The United Arab Emirates (UAE) has issued a new insurance law, Federal Law No. 48 of 2023 (the New Insurance Law), expressly repealing Federal Law No. 6 of 2007 (as amended) (the Insurance Law of 2007) .
The new insurance law was published in the State Gazette on October 31, 2023 and will enter into force on November 30, 2023.
The main objective of the New Insurance Law appears to be the codification of the transfer of insurance regulation from the Insurance Authority to the UAE Central Bank. Indeed, many provisions of the Insurance Act 2007 remain in force and the New Insurance Act expressly provides that regulations and circulars issued under the Insurance Act 2007 remain in force to the extent that they do not conflict with the provisions of The new insurance law (Art. 114 (2)).
As with the Insurance Law 2007, the Central Bank has broad powers under the New Insurance Law to issue regulations and circulars regarding the UAE insurance industry, including the corporate governance of insurance and reinsurance companies. It also has broad powers to ensure compliance with the New Insurance Act, including powers in respect of inspections/audits, fines, suspension of licences, restructuring, liquidation, merger and other control measures.
However, there are some notable changes:
Remarkable changes
Article 2 letter b)
Article 2 of the new Insurance Law defines the scope and application of the law. Article 2(b) provides that holding companies that acquire 15% of insurance business in the UAE or in which insurance business and related services exceed 50% of their revenue are subject to the application of the New Insurance Law, with provisions regarding such entities to be issued in a timely manner.
Article 2, paragraph 2
Article 2(2) states that the New Insurance Law will not apply to companies operating in financial free zones and is therefore only applicable to companies operating in non-financial free zones and onshore UAE. The Insurance Act 2007 states that it does not apply to free zones (but does not distinguish between free zones and financial free zones). Article 64 of the New Insurance Law states that companies licensed in free financial zones cannot carry on business in the UAE except in free financial zones and except in relation to reinsurance business.
Art. 100
Under Article 100 of the New Insurance Law, the Emirates Insurance Association has been replaced by the Emirates Insurance Federation. The central bank will oversee the work of the Emirates Insurance Federation and approve its constitution.
Art. 101
The Insurance Act 2007 provides a mandatory procedure for insurance claims brought by an insured or a beneficiary against an insurance company under section 110 with the establishment of an Insurance Disputes Settlement Committee (IDC). The provisions of section 110 of the Insurance Act 2007 have been replaced by section 101 of the New Insurance Act which provides that:
• The IDC has been replaced by the Banking and Insurance Dispute Resolution Unit (BIDRU), which was established under section 121 of Federal Act No. 14 of 2018 (as amended) (the Central Bank Act).
• BIDRU is an independent legal entity established to receive and resolve complaints against insurance companies. Regulations will be issued providing more detail on the scope of the unit.
• BIDRU is the competent authority for settlement of disputes arising from insurance contracts, construction and services. Any complaint must be submitted in accordance with the mechanisms and procedures approved by BIDRU.
• The new claims procedure is as follows:
− If the value of the claim does not exceed AED 50,000, the insurer cannot appeal the decision of BIDRU.
− If the value of the claim exceeds AED 50,000, the Insurer may appeal the decision of BIDRU within 30 days from the date of issue or notification of the decision before the Court of Appeal.
− However, the affected party ( interested party not defined but appears to be the Insured/Beneficiary) may appeal the decision of the BIDRU to the Court of Appeals within 30 days from the date of issue or the date of notification.
• Based on the above procedure, the right of appeal is granted to the Insured and is not limited by the value of the claim as is the case with the Insured.
• The fact that decisions are referred to the Court of Appeal indicates that the BIDRU will act as the equivalent of the UAE Court of First Instance and is a welcome step in reducing the stages required to reach a final binding decision in relation to insurance claims.
• What is less clear is whether recent decisions of the DIFC Court will be affected by the change in law and whether the DIFC Court will still consider that it has jurisdiction to hear cases brought by insurers or indeed appeals from the newly formed BIDRU (see our article here).
Art. 104
Section 104 of the New Insurance Law establishes the Central Bank’s capacity to intervene in any legal proceedings brought before judicial authorities in which one of the parties is an insurance company, reinsurance company or other insurance-related professional.
After being notified of the legal action, the Central Bank may, after investigating the matter, provide any clarification, data or information to the competent authority that it deems appropriate.
The above significant changes in the new Insurance Law are exemplary and not exhaustive. More highlights will follow in the next article.
