Ibrahim Jarjoura, Junior Associate

In the backdrop of a worldwide health crisis brought about by the novel coronavirus (COVID-19), the Insurance Authority in the UAE took a number of measures to limit the adverse implications of the virus on the insurance sector and to ensure continuation of insurance businesses across the UAE.

On 8th March 2020, the Authority passed Circular No. (3) of 2020, which relates to precautionary measures and preventive procedures for the protection of public health and safety; its intent was to also curb the spread of the novel coronavirus (COVID-19):

By virtue of this circular, the Insurance Authority requested insurance companies and professionals associated with the insurance sector, who are operating in the UAE, to take precautionary and preventive measures as necessary for the protection of public health at workplaces. This direction relates to the technical and operational level of businesses. The Circular further directed employees and clients to implement all preventive procedures issued by the competent authorities of the UAE, which included: quarantine for employees who have returned from overseas travel, in particular for those who were returning back to the UAE from the countries that were mostly affected by the virus, and further recommended opportunities to work from home for any employee manifesting symptoms similar to the symptoms of the Covid-19 virus. They also emphasized the necessity to follow all means of hygiene and the ongoing sterilization of all company facilities.

On 30th March 2020, the Board of Directors of the Insurance Authority passed several resolutions, which provided:

  1. Resolution No. (13) of 2020, which amended several provisions of Resolution No. (9) of 2011 of the Board of Directors of the Insurance Authority and directed on the instructions for the licensing of health insurance claims of management companies and further updated the regulation of insurance businesses whereby, “Health Insurance & Claims companies shall provide the Authority with an annual report that contains details of all the business of the company during that year, and the closing financial statements of the financial year, duly audited, having enclosed therewith the report of the external auditor, within (4) months from the ending date of the financial year.”

In addition, the Authority added a third clause to the said Article (13) requiring  Health Insurance & Claims companies to provide the Authority with a quarterly report on the company’s business and the accounts related thereto. This was to be signed by the chairman of the board of directors, the general manager, or the executive director, within a duration not exceeding (45) days from the end of the quarterly period.

2. Resolution No. (14) of 2020, amended provisions of Resolution No. (15) of 2013 of the Board of Directors of the Insurance Authority. This concerned the system of insurance brokerage. Under Article 1, the Authority amended Article (13) of its said Resolution No. (15) of 2013, with the addition of a sixth clause which allowed for an insurance broker to submit an application to the Authority for the reduction of the amount of the letter of guarantee issued by a banks operating in the UAE by an amount of one (1) Million Dirhams from the amount stated in clause (4) of this article. In relation to a company that was incorporated in the UAE, or a branch of a foreign company, or a branch of a company incorporated in a financial free zone, the following provisions were made:

i. The insurance broker shall comply to submit the audited annual financial statements, reports, and the quarterly financial statements and reports within the timings specified in the regulations and the instructions;

ii. the net equity mentioned in the last audited annual financial statement submitted to the Authority shall be not less than one hundred percent (100%) of the minimum required capital;

iii. there shall be no executive court judgments submitted to the Authority as against the broker.”

By virtue of Article (2) of this resolution, the Authority replaced  paragraphs (a) and (b) of clause (12) of Article (14) through Resolution No. (15) of 2013,  with the following paragraphs:

a. A quarterly report signed by the chairman of the board of directors, the general manager, or the CEO, and reviewed by the external auditor, containing all the insurance brokerage business and the accounts related thereto, within a duration not exceeding (45) days from the end of the quarterly period.

b. An annual report signed by the board of directors, containing all the insurance brokerage business undertaken thereby during the year, and the closing annual financial statements, audited and having enclosed therewith the report of the external auditor, within a period of (4) months from the end of the financial year, as well as to provide the Authority with a copy of the insurance brokerage agreements that were made with companies during the financial year.

3. Resolution No. (15) of 2020, for the amendment of some of the provisions of Resolution No. (49) of 2019 of the board of directors, concerning instructions for life insurance and family Takaful insurance.

Under this amendment, the board of directors resolved to extend the duration granted for the effectiveness of the provisions of the said Resolution No. (49) of 2019 of the board of directors of the Insurance Authority for a duration of

one additional year, commencing from 16 April 2020. Accordingly, the Director-General will pass the resolution and the necessary circulars for the implementation of the provisions of this resolution.

4. On 22nd April 2020, the Board of Directors of the Insurance Authority passed Resolution No. (17) of 2020, which amended provisions of Resolution No. (30) of 2016 of the Board of Directors. It related to the system of vehicle insurance rate tariffs, and the amendment thereof passed by virtue of the board’s Resolution No. (41) of 2017.

Under this resolution, the Board of Directors of the Insurance Authority permitted insurance companies to grant vehicle owners with low records of accidents, a discount of fifty percent (50%) on the minimum insurance premium upon renewal or the issuance of new policies, for workers in the medical sector, the army, the police, and the civil defense;  and for people of determination, the elderly or those over 60 years old, as well as any insurance applicant with a traffic record clear of any accidents.

Furthermore, the Authority’s Board of Directors granted insurance companies the right to apply either one of the following cases:

-To refund back a part of the premium on valid policies in proportion to the application periods of the national sterilization program as issued by the competent authorities.

-To reduce the insurance premium below the minimum amount upon the renewal of the insurance policy in proportion to the application periods of the national sterilization program as issued by the competent authorities.

Furthermore, the Board granted insurance companies the right to change the calculation of premiums for new or renewed policies by making the same linked to the number of kilometers traveled by the vehicle, in case the insured requests so, provided that the insurance premium shall not exceed the maximum amount specified in the vehicle insurance rate traffic as stipulated by the Authority.

5. On 27 April 2020, the Board of Directors passed Resolution No. (18) of 2020. This concerned the electronic insurance system, and defined electronic insurance transactions to be any business that is undertaken by the company using electronic or smart systems, such as insurance coverage offers, insurance premiums, the sale and marketing of insurance policies, the collection of premiums, and receiving and processing claims and complaints. The resolution stated that the electronic insurance system shall take effect to all electronic and smart insurance transactions that are made by the companies and the professionals associated with insurance and the marketing of insurance policies through banks, the amount that is consistent with the nature thereof.

Furthermore, the resolution stated:

i. that insurance companies are bound to comply to the information security standards issued by the competent authorities;

ii.that insurance companies and the professionals associated with insurance shall file an application to the Authority for the approval of electronic insurance transactions and set forth a certain business plan for electronic insurance transactions, as approved by the company’s board of directors. This would include:

a. an analysis of the anticipated size of electronic business during three (3) years, and

b. an analysis of the risks associated with such risks and the necessary precautionary measures for the mitigation thereof, such as information security risks and the crimes of money laundering and the financing of terrorism in insurance activities, in addition to setting forth an emergency plan that shall include the actions to be taken in case the electronic or smart system become(s) faulty, and such plan shall also include the corrective measures to ensure business continuity.

iii. that insurance companies shall be required to obtain the Authority’s approval of the types of insurance products to be sold electronically and to set forth several regulations and restrictions on electronic insurance transactions. Moreover, it stated that insurance premiums shall be paid electronically through electronic means of payment. This resolution shall take effect from the day following the publication date thereof in the official gazette.

On 30th April 2020, the Insurance Authority passed Resolution No. (19) of 2020.  This requested supervisory reports to be submitted by insurance companies and the professions associated with insurance.

6. Finally, on 13st May 2020, the Insurance Authority passed Resolution No. (19) of 2020, which extended the duration granted to insurance companies for their submission of quarterly financial reports and statements and any quarterly reports or statements that were required by the Authority for an additional duration of 45 days, ending on 30 June 2020. The Authority’s Director-General was given the authority to pass the resolutions and circulars necessary for the extension of the stipulated durations for the submission of financial statements and any reports, details, information, or forms required by the Authority from the companies and the professionals associated with insurance under the legislations in force.

The Insurance Authority passed the aforementioned resolutions to protect the insurance sector and to ensure that its role in supervising and regulating guarantees, the rights of the insured and its beneficiaries. The Insurance Authority emphasized the commitment of insurance companies towards the Authority and towards the insured to provide insurance services in a professional manner. In addition, the Insurance Authority provided several facilities for insurance companies during the COVID 19 crisis. The Authority’s support was not limited to issuing resolutions only, as it has initiated the creation of a page on its website under the title “Insurance and Impacts of COVID19”  which aimed to maintain safety, health, increasing insurance awareness, education for policyholders, insurance beneficiaries, customers and companies to limit the spread of this virus.

Should you have any questions related to the insurance sector in the UAE, please get in touch with Ibrahim Jarjoura, Associate at Al Suwaidi & Company on +971 2 626 6696 or by emailing him at Ibrahim.jarjoura@alsuwaidi.ae.