The UAE government’s planned merger of the insurance regulator and the securities market regulator sets the groundwork for a mature and cohesive market that will pave the way for a systematic consolidation and an efficient regulatory framework.
On 5 July 2020, Sheikh Mohammed bin Rashid Al Maktoum, the prime minister and vice president of the UAE and ruler of Dubai, confirmed on social networking platform Twitter that the IA and Sca will join forces under the watchful eye of the Minister of Economy.
International Adviser spoke to cross-section of the UAE’s advice market, brokers and insurers, said they feel such a regulatory framework will provide more efficiency, greater clarity and transparency that will attract more international investors.
The right direction
“It is in the right direction for a more efficient regulatory framework, and in line with the global practice of having single regulator for insurance and investments, which is an indicator that the market is maturing as an international centre for investors from all over the world,”said Anand Singh, senior associate in the insurance and reinsurance practice at law firm BSA Ahmad Bin Hezeem & Associates.
Sca had earlier indicated that it was in the process of changing the regulatory framework completely; but, anticipating the merger, the regulator held off on the issuance of new licences.
Some applicants have been told to wait for a couple of months.
The implementation of some of the regulations, announced earlier, is currently on hold as Sca is working on the revised regulatory framework covering the capital requirements for financial advisers and other regulations.
Krishnan Ramachandran, chief executive officer of Barjeel Geojit Financial Services, said: “The move to have single regulator will bring the much needed stability and oversight in the financial markets of UAE.
“This move will provide a greater clarity especially for the savings and investments products and above all enable more product transparency and disclosure to clients.”
More transparency
As it is, the industry is well regulated, but the merger of the regulators will bring about more efficient regulation.
The current scenario is that the financial advisory and insurance sectors are regulated by two different watchdogs.
Brokers and advisers are currently required to get licences from the Insurance Authority as well as Sca.
When brought under one entity, it will ease the regulatory burden.
For example, the capital requirement for brokers is different under the two regulators.
Once the merger takes place, there will be uniform licence and capital requirements and the firms will not be answerable to two regulators after filing and furnishing documents.
This will definitely ease the business procedures and will bring more transparency to the jurisdiction.
The much talked-about consolidation – of the insurance sector, brokers, financial advisers — will be easier, because insurance companies are regulated by the Insurance Authority as well as Sca when they are listed on the stock exchanges, requiring them to follow two sets of regulations.
For now, for certain transactions, the approval has to come from two regulators, and if this merger happens, there will be requirement for one approval only.
Future in fintech
DJ Sengupta, co-founder and managing partner of Capstone Insurance and Bankonus, commented: “It is very positive because there were gaps which used to arise when two different regulators exist, which will now go away.
“It is absolutely in the right direction as it is exactly the way most advanced and mature markets, like Singapore, evolved.
“It is an indication of how the market is maturing and the UAE will be looked at in the same lines as mature financial markets such as Singapore and London.
“The future of financial service is in fintech. To effectively position yourself as a future fintech market this merger is in the right direction. When you talk about the fintech industry it becomes difficult to say whether one is insurance, investments or the combination of the two.
“The dividing lines are very thin.”
Sajith Kumar PK, chief executive and managing director of IBMC Financial Professionals Group, added: “Whether it is in insurance, commodities or securities market, it will lead to adopting policies followed in the developed markets.
“A well-regulated market will attract international investors as global best practices and standards will be adopted here in the UAE which will raise the confidence level of investors.
“This will also enable insurance products into the stock market.”