Afridi & Angell inBrief
Recently, the Emirates Insurance Authority (the “Insurance Authority”) proposed a regulation in draft form concerning marketing of insurance policies by banks (the “Draft Regulation”). It is intended to regulate local insurance companies that market insurance policies through banks in the UAE. Once this Draft Regulation comes into force, banks will, in addition to the approval of the UAE Central Bank, require the approval of the Insurance Authority to market insurance policies.
Scope of the Draft Regulation
The Draft Regulation applies to insurance companies and banks that operate in the United Arab Emirates. It does not apply to insurance companies and banks in free zones.
Approval of the Insurance Authority
To obtain approval from the Insurance Authority to market insurance policies through a bank (the “Approval”), an insurance company must submit an application to the Insurance Authority. Within twenty (20) working days, the Insurance Authority will either approve or reject the application. An Approval shall be valid through December 31 of each year and must be renewed annually.
To cancel an Approval, an insurance company must terminate the agreement between the bank and the insurance company and notify the Insurance Authority of such termination. The Insurance Authority will then cancel the Approval. The Draft Regulation also permits an insurance company to temporarily suspend the Approval, thereby temporarily stopping the bank from marketing insurance products.
Restrictions under the Draft Regulation
The Draft Regulation imposes certain restrictions on banks and insurance companies:
Bank’s Obligation Towards its Customers
The Draft Regulation sets out rules on how the bank should market insurance products to its customers. The bank must ensure that customers are aware of the terms of, and the risks under, an insurance policy.
A bank must not condition the provision of banking services to the purchase of insurance and must disclose the fact that it will earn a commission on the sale of insurance.
Non-Compliance and Penalties
To enforce the draft Regulation, the Insurance Authority can:
Banks that Currently Market Insurance Policies
Banks that currently market insurance policies must ensure that the relevant insurance companies obtain Approval from the Insurance Authority within a period of six (6) months from the effective date of the Regulation. ■Download inBrief as PDF