Circular No 48 of 2012
To the General Managers of the insurance companies operating in the State & the
insurance brokers operating in UAE insurance market
Dear Sir,
Subject: Draft Regulation No ….of 2012 on Registration of the insurance brokers and
organization of their operations
The Insurance Authority presents its compliments to you wishing you all success to
serve UAE insurance market and has the pleasure to send herewith a copy of the
captioned draft along with an explanatory note on the new provisions stated in the
draft.
As you may notice upon reviewing the draft, the new provisions have been introduced
into the field of insurance brokerage aimed to protect interests of all the parties i.e., the
insured, the insurance companies and the insurance brokers.
Given the importance of the subject matter, we hope that all the insurance companies
and brokers will consider attentively the contents of the draft and present their
suggestions and comments on such respect.
The Insurance Authority hopes to receive your point of view in the draft within 60 days
as from date.
Hoping that the matter will be given due importance.
Sincerely yours,
Fatima Ishaq Al Awadi
Deputy Director General
Insurance Authority
Enclosed:
Draft Regulation and explanatory note
C.C.; Office of the Assigned Director General
United Arab Emirates
Insurance Authority
The Board of Directors
Regulation No….of 2012
on
Registration of the Insurance Brokers
and
Organization of their Operations
March 2012
Arrangement of articles
Details
Terms & Definitions
Scope of Applicability
Key Rules of Registration
Registration Requisites
Registration Documents
Registration Procedures
Registration Rejection and Appeals
The Broker’s Financial guarantees
Renewal of Registration
Changing particulars and information
Opening Insurance Brokerage Branch in the State
The Broker’s Duties
Rules Governing the Relation between the Insurance
Company and the Insurance Broker
Rules Governing the Relation between the Broker and
the Client
The Financial Relations of the Insurance company, the
Broker and the Client
The Insurance Broker’s Accounts
The Insurance Broker’s Records
Providing the Insurance Authority with Information
and Examining the Insurance Broker’s Books and
Records
Discontinuing Practicing the Profession
Disciplinary Penalties
Suspension from Practicing the Profession
Writing off the Registration
Dispute Settlement
Final Provisions
Publication in the Official Gazette
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Insurance Authority
The Board of Directors
Regulation No….of 2012 on Registration of the Insurance Brokers and
Organization of their Operations
Having considered the Federal Law No.1 of 1972 on the Ministries'
responsibilities and the Ministers' authorities and the amending laws,
The Federal Law No.6 of 2007 on Establishment of the Insurance Authority
and Organization of the Insurance Operations,
The Executive Regulation of the Federal Law No.6 of 2007 on
Establishment of the Insurance Authority and Organization of the
Insurance Operations,
The Ministerial Decree No. 543 of 2006 on Organization of Practicing the
insurance brokerage profession,
And on basis of the Insurance Authority Director General’s presentation,
and the Insurance Authority Board of Directors’ approval,
Resolved as follows:
Article (1)
Terms & Definitions
1. The Regulation herein shall be called “Regulation on Registration of the
Insurance Brokers and Organization of their Operations” and hereafter
referred to as ’Regulation’.
2. The following words and expressions shall bear the meanings beside
each of them unless the context provides otherwise:
State:
Law:
Executive Regulation:
Authority:
Board:
Chairman:
Director General:
Company:
The United Arab Emirates
The Federal Law No.6 of 2007 on
Establishment
of
the
Insurance
Authority and Organization of the
Insurance Operations.
The Executive Regulation of the Law
issued by Decision of the Insurance
Authority’s Board of Directors.
The Insurance Authority established by
virtue of the provisions of the Law.
The Insurance Authority's Board of
Directors
The Chairman of the Board
The Director General of the Insurance
Authority
Any insurance company ( or takaful
insurance company) incorporated in the
State and foreign insurance company
(or foreign takaful insurance company)
licensed to carry out insurance
activities in the State either through a
branch, or through an insurance agent.
Insurance Broker:
Client:
Insurance brokerage
operations
Register:
The
person
who
independently
intermediates in insurance operations
between the applicant of the insurance
and the insurance company in return
for a commission from the insuring
company
The applicant of the insurance or the
insured
They include brokering in operations of
insurance
of
persons,
fund
accumulation operations and property
and liability insurance ( and the similar
takaul insurance operations)
The register of the insurance brokers
maintained by the Insurance Authority.
Article (2)
Scope of applicability
1. The provisions of the Regulation herein shall apply to all insurance
brokers operating in the State or to all those intending to work inside
the State to practice the insurance brokerage profession.
2. It is impermissible to practice the insurance brokerage profession
only upon registering in the register according to the provisions of
the regulation herein.
3. It is impermissible for a company to accept insurance operations of
risks existing inside the State through an insurance broker
unregistered in the register.
Article (3)
Key Rules of Registration
1. Registration shall be affected according to the insurance classes and
types stated in the Law and the Executive Regulation.
2. A broker may cumulate operations of brokerage in insurance of
persons and fund accumulation operations on one side and
brokerage in insurance of property and liabilities on the other side
provided that complete separation between them be maintained
whether as to records, books, or the individuals working in each class
of insurance. The broker, as well, may take up specialization in
certain class of insurance or in one type of insurance or more.
3. The broker shall not cumulate the broker’s role as an insurance
broker for one side and as an insurance agent, consultant, adjuster or
an actuary on the other side. In case the broker is licensed to carry out
re-insurance, the broker shall not cumulate the two roles as to the
same operation for the same entity the broker is working for its
account.
4. Registration in the register shall not be subject to sale or assignment
to any other person or entity.
5. A broker shall conclude within three months as from date of
registration two brokerage agreements in insurance operations with
at least two insurance companies operating in the State.
Article (4)
Registration Requisites
An applicant for registration in the insurance brokers’ register shall
meet the following requisites:
1. A local broker:
a. Shall be a limited liability company or a private stock company.
b. UAE nationals’ stake in the company shall not be less than 51%.
c. One partner at least obtained a university degree in one of the
following domains: insurance, management, law, accounting,
commerce, finance, economy or acquired AC11 of London or
similar institutes and that all partners fulfilled the provisions of
Article (30) of the Law.
d. The company’s capital shall not be less than AED five million;
fully paid-up.
e. All the partners, the board members and the manager shall be of
legal capacity, good practice and never been declared bankrupt.
f. The company shall appoint a manager in charge fulfilling
paragraph 1/3 of Article (4) herein and having at least the
minimum of the required specializations stated in paragraph 2/3
of Article (4) herein.
2. A foreign broker:
a. Shall be a company incorporated outside the State and licensed in
its country of registration to practice the insurance brokerage
profession in the classes and types of insurance the broker is
intending to practice in the State.
b. Shall carry out its operation in the State by way of opening a
branch of a foreign company.
c. The company’s paid-up capital in its country of registration shall
not be less than AED ten million.
d. Shall appoint a local national representative.
e. The company shall satisfy clauses E&F of paragraph 1 of Article
(4) herein.
3. Requisites to be met by the manager in charge and the employees of
both the local and foreign brokers.
1. A manager in charge:
a. Obtained a university degree in one of the specializations
related to insurance operations or acquired ACII at least of
London or of a similar professional institution.
b. Of legal capacity.
c. Shall work full time as manager in charge.
d. Successfully passed three training sessions in insurance or
insurance brokerage.
e. Having practical experience in the fields of insurance or
insurance brokerage for a period no less than five years if the
broker is a UAE national and ten years if the broker is a non
UAE national.
f. Passed the examinations conducted by the examination board
set to test the employees of insurance and the professions
related to insurance formed by the Insurance Authority.
g. Of good conduct and behavior, never been convicted for breach
of honor or being declared bankrupt unless rehabilitated.
h. Never been dismissed from any insurance company or any
other company for disciplinary reasons.
i. Not liable according to the Insurance Authority own discretion
for grief violations of any of the provisions of the Law or the
companies’ Law in his capacity as general manager or a
member of the board of a company including liability of
causing compulsory liquidation of the company.
j. Any other requisites deemed suitable by the Insurance
Authority issued by decision of the Director General.
2. The specialized employees of the broker:
The broker shall appoint at least two specialists in insurance of
persons and fund accumulation operations and at least two
specialists in general insurance (depending upon the broker’s
specialization). They shall meet the following requisites:
a. Obtained preparatory school certificate at least.
b. Met the requisites stated at paragraphs b, c, d, e, f, g, h, I, j, k.
c. Having
practical
experience
(depending
upon
the
specialization) in the field of insurance or insurance brokerage
for three years at least if the broker is a UAE national and five
years at least if the broker is not UAE national.
Article (5)
Registration Documents
1. A local company intending to register in the register shall submit the
following documents:
a. True copy of its article and memorandum of association and its
registration in the trade register.
b. True copy of UAE nationals’ registration card or passport.
c. List of the partners’ names, each one of them shares and
documents establishing their legal capacity, nationalities and
previous experience.
d. Statement of the types of insurance operations the company is
intending to practice therein brokerage activities.
e. An undertaking that the manager in charge is a full time manager
to carry out insurance brokerage operations.
f. The required professional liability insurance policy and bank
guarantee.
g. True copy of the bank agreement concluded by the broker and one
of the banks operating in the State therewith the broker opened an
account especially for insurance brokerage operations.
h. Any other documents required by the Insurance Authority needed
to register the broker.
2. A foreign company intending to open a branch to practice insurance
brokerage in the State shall submit the following documents:
a. An official certificate from the concerned authority in its country
of registration affirming that the company is incorporated and
registered in that country and is licensed to practice the insurance
brokerage profession in the types and classes of insurance it
intending to carry out in the State.
b. Practiced insurance brokerage professions in its country for no less
than five years.
c. List of the partners’ names and their nationalities.
d. Copy of two of the most recent statements of accounts approved
and authenticated by the concerned authorities of the country of
the company.
e. True copy of the company’s board of director’s resolution to open
a branch in the State.
f. The documents stated in d, e, f, g, h of paragraph 1 of Article (5)
herein.
Article (6)
Registration Procedures
1. The Insurance Authority upon submission of the application shall:
a. Register the application in the relevant record and endorse it with
a number and date of submission.
b. Hand the applicant a receipt containing name of the applicant of
registration, the subject matter, the registration number, its date
and list of the attached documents.
2. Should the Insurance Authority find the registration application not
meeting any of the requisites, the required particulars or documents,
the applicant shall be advised by a registered letter or direct delivery to
meet same within two months as from date of notice and should he fails
to act as so within the stated period, the application shall be deemed
cancelled by law and the applicant shall not submit any other
application before lapse of three months as from date of such
cancellation of the application.
3. The application shall be considered and evaluated within (30) days at
most as from date of submission and thereafter such application shall
be referred to the Director General coupled with the opinion of the
pertinent department of the Insurance Authority.
4. The Director General may accept or reject the registration application in
light of what he sees suitable to the market needs and necessities of the
public interest.
5. In case of accepting the application, the applicant shall be advised as so
and requested to submit the documents of the financial guarantees
within fifteen days as from date of advice.
6. Following accomplishment of the documents submission procedures,
the broker shall be registered in the register and given registration
certificate of an insurance broker according to the particulars and
information stated in the register.
7. Duration of the broker’s registration shall be one year subject to annual
renewal.
8. The broker shall be committed to carry out his operations within six
months as from date of registration.
9. Should the registration being done on basis of incorrect documents and
information and same not corrected within a period determined by the
Director General, the registration shall be cancelled by decision of the
Director General.
Article (7)
Registration Rejection and Appeals
1. In case the registration application is rejected, the applicant shall be
advised as so.
2. The applicant of the registration may appeal before the Board the
decision of the Director General rejecting the registration. The appeal
shall be referred to the Board along with the Director General’s opinion.
3. The Board may accept or reject the appeal in light of what seen suitable
for the market needs and necessities of the public interest. However, the
Board shall not be obliged to give justification for or reasons of its
decision in any case.
4. In case the Board upholds the decision of the Director General rejecting
the registration application, the applicant shall have the right to file a
new application only after expiry of one calendar year at least as from
date of advising the applicant of the rejection decision.
5. The Board’s decision rejecting the application shall be final.
Article (8)
The Broker’s Financial Guarantees
1. The insurance broker shall be obliged to submit the following financial
guarantees and make the following procedures:
a. A professional liability policy of AED three million by the local
insurance broker and five million by the foreign insurance broker
per event as guarantee of the civil liability emerging from damages
incurred due to the broker’s practicing of his profession. The policy
shall be issued in the broker’s name in favor of the Chairman of the
Board in so capacity.
b. One year bank guarantee automatically renewable throughout the
period of registration and of continual duration beyond the date of
completing the registration until a decision is made by the
Insurance Authority cancelling the bank guarantee and advising
the bank as so by a letter issued by the Insurance Authority.
Amount of Guarantees:
For a local Broker:
For a foreign broker:
AED 2 million
for the broker’s main office
AED 1 million
for each of the broker’s branches
AED 3 million
for the broker’s main office in the State
AED 2 million
for each additional branch in the State.
2. The broker shall be obliged to open a separate account with one of the
banks operating in the State to be assigned for the financial transactions
relevant to the insurance broker’s operations only.
Article (9)
Renewal of Registration
The broker, for purposes of renewing the registration, shall submit the
following:
a. An application to the Insurance Authority before one month at least as
from the expiry date of registration to be submitted in two copies
signed by the brokers or by whoever legally represents the broker.
b. Statement of the operations carried out by the broker during the last
year.
c. Copy of the brokerage agreement concluded by the broker with the
insurance companies.
d. List of the partners’ names, the name of the manager in charge or the
manager in charge of the administration as the case might be and of all
the senior officials in charge of the brokerage operations.
Article (10)
Changing Particulars and Information
1. The insurance broker shall advise the Insurance Authority of any
change may develop in any of the particulars, information or
documents on their basis the broker’s registration has been
accomplished within fifteen days as from date of occurrence.
2. In case the post of the manager in charge became vacant, the broker
shall advise the Insurance Authority and appoint another in his place
within one month as from date of the post becoming vacant and notify
the Insurance Authority of the new manager’s name and qualifications.
However, the new manager in charge shall meet the destined requisites.
Article (11)
Opening Insurance Brokerage Branch in the State
1. The insurance broker may file an application to open a branch or
branches inside the State should the broker meets the following
requisites:
a. Two years at least have already passed as from date of registration
during which the broker actually practiced the profession and that
no disciplinary penalty has been imposed on the broker.
b. Obtained the approval of the pertinent authority of the concerned
Emirate.
c. The amount of premiums attained by the broker in the last fiscal
year shall not be less than AED one million.
d. The new branch shall operate under the direct supervision of the
manager in charge of the broker’s main office and that the person in
charge of the branch shall meet the requisites destined for the
manager in charge of a brokerage company.
2. The insurance broker shall file an application to the Insurance
Authority on the form prepared for the purpose along with the required
documents.
3. The Director General shall make a decision either accepting or rejecting
the application. However, his decision rejecting the application shall be
final.
Article (12)
The Broker’s Duties
The insurance broker while practicing his profession shall do the following:
a. Adhere in carrying out the insurance brokerage operations to the types
and classes of insurance stated in the broker’s registration.
b. Insert the broker’s name and registration number with the Insurance
Authority into all the papers, corresponds and documents.
c. Not to rely at any time on one insurance company in the broker’s
activity in the State.
d. Respond to the queries of the applicant or the insured in the
professional way expected to be of an insurance broker.
e. Forth comply with rules of fairness and transparency in practicing the
profession with the clients, insurance companies and others.
Article (13)
Rules Governing the Relation between the Insurance Company and the
Insurance Broker
The relation between the insurance company and the insurance broker
shall be subject to the following rules:
First: Existence of an agreement signed by the two parties:
1. An insurance company shall not accept insurance operation by an
insurance broker and the insurance broker shall not offer insurance
operations to an insurance company unless there is a written agreement
signed by the two parties.
2. The parties (the insurance company and the broker) shall be obliged to
submit a copy of the agreement with the Insurance Authority as well as
any amendments thereto and the parties’ agreement to terminate it and
also the decision of one of the parties to terminate it according to the
terms and conditions of the agreement.
3. The agreement shall not be exclusive or prohibiting the broker to deal
with other insurance companies (all other insurance companies or
certain insurance companies)
4. The agreement concluded by the two parties shall contain at least the
following:
a. The period of agreement
b. The insurance classes the subject matter of the brokerage activity
c. The geographic territory
d. Authorizing the broker to collect the premiums in favor of the
insurance company of the operations where authorization is
permitted.
e. How to pay balances from one party to another in the operations
where authorization is permitted.
f. The broker entitlement of the commission as soon as the insurance
policy is issued as a result of the broker intermediating between the
parties. The commission will be paid according to the terms and
conditions regulating the financial relation between the two parties.
5. The agreement shall not contain an authorization to the broker to affect
the following tasks:
a. Issuance of the insurance policy, its endorsements or insertion of
amendments thereto except issuance of motor vehicle certificates
should the parties wish so.
b. Receipt of the indemnities due to the insured or the other
beneficiaries in order to pay the stakeholders.
c. The right to reject claims.
Secondly: the insurance companies’ duty in dealing with the broker:
1. In case the insurance company received a request from the broker to
offer conditions and rates of certain insurance operations, the insurance
company shall have no right to contact the related client directly unless
the client required so by written request confirming his intention to deal
directly with the company.
2. In case another broker authorized by the same client in respect of same
insurance operation contacted the insurance company, the insurance
company shall have no right to offer conditions or rates other than the
ones offered earlier to the broker unless the later broker presented new
information that would influence the companies’ decision on the
conditions and rates.
3. In case the broker is not authorized by the client to renew the policy
with the same issuing company, the company shall send a notice to the
client to declare his intention to renew it and hand the broker a copy of
same.
Article (14)
Rules Governing the Relation between the Broker and the Client
The relation between the broker and the client shall be subject to the
following rules:
First: Authorization:
1. Existence of a written signed power of attorney by the insurance
applicant authorizing the broker to carry out brokerage in the insurance
operation.
2. The insurance broker shall prepare text(s) of the power of attorney to be
presented to the client to sign it and send a copy thereof to the
Insurance Authority before putting same into effect. The Insurance
Authority shall give its opinion on the conditions it contains and the
broker shall adjust them according to the Insurance Authority’s
comments.
3. The following rules shall be included in particular in the power of
attorney:
a. That the client authorized the broker to contact one or several
insurance companies designated by the client or that he let the broker
contact any insurance company approved by the Insurance
Authority.
b. That the broker is committed or not committed to make procedures
to claim the indemnity due to the client when informed of the insured
event by the client. However, no reference shall be given in the power
of attorney that the broker is authorized to receive the indemnity due
to the client.
c. That the broker is authorized to renew the policy with the same
company or solicit new offers from other companies or otherwise is
principally not authorized to renew the policy.
d. That the client has the right to dismiss the broker and withdraw the
so given authorization at any time and the broker shall have no right
to impose any terms that would limit the client’s own discretion in
this respect or put any burden on the client as a result of
withdrawing the authorization.
Second: the broker’s duties towards the client:
1. The broker shall deal with the client according to the principles of good
faith and transparency and give the client suitable technical advice.
2. The broker shall protect the client’s interests whether in comparing the
conditions and rates obtained for the client’s account or in preference to
deal with certain insurance company other than the others.
3. The broker shall solicit conditions and rates to the client’s own account
from more than two companies.
4. The broker shall explain to the client in readily comprehended form,
importance of disclosing the relevant material facts to the insurance
company upon requesting the insurance as the client should faithfully
and precisely disclose all material circumstances relevant to the subject
matter of the insurance that would influence the insurance companies’
decision to agree to conclude a contract or not, to determine the
conditions and rates. He shall explain to the client the risk of noncomplying as so.
5. The broker shall inform the client in a sufficient time as from the expiry
date of the insurance policy whether he intends to renew the policy
through the broker (unless authorized to renew policies according to
the power of attorney) or to renew it with the same company according
to the earlier conditions or intends to solicit other offers.
6. The broker shall explain to the client whether is being authorized or not
authorized to receive the premium on behalf of the insurance company
intending to deal with according to the provisions of Article (15) of the
Regulation herein and shall indicate importance of paying the
premiums on the dates destined by the company and the negative
consequences might affect him as a result of not paying on time.
7. Should the broker be authorized by the client to follow up the claim
procedures of the indemnities due to the client, the broker shall specify
to the client the legal procedures should be adopted and the documents
be submitted and make the client aware of the company requisites such
as further explanations or other documents. The broker as well shall
convey to the client the insurance companies’ decision on the so
presented claim.
The broker shall not act on behalf of the client vis-a-vis the insurance
company of any commitment to accept or reject the companies’ decision
as such decision shall be made by the client.
Article (15)
The Financial Relation of the Insurance Company, the Broker and the
Client
1. The financial relation between the insurance company and the client
shall be direct relation. Accordingly, the client shall pay the insurance
premium and any other amounts due from the client to the insurance
company directly and not to the broker. Further, the broker shall have
no right to receive the insurance premium or any other amounts due
from the client.
In case the client paid the broker irrespective of the provisions herein,
the client’s liability towards the insurance company shall not be
discharged.
2. The provisions of paragraph (1) above shall not apply to operations of
the compulsory insurance of the civil liability emerging from motor
vehicle accidents (individual) as the broker is obliged to collect the
premiums and pay them to the insurance company monthly within the
next seven days following the month of issuing the policy.
3. The insurance company shall be obliged to pay the commission of the
broker within seven days as from date of receiving the insurance
premium.
4. The insurance company shall not pay the indemnities, due to the client
or the beneficiary, to the broker in order to pay them. In case this
happens, the insurance companies’ liability towards the client or the
beneficiary shall not be discharged unless they actually received the
indemnity.
Article (16)
The Insurance Broker’s Accounts
1. The insurance broker shall abide by the directives on anti-money
laundering and combating terrorist financing issued by the Insurance
Authority and the other official bodies.
2. The insurance broker shall be obliged to submit to the Insurance
Authority within one month as from the end of each fiscal year copy of
the movement of the account’s entries referred to in paragraph (2) of
Article (8) of the Regulations herein approved by a licensed auditor.
3. The insurance broker shall be obliged to affect separation between his
own accounts and the accounts of the clients and company he is
brokering for.
4. The account of the financial transactions of the brokerage operations
shall be assigned only to these operations and exclusively be used for
the following:
a. Depositing the premiums paid by the clients.
b. Depositing the amounts received from the clients in respect of the
insurance operations.
c. Depositing the amounts received from the insurance companies to
pay the clients.
d. Withdrawing the commissions due to the broker as a result of his
effort to execute brokerage operations after getting the insurance
company approval to deduct them from the accounts.
5. The broker shall not get any interests against the amounts deposited in
the brokerage account and as well shall not maintain these amounts in a
form of fixed deposits or get credit facilities or bank loans backed by
these amounts.
Article (17)
The Insurance Broker’s Records
1. The insurance broker shall be obliged to maintain duly kept books and
records and insert the data and information on the operations he is
carrying out in these books and records as the case might be. Further,
he shall maintain the documents of these operations as follows:
- to insert the following data and information into the records:
a. Name and address of the insurance company he is carrying out
operations of insurance for as broker.
b. Insurance operations carried by him as broker of the company
c. Name of the insurance applicant, the insured, the beneficiary, the
policy’s date of issue, and the due premiums.
- to keep the documents relevant to the following brokerage
operations in insurance:
a. The memos and correspondence of the broker’s operations
b. The insurance policies and their endorsements brokered
according to the Regulation herein.
c. The serially numbered documents relevant to receipt, payment,
entries and settlements and other financial transactions of the
insurance brokerage operations carried out by the broker.
d. The bank accounts of the insurance brokerage operations carried
out by the broker.
2. The insurance broker shall maintain the records and documents for
five years at least as from date of closing them.
3. The Director General shall determine the records and books ought to
be maintained by the insurance broker for a period longer than the
stated in the preceding paragraph.
Article (18)
Providing the Insurance Authority with information
and
Examining the insurance broker’s books and records
1. The insurance broker shall be obliged to submit within one month as
from the end of each year the following information to the Insurance
Authority approved by an accredited auditor:
a. The budget and the final statement of the accounts of the insurance
brokerage operations in the State for the previous fiscal year.
b. Names of the insurance companies the broker is dealing with and
the amounts due to and from them at the end of the year.
c. Amount of commissions received by the broker and the amount of
commissions due from the companies for the previous fiscal year
(each company separately).
d. The statistical data required by the Insurance Authority according to
specimen forms prepared for the purpose.
2. The Director General may assign one or more of the Insurance
Authority’s employees or appoint an outside entity to examine the
broker’s operations and records and that the insurance broker shall put
all the brokerage records, documents and entries at their disposal,
cooperate with them and meet their requests in order to do their work
in good order.
3. The insurance broker shall bear the expenses determined by the
Director General in case an outside entity is being appointed for such
examination.
4. The insurance broker shall submit any particulars or information
requested by the Director General within the period as he determined
for the purpose.
Article (19)
Discontinuing the Profession
The insurance broker may place an application to the Insurance Authority
to discontinue working according to the following terms:
1. Submit a written application indicating therein reasons of work
discontinue.
2. The period of discontinuation shall not exceed one year.
3. The application shall be decided on by the Director General by
acceptance or rejection. His decision shall be deemed final.
4. The broker shall make the necessary procedures of following up the
transactions originated prior to the discontinuation in order to protect
interests of the client and the insurance companies.
5. In case the broker did not resume his operations after the end of the
specified period, a notice shall be served on him to resume his work
within one month as from date of the notice and in case he did not
resume his work, the Director General shall make a decision to write off
his registration. The Director General’s decision shall be final.
Article (20)
Disciplinary Penalties
1. Should it appears for the Insurance Authority that the broker violated
the provisions of the law, the Regulation herein, or any of the
regulations, rules and resolutions issued by virtue of the Law, the
Director General shall have the right to impose the following
disciplinary penalties:
a. Serve a written notice on the broker on the incurred violations and
necessity of remedying the situation according to the procedures
and within the period determined by the Director General.
b. Suspend the broker from practicing the profession for a period not
to exceed six months and in case of repeating the violation such
period shall be doubled.
c. Cancel the broker registration.
2. If the broker did not remedy the situation as required according to
paragraph (a) and (b) above, the Director General shall have the right to
cancel the broker’s registration.
3. The cancellation shall become compulsory in case the broker committed
three violations of the Law, the Regulation herein or any of the
regulations, rules, and resolutions issued by virtue of the Law.
4. Penalties imposed by the Director General shall be without prejudices
to the civil or penal liabilities determined by the Law or the related
legislations.
Article (21)
Suspension from Practicing the Profession
1. The broker shall be suspended from practicing the insurance brokerage
profession in the following cases:
a.Dealing with an insurance company not registered in the insurance
companies’ register.
b. Delaying payment of his financial liabilities according to his
agreement with the insurance company for a period exceeding three
months as from their due dates.
c. Assigning his registration to another person or renting out his main
office or branches licensed to operate in the State.
d. Non-renewing his registration with Insurance Authority within
thirty days as from the expiry date of registration.
e. Violating the Law in force or the Regulation herein or the resolutions
organizing the insurance brokerage profession.
2. The Director General shall make a decision to suspend the broker from
practicing the profession and inform the companies and the relevant
bodies as so.
3. The broker shall not practice the brokerage profession during the
period of suspension and shall remain liable for the liabilities accrued
on him as a result of his operations prior to the date of issuing the
suspension decision.
4. In case the broker remedies reason led to such suspension in a way
according to the Insurance Authority’s own discretion removed the
reasons led to the suspension, the broker shall request resumption of
his operations within three months as from date of issuing the
suspension decision, otherwise the Insurance Authority shall take the
procedures to write his registration off the register of the insurance
brokers.
Article (22)
Writing off the Registration
1. The act of writing a registration of a broker off the Insurance
Authority’s register shall be as follows:
a. A notice in two daily newspapers (one in Arabic and the other in
English) issued in the State shall be published on the intention to
write the broker off the register calling those opposing the writing
off or those incurred damages from such an action to lodge their
opposition to the Insurance Authority within one month as from
date of publishing the notice.
b. Following the expiry of the one month period and in case of
resolving all the oppositions lodged to the Insurance Authority, the
Director General shall make a decision to write off the registration
and the broker shall be advised as so by a registered letter with
acknowledgment receipt as well the companies and the pertinent
authorities shall be informed of the writing off decision.
c. A broker written off the register shall have no right to request be reregistered in the register except after lapse of three years as from
date of issuing the writing off decision unless such action been
affected according to the provisions of paragraph (3) of Article (20)
of the Regulation herein as the broker shall not be re-registered.
2. Should a decision been made to write the insurance broker off the
register, the broker shall be obliged to fulfill the duty related to the
transactions originated prior to the date of issuing the writing off
decision in order to finalize all the incurred liabilities or transfer the
operations under brokerage to another insurance broker(s) by approval
of the client and the insurance company and shall advise the Insurance
Authority of details of the transfer operations. However, such transfer
shall not be valid unless approved by the Insurance Authority. The
Insurance Authority shall have the right to oppose the transfer in case it
appears that the transfer offer would threaten the interests of the
insured.
Article (23)
Dispute Settlements
In case of dispute arising from the brokerage operations in insurance
between the insurance company and the insurance broker or between the
insurance broker and the client, the dispute shall be referred before seeking
judicial ruling to the Insurance Authority to attempt to find a compromise.
Article (24)
Final Provisions
1. Each entity carrying out brokerage operations in insurance upon
putting the provisions of the Regulation herein into effect shall adjust
its status according to the provisions of the Regulation herein within
a period not to exceed one calendar year as from date of putting the
Regulation herein into effect.
2. The Insurance Authority shall charge the prescribed fees against any
of the procedures the Insurance Authority is making according to the
provisions of the Law and the regulations issued by its virtue.
3. The provisions on the insurance broker issued by the Minister of
Economy’s decree No (543) of 2006 on Organization of Practicing the
Insurance Brokerage Profession shall be annulled.
4. The Director General shall issue the necessary decisions to put the
provisions of the Regulation herein into effect.
Article (25)
Publication in the Official Gazette
The Regulation herein shall be published in the Official Gazette and put
into effect as from date of publication.
Minister of Economy
Chairman of the Board of the Insurance Authority
Issued in Abu Dhabi on 00/00/2012
Explanatory Note
on
Regulation No ( ) of 2012
on
Registration of the insurance brokers and organization of their
operations
Introduction:
The profession of brokerage in insurance was subject to the provisions of
the Decree of H.E. the Minister of Economy and Commerce No 11 of 2000
on Organization of the Profession of Insurance Brokers. Then, the
Ministerial Decree No 543 of 2006 on Organization of the Profession of
Insurance Brokers was issued to replace the said Decree. Following the
issue of the Federal Law No 6 of 2007 on Establishment of the Insurance
Authority and Organization of the Insurance Operations and as a result of
the development witnessed by UAE insurance market, there was a need to
reconsider the status of insurance brokerage operations in order to protect
interests of all concerned parties i.e., firstly, the insurance applicants, the
policyholders and the beneficiaries of these policies, secondly; the
insurance companies and thirdly, the insurance brokers themselves. This is
what the draft of the new regulation is tackling.
First: Insurance brokers (their number and decisions made in their respect):
In 2009, the number of the insurance brokers reached 303. And since a
considerable number of the insurance brokers did not adjust their status
according to the new requirements of the Ministerial Decree No 543 of 2006
as to increasing the minimum required capital of the insurance broker and
the amount of bank guarantee should be presented to the Insurance
Authority. Thus, due to expiration of the period given to the brokers to
adjust their status in 2009, a process of a wide writing off the registrations
of the insurance brokers who failed to adjust their status was conducted.
Accordingly, the number of the insurance brokers decreased as indicated
here below.
On July 2 2009, the Insurance Authority advised all the insurance
companies and brokers operating in UAE insurance market that the
Insurance Authority’s Board of Directors made a resolution ceased
granting the insurance brokers new licenses and as well stopped issuing
any licenses to open new branches for the insurance brokers registered in
the register. The said Resolution is still in force today.
The brokers are categorized according to nationality as of February 20, 2012
as follows:
Nationality
National brokers
Non-national brokers
Total
Number
163
7
170
As for categorizing the brokers according to Emirates where their main
offices are located is as follows
Emirates
Abu Dhabi
Dubai
Sharjah
Ras Al Khaimah
Total
Number
49
106
12
3
170
Secondly: New directives introduced by the new draft regulation as
compared with the existing regulation:
1. The new Regulation organizes operations of the insurance brokers only.
As in respect of the Re-insurance brokers, a new draft regulation will be
prepared for the purpose due to the different nature of their operations
and the entities those re-insurance brokers are dealing with.
2. The insurance broker should carry out brokerage operations by way of
specialization and thus the broker has no right to cumulate the broker’s
present profession with any other profession related to insurance except
re-insurance brokerage operations.
3. The broker shall be in a form of a limited liability company or private
stock company. Accordingly, the broker shall not be a natural person or
an individual establishment. Though there are no more than 11 brokers
carrying out insurance brokerage operations through other formations
(a joint liability company or an establishment), it is preferable to close
this issue completely.
4. The Minimum Capital required for an insurance broker is increased as
follows:
Broker
Local broker
Foreign broker
Paid-up capital
according to the draft
regulation
AED 5 million
AED 10 million
Current
regulatory
capital
AED 1 million
AED 1 million
5. The new draft Regulation focused on the manager in charge and the
specialists working for the broker instead of focusing on the
companies’ shareholders as the shareholders are the financiers but the
insurance operation is carried out by the manager in charge or the
technical expertise. Accordingly, new requisites have been introduced
as to education and technical experience. Further, each one of the
specialists should pass the test conducted by the Insurance Authority
in the legal, technical and financial aspects of the insurance operations
and insurance brokerage. Since, those specialists deserve
remunerations that suit their qualifications, the insurance broker
should be financially solid to attract them and this is the reason behind
increasing the minimum capital required for a broker.
6. In the field of financial warranties, material changes have been
introduced in the new draft regulation as follows:
First - Financial Guarantee:
Broker
Local broker
Amount of financial
guarantee according to
the draft regulation
AED 2 million
for main office in the
State
AED 1 million
for each branch in the
State
AED 3 million for main
office in the State
Current regulatory
financial guarantee
AED 2 million for each
branch in the State
AED 500 thousand
for each branch in the State
AED 1 million
for main office in the State
AED 500 thousand
for each branch in the State
AED 1 million
for main office in the State
Foreign broker
Secondly - Professional Liability insurance:
Further, other changes have been introduced in the field of professional
liability insurance as follows:
Broker
Insurance amount according to
the draft regulation
Local broker
Foreign broker
AED 3 million
AED 5 million
Current
regulatory
insurance amount
AED 1.5 million
AED 1.5 million
7. In the draft regulation a new principle has been introduced related to
the rules governing the relation of the insurance company and the
insurance broker where it’s provided that a written agreement to
determine the broker’s powers and organize the financial and technical
matters of the two parties has to be included. Though the new
regulation did not arrive at designing a model agreement for the
relation of the company and the broker and obliging the parties to
comply with the provisions stated therein (a matter left to the parties to
decide), it handled those aspects influencing the rights of the insurance
applicants and the policyholders. The draft regulation did not decide on
the amount of commission entitled to the broker from the insurance
company against the broker’s services as it opted to leave such matter
for the parties to decide.
8. Another innovation in the new draft regulation is the act of setting
down some of the rules governing the relation between the broker and
the client as the broker has been obliged in order to initiate the
brokerage procedures to obtain a written authorization from the
insurance applicant. Further, the broker has to prepare the text of the
authorization and present it to the insurance Authority for
consideration, sanction and introduce any amendments in order to
protect interests of the insurance applicant.
9. The major innovation introduced by the new draft regulation is in the
field of the financial relation between the insurance company, the
broker, and the client. This is the area where most of the problems are
found in UAE insurance market; same as the case with the clients and
the insurance companies. Therefore, it’s necessary for the new draft
regulation to handle organization of this matter by way of radical
solutions as follows:
a. The premiums due to the insurance companies should be paid
directly to these companies except those premiums related to only
one single class of insurance owing to its special nature.
Accordingly, payment by the client to other than the insurance
company will not lead to discharge the client from his liability
towards the insurance company.
It’s worth mentioning that the Insurance Authority issued a circular
indicating that cheques written by the clients to settle the insurance
premiums have to be in the insurance companies’ name.
However, the notion established by the new draft regulation is
considered a radical solution not for this problem alone but also for
the problems the insurance market are facing. Thus, there is no
room to express one’s displeasure of such a notion as long as the
broker receives the due commission within seven days as from date
of receiving the premium by the insurance company and these are
the fees for the services rendered by the broker. This being the case,
supposedly no other fees for the broker’s services.
b. The due indemnities should be paid to the stakeholders and not to
the broker and in case the insurance company paid to other than
those, the companies’ liability will not be discharged unless they
actually receive their compensations.
10. Penalties imposed on the brokers when they commit violations have
been tightened in a way that would lead to write the broker off the
register if the broker commits a violation for the third time. This
procedure was forced by the circumstances of some insurance brokers
who committed serious and repetitive violations.
11. An indication has been given in the draft regulation to the importance
of referring disputes may arise due to operations of insurance
brokerage to the Insurance Authority to attempt to find a compromise
before seeking a Court ruling.
12. One year grace period was granted to those brokers currently
registered in the Insurance Authority’s register to adjust their status
according to the provisions of the new regulation. The given period is
suitable and sufficient and forms an incentive for the brokers not
having the required technical and financial capabilities to merge.