Insurance brokerage profession can be carried on only after obtaining License to practice insurance activities in the UAE as a Company or a Branch or an Insurance Agent of Foreign Company. All Insurance Broker in the UAE is subject to resolution 15 of 2013 including amendment thereto from time to time. Under Federal Law No. 6 of in 2007 the Insurance Authority (IA) was set up as a separate legal personality for regulating and supervising the insurance sector in the United Arab Emirates (UAE).
The License is issued by the Insurance Authority (IA) is valid for One (1) year from the date of issuance and expiring at the end of December of the same year along with prescribed payment for renewal. Also, IA has a discretionary power to suspend the Insurance Broker license for carrying the activity in case completed application for license renewal not submitted.
Criteria for Insurance Brokerage Licensing
The companies must satisfy the following criteria to be eligible for issuance of license by the IA:
- Must be a company incorporated in the UAE and registered under the Commercial Companies Law having paid up capital of AED 3 million Dirhams or more and with the object of practicing the insurance Brokerage activity.
- A foreign Company having its branch or a branch of a financial Free Zone registered under the commercial law of UAE and having paid up capital of AED 10 million Dirhams or more.
- A Letter of Guarantee produced by a bank and A professional indemnity insurance policy in favor of the IA.
- The appointment of the technical and administrative staff required for practicing the activity.
- Provision of a suitable headquarters, software and technical systems required to practice the activity.
- Must have an internal control system to ensure proper application of law, regulations, instructions, resolutions and circulars issued thereunder from time to time by the IA.
- Submission of the agreement concluded between the license applicant and a bank operating in the UAE concerning the account designated to the practice of Insurance Brokerage.
- Full payment of the prescribed fees must be made and comply with any additional conditions or requirements determined by the IA.
Application for approval to practice the Insurance Brokerage business needs to be submitted to the IA in the prescribed Form along with required documents and supporting thereto. After submission of the application the IA issues the decision of approving or rejecting the application for license within a maximum period of 20 working days.On approval of the application the Insurance Broker is registered in the IA’s Insurance Brokers Register.
Technical and Administrative Staff
Further, Insurance Broker is continuously required to have the technical staff to practice the licensed activity and must at least appoint at least one specialized employee to assume the jobs of General Manager, operation Manager, Internal Auditor for each license type having the required qualification, experience.
The individual appointed as technical and administrative staff for the insurance brokerage company must fulfill the following conditions:
- a natural person enjoying full capacity.
- Needs to be of good conduct and behavior and has never been sentenced for a freedom restricting punishment in a moral turpitude crime without being rehabilitated.
- Anytime judged bankrupt without being rehabilitated, or has not stopped the payment of his commercial debts.
Also, the Insurance Broker is required to notify the IA of appointment, Alteration, transfer or modification or termination, if any within a period of sixty days.
Obligations of the Insurance Broker
- Within (3) months from the date of obtaining the license to make written internal bylaws, and provide a copy thereof to IA.
- Continuous review and updating of the internal control system to ensure proper application of the Law, regulations, instructions, resolutions and circulars issued by the IA.
- Creating an Operational Guide for risk management and to update and review periodically the same and as per the applicable rules in this regard.
- Developing of a professional code of conduct for employees; and supervising and organizing their undertakings to ensure compliance with the Law.
- In terms of place or organizational, technical or administrative aspects the Insurance Broker and their branches must be independent from any other party.
- Co-operation and coordination with the internal controller, for enabling them to perform the assigned tasks and notifying the IA of any violation.
- To dismiss the internal controller except by a decision of the board of directors or management board of the Insurance Broker.
Also, apart from, above regulations set certain obligations which the insurance broker must comply towards the IA, Customers and insurance companies.
Even though the UAE law has provided for the role and responsibilities of the Insurance Broker, recently Dubai Court has held the Insurance Broker to be liable for payment of recoveries to an insurance company from a reinsurance company.
Conclusion
Generally, Insurance Broker are not liable for the default of the insurance companies or the customers. Thus, IA by regulating the license issued makes business safer for clients in the UAE, ultimately protects the national economy; supports the economic development; encourages fair and effective competition; and provides the best insurance services with appropriate coverage at affordable rates in the insurance market of UAE.
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