The Regulatory Landscape for Insurers in Saudi Arabia and the United Arab Emirates

This article provides a high-level overview of the main legislative and regulatory provisions governing the insurance sector within the United Arab Emirates and Saudi Arabia.

United Arab Emirates (UAE)

The UAE insurance market has demonstrated substantial growth in recent years despite the considerable impacts of COVID-19 and Russia’s subsequent invasion of Ukraine. Simultaneously, legislative reforms have been enacted to help develop the insurance market in the region.

Regulating entities

The onshore UAE insurance market was previously regulated by the Insurance Authority. However, due to the Decretal Federal Law 25/2020, the Insurance Authority merged into the UAE Central Bank (CBUAE), which now oversees any activities relating to insurers, brokers, and other insurance related service providers. By contrast, insurance companies, contracts and policies entered within other financial centres in the area (so-called free zones) are regulated by different entities. For example, insurance companies operating in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) are regulated by DFSA and ADGM respectively.

Main regulatory framework

There are several UAE insurance laws and regulations which govern a wide range of products and services. The main UAE legal framework is Federal Law 6/2007 on the Establishment of the Insurance Authority and Organisation of its Operations (as amended by Federal Law No. 3/2018 (Insurance Law)). Under Article 4 of Federal Law 6/2007, life insurance and funds accumulation, property insurance and liability insurance are the three main types of insurance regulated by this law in the UAE.

Additionally, general laws on insurance contracts are set out in the UAE Civil Code, specifying that provisions concerning various insurance contracts not mentioned in the Insurance Law are governed by special laws.

Other UAE Insurance regulations/updates

There are various other laws, regulations and ministerial resolutions governing the conduct of insurance business in the UAE, setting out guidelines on topics including ethics, corporate governance, insurance broking and insurance consultancy.

Recent examples of these legislative updates issued by CBUAE include:

• On 9 March 2023, CBUAE issued Corporate Governance Regulation for Insurance Companies (Circular No. 24/2022), to help ascertain the minimum acceptable standards for companies’ approach to Corporate Governance, as well as the Corporate Governance Standards for Insurance Companies, to supplement that Regulation.
• On 24 November 2022, Regulation Regarding Takaful Insurance (ie insurance based on sharia or Islamic religious law) was issued with the aim to promote efficient development of Takaful Insurance activities.
• On 31 October 2022, Guidance for the insurance sector on Anti-Money Laundering protocols was issued to improve the UAE’s status as a transparent jurisdiction.

Kingdom of Saudi Arabia (KSA)

Saudi Arabia’s recent economic developments have contributed to the rapid market growth in insurance, including creating new insurable assets and new lines of mandatory coverage. KSA’s three main types of insurance are health insurance, general insurance and Protection and Saving (P&S) insurance.

Regulating entities

All insurers and reinsurers registered in KSA are regulated by the Saudi Arabian Central Bank (SACB), previously known as Saudi Arabian Monetary Authority (SAMA). However, health insurers are supervised by the Council of Cooperative Health Insurance (CCHI). Insurers registered locally are also regulated by the Capital Markets Authority (CMA). Moreover, insurers must comply with the laws and regulations of the Ministry of Commerce (MOCI) and be established as a publicly listed joint stock company (PJSC). Insurance and reinsurance companies with foreign shareholders must adhere to additional requirements. This includes abiding by the Foreign Investment Act and obtaining a foreign investment license from Saudi Arabia General Investment Authority (SAGIA).

Main regulatory framework

KSA insurance and reinsurance is governed by the Law on Supervision of Co-operative Insurance Companies, Royal Decree No M/32 (Insurance Law). This applies to all registered companies undertaking insurance business in KSA. The Insurance Law provides that insurers and reinsurers must not carry out non-insurance business unless the business is complementary or necessary for the insurance or reinsurance business. If any non-insurance business is proposed to be undertaken, the appropriate approvals are required from the SACB. The Insurance Law is supplemented by Implementing Regulations 2003, published by SAMA on 23 April 2004 (Implementing Regulations), and other regulations issued by SAMA. This includes the Insurance Market Code of Conduct Regulations 2008, Rules Governing Insurance Aggregation Activities 2020 and Implementing Regulation to the AML Law 2017.

Other KSA Insurance regulations/updates

In September 2022, SACB and CBUAE signed a Memorandum of Understanding with the intention to “establish a general framework for co-operation activities in the field of supervision and control within the insurance sector in both countries”.

In Summary

Insurance regulation in the UAE and KSA is not too dissimilar to better known jurisdictions, and there is a clear trend to develop the market in these two countries, in line with European/US/AUS insurance market standards.