The UAE’s insurance sector has seen a major transformation with the introduction of Federal Decree Law No. 48 of 2023 concerning the regulation of insurance activities. Published on July 25, 2024, the New Insurance Law strengthens the regulatory framework by transferring oversight of insurance operations to the Central Bank of the UAE (CBUAE), following the merger of the UAE Insurance Authority with the CBUAE under Federal Decree Law No. 25 of 2020. The New Insurance Law brings the UAE’s insurance market in line with international standards and provides clarity on regulatory requirements, especially for insurance brokers.
Key Changes in Licensing and Regulatory Control of Brokers
Under Article 65 of Federal Decree Law No. 48, the licensing of insurance brokers is now more stringent, with the CBUAE tasked with regulating all brokers operating within the UAE. This builds upon the framework of the old law but adds specific requirements and broader regulatory controls. Brokers can now apply for one of three distinct categories of licenses, which must be chosen based on the broker’s area of expertise and focus:
- Primary Insurance Operation – for those dealing directly with clients on standard insurance products.
- Reinsurance Operation – covering brokers engaged in arranging reinsurance contracts.
- Dual Operations – where the broker provides both primary insurance and reinsurance services.
To be eligible for these licenses, brokers must have a minimum of five years of relevant experience in their chosen field, a significant requirement under the New Insurance Law. This ensures that brokers are equipped with the necessary expertise to manage risks and provide professional services to their clients, ensuring that only qualified professionals are active in the UAE’s insurance market.
Capital Requirements and Financial Safeguards
One of the notable developments introduced under the New Insurance Law is the specific capital requirements imposed on brokers, aimed at ensuring their financial stability and ability to absorb operational risks. Although the minimum capital and bank guarantee requirements for insurance brokers and foreign branches have not changed, it has been clarified that the bank guarantee is now separate from the minimum capital requirement. This raises the issue of whether brokers will need to manage these two requirements independently and what effect this will have on their balance sheets. However, full clarification on this matter is still pending.
In addition, and according to Article 65 of the New Insurance Law, anyone intending to operate as insurance agents, brokers, loss adjusters, consultants, actuaries, or health insurance claims managers—such as Third-Party Administrators—must obtain a license from the CBUAE. While this provision is reminiscent of Article 69 of the previous law, it explicitly includes Third-Party Administrators and allows the CBUAE the flexibility to broaden its licensing framework to encompass additional insurance-related professions.
Prohibition of Non-Admitted Insurance and the Impact on Brokers
A key element of the New Insurance Law is the reinforcement of the prohibition on non-admitted insurance, outlined in Article 12. This provision prohibits insurance on assets or liabilities within the UAE from being brokered through unlicensed foreign insurers. Only insurers and brokers licensed by the CBUAE are permitted to issue policies covering risks within the UAE, ensuring that local regulation governs the market.
Article 41(4) further strengthens this by declaring that insurance policies issued by unlicensed entities will be considered null and void. However, an important caveat is introduced in this article: even though such policies are void, injured parties may still have the right to claim compensation. This subtle addition provides a level of protection to the policyholder, ensuring that their interests are safeguarded even in the event of regulatory non-compliance.
Regulation of Foreign Brokers and Representative Offices
The New Insurance Law also sets out clearer provisions for the operations of foreign brokers and representative offices. Chapter 11 of Federal Decree Law No. 48 governs the licensing of representative offices for foreign insurers, requiring them to obtain a license from the CBUAE. Although the law focuses on regulating marketing activities rather than direct underwriting, there is still some ambiguity regarding the full scope of activities allowed for these representative offices, as regulatory guidance from the CBUAE is awaited.
This is an important area for foreign brokers who operate in the UAE through branches or representative offices, as it highlights the growing emphasis on compliance with local regulatory requirements.
Compliance and Enforcement
The New Insurance Law significantly enhances the enforcement powers of the CBUAE, providing the regulator with extensive tools to ensure compliance. Violations of the law, including failure to meet capital requirements, misleading regulatory submissions, or engaging in unlicensed activities, can lead to the suspension or revocation of licenses, fines, and other penalties. However, the law goes further by establishing that such violations may also result in civil or criminal liability, meaning that brokers and other insurance professionals may face serious consequences beyond regulatory sanctions.
Conclusion: A New Era for Insurance Brokers in the UAE
The introduction of Federal Decree Law No. 48 of 2023 represents a transformative shift in the UAE's regulatory landscape for insurance brokers. With stricter licensing requirements, higher capital thresholds, and an expanded scope of regulatory control, the New Insurance Law seeks to raise the standards of professionalism and financial resilience within the sector. Brokers now face increased scrutiny from the CBUAE, but they also benefit from a clearer regulatory framework that brings greater stability and confidence to the market.
For brokers and other professionals in the insurance sector, the New Insurance Law mandates a proactive approach to compliance, ensuring that they meet the enhanced requirements within the transitional six-month period before the law fully comes into force. The CBUAE’s rigorous oversight, coupled with the law’s detailed provisions on non-admitted insurance and unlicensed activities, positions the UAE as a leading jurisdiction for insurance regulation in the region.
For further guidance on how these regulatory changes might impact your business, please contact our insurance advisory team, led by Partner. Fadi Hassoun.