Middle East | Publication | March 2025
The Insurance Broker’ Regulation 2024 (the Regulation) came into effect on 15 February 2025. The Regulation, issued by the United Arab Emirates (UAE) Central Bank (CBUAE) in July 2024, introduces significant changes to the way insurance brokerages operate in the UAE. It is designed to streamline insurance operations, enhance compliance and ensure greater transparency in the relationship between brokers, insurance companies and policyholders.
The Regulation repeals previously issued law and guidance and applies to regulated entities operating outside the UAE’s financial freezones (FFZ) in “Onshore UAE”. This includes insurance brokers, insurance companies and reinsurance companies, foreign branches of insurance companies and all primary insurance and reassurance operations. The Regulation does not apply to insurance brokers licensed in FFZs or for relevant business carried out in the FFZs.
We set out below a number of key aspects to the Regulation.
The Regulation contains several measures designed to protect policyholder interests. Primary among these is a requirement for claim settlements and premium refunds to be paid directly by the insurance companies to the policy holder. This significantly reduces the risk of funds being delayed or misappropriated in transit, providing greater security for policyholders and improving the overall efficiency of premium collection.
The Regulation also imposes financial soundness requirements relating to the net equity of insurance brokers. These measures are designed to protect policy holders and are line with the overall objectives of the Regulation, which include fair treatment of clients and promoting the reliability and efficiency of insurance brokerage operations.
The CBUAE will apply the principle of proportionality when considering the insurance broker’s compliance with the Regulation. Therefore, it may be sufficient for an insurance broker to demonstrate that is has complied with the objectives of the Regulation, even if it has not necessarily complied with all of the detailed rules. In determining this, the UAECB will consider the nature, scale and complexity of the relevant business when deciding the extent to which an insurance broker is expected to meet the requirements set out in the Regulation.
To promote price transparency, insurance brokers are now prohibited from offering discounts by reducing their commissions. Any discounts offered to clients must come directly from the insurance company.
Additionally, insurance companies are required to pay broker commissions within ten business days of each transaction. The brokerage agreement can specify a shorter payment period.
Corporate governance and risk management is a key priority for the CBUAE and the Regulation imposes an obligation on brokers to have in place effective, robust and well-documented corporate governance arrangements. These arrangements must include controls on conflicts of interest to ensure the integrity and transparency of the broker’s operations.
Consistent with the principle of proportionality, insurance brokers must ensure that their corporate governance arrangements reflect the nature, scale and complexity of their operations.
In recognition of the increasing digitalisation of insurance services, the Regulation contains specific provisions relating to the protection of personal data and management of cybersecurity risks. Brokers must implement adequate policies and procedures to protect client data and ensure secure digital transactions.
The Regulation also mandates that personal data be stored and maintained within the UAE, with secure backups for at least ten years.
The Regulation introduces significant changes to the required structure and operations of insurance brokers operating in Onshore UAE and reflects the CBUAE’s desire to build a transparent industry that is supported by good corporate governance and appropriate risk management.
In keeping with advancements in the financial services sector more generally, the Regulation also addresses the substantial technological advances and general modernisation of insurance operations that have transformed the industry since the previous regulations were introduced.
Finally, it is important to note that time is up for implementation, as the CBUAE directed insurance brokers and companies to adjust their operations to ensure compliance with the Regulation prior to it coming into effect. Therefore, affected insurance brokers and companies that have not already done so should immediately assess their compliance with the new Regulation to ensure that they are fully aligned with its requirements.
This article has been written by Middle East Partner and Head of Financial Services Regulatory Matthew Shanahan, Counsel Karl Masi and Associate Jack Abrehart.
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On 3 February 2025, the Full Court of the Federal Court of Australia handed down its decision in the matter of Bachelard v Australian Federal Police [2025] FCAFC 5 (Bachelard).
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