UAE: New rules issued for insurance brokers from next year

Brokers licensed in financial free zones for reinsurance businesses are exempt from these changes as a regulatory regime will apply to them

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Published: Wed 25 Sep 2024, 6:00 AM

Insurance brokers in the UAE cannot combine their role with any other insurance related profession nor become partners or agents of any other broker, according to new regulations issued by the Central Bank of the UAE.

Under the new rule, insurance companies may not communicate directly or indirectly with policyholders that are clients of the insurance broker whether at inception or renewal in order to deprive these brokers of remuneration.

The law mandates that insurance firms must pay the agreed remuneration to the broker within the deadline specific in the applicable Insurance Brokerage Agreement, which must not exceed 10 business days from receipt by the insurance companies of premium payments. When premium is paid in instalments, remuneration must also be paid within instalments, subject to the same time restrictions.

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The new regulations, shared by the legal firm HFW, will come into effect from February 15, 2025.

The article about the new laws was authored by HFW’s partners Sam Wakerley and John Barlow, senior associate Thomas Neighbour, and associate Benjamin Obinali.

Who falls under new rules

The regulations apply to onshore UAE regulated entities, including all insurance brokers; all insurance companies; foreign branches of insurance companies licensed to underwrite primary insurance and reinsurance (including Takaful); and reinsurers.

Brokers licensed in financial free zones for reinsurance businesses are exempt from these changes as a regulatory regime of the free zone will apply to them.

Prohibitions

Importantly, HFW lawyers noted that regulations put out a number of prohibitions on insurance brokerages and their staff, including:

Not engaging in any insurance-related professions other than broking operations.
Not assigning any broking operations to other brokers without written consent from the client and the insurance company, including when using placing brokers in other jurisdictions.
Not allowing any person or entity not regulated by the Central Bank to use any employees or agents of licensed entities to solicit insurance policies.
Not sharing any remuneration with or to other insurance related profession practitioners.
Not offering any discounts to clients out of the remuneration received from insurance companies.

The law requires brokers to adhere to best practices such as assisting clients with claims procedures, including asking for any missing documents within two business days of receipt of the claim application form; informing clients within 20 days before the expiry date of the policy for renewals in writing; and using official email among others.

The new regulations prohibit insurance brokers from collecting claims settlements as they must be paid directly by the insurance companies to policyholders. It only applies to primary insurance operations as reinsurance operations are exempt and are subject to the terms of any reinsurance brokerage agreement.

No discounts

HFW’s lawyers explained in the note that under the new regulations, insurance brokers are expressly prohibited from offering discounts to clients out of the remuneration that they receive from companies. Brokers must additionally avoid any action that would lead to market manipulation in terms of pricing. Any discounts offered to clients must come directly from the insurance company.

The legal firm said in a note that brokers are required to enter into and maintain Insurance Brokerage Agreements with at least two insurance companies, which, at a minimum, address the duration of the agreement, termination provisions, types and lines of business, geographical areas, and remuneration. The agreements may not make the broker responsible for any unpaid premium by clients and also not authorise brokers to issue insurance policies or endorsements, nor amend the same, except in the case of motor certificates.

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