insurers’ solvency and financial governance, as well as anticipated conduct of business regulations, which are anticipated to be similar to UK financial regulations. The Kingdom of Saudi Arabia has also a developed a system, which regulates both insurers and incoming reinsurers to a very high standard, based on a stated goal of SAMA (the Saudi Arabian Monetary Agency) of achieving a transparent and open insurance market. Dubai (with the Dubai International Financial Centre - DIFC) and Qatar (with the Qatar Financial Centre - QFC), have set-up financial centres incorporating western- style regulation, and both of which have had an impact on the distribution channels available to international markets. For example, many reinsurers have set-up in these centres, in order to accommodate their global risk business with a regional approach. Lloyd’s of London has recently launched a platform in the DIFC to facilitate a regional distribution model.

While insurance law and regulation in the Middle East may not be keeping pace with the emerging distribution models, there has been positive progress in the region to address the balance. Recent changes by local regulators indicate a willingness to adopt a more hands-on, “western” style, and principle-based regulatory system. In our view, this will present significant regional opportunities to members of the London and international insurance markets.

This article was first published in Insurance Day