As reported, the Insurance Authority is introducing a number of new regulatory requirements for brokers selling insurance in the UAE.
In addition to capital and solvency requirements, the new rules will require each brokerage to have specific, dedicated staff appointed to a number of mandatory company positions.
These positions include: a chief executive, an operations manager, an internal auditor, a head for each business line and a head for each branch. The Insurance Authority said these roles must be filled by people holding relevant qualifications and experience.
It is widely understood that these initiatives are aimed at driving out the smaller, less well-resourced players in order to boost professionalism among those offering financial advice in the UAE.
Flouting the law
However, there are concerns some brokers will ignore the new regulation and continue to flout the law.
Sam Instone, chief executive of London-headquartered AES International, which has an office in Dubai, said: “This will certainly drive smaller firms out of business in the UAE as it is an increase in both capital and overhead.
“Although smaller firms may continue to operate on an unlicensed basis – this is a criminal offence punishable by imprisonment and so is unlikely to occur for long.”
There are concerns the “pain” of tightened regulations will be felt largely by those firms which have always obeyed the rules and which are not the root cause of advice issues in the UAE.
Sean Kelleher, CEO of Mondial in Dubai, said: “If you look at those brokers, [which collect premiums and handle client monies as part of the insurance process] then, the initiatives look like a good idea. Capital adequacy, liability management and so on are fairly important in that context and therefore the rules and initiatives should be applauded.
“The “pain” will be felt by the traditional UK-type “financial advisers”, whose profession revolves around the provision of advice and product sales. Within much of that industry, capitalisation is less relevant to the quality of the business. Even irrelevant to the quality of the advice. Professional indemnity cover maybe, but why capital?”
This view was shared by Tim Searle, who heads up international advisory firm Globaleye, which has its head office in Dubai.
Searle said the situation is similar to that in Singapore where the introduction of the Financial Advisory Industry Review has increased the regulatory burden for licensed companies, but that there are some which continue to ignore the rules.
However, Searle said he had been “encouraged” by the Insurance Authority in Dubai, when aware of illicit activity, to report it to it and intends to do so.
Instone also said he would and plans to encourage other companies to report unlicensed activity too.
