Circular No 48 for registration of insurance brokers

First - Financial Guarantee:

Broker	Amount of financial guarantee according to the draft regulation	Current regulatory financial guarantee
Local broker	AED 2 million for main office in the State	AED 1 million for main office in the State
	AED 1 million for each branch in the State	AED 500 thousand for each branch in the State
Foreign broker	AED 3 million for main office in the State	AED 1 million for main office in the State
	AED 2 million for each branch in the State	AED 500 thousand for each branch in the State

Secondly - Professional Liability insurance:

Further, other changes have been introduced in the field of professional liability insurance as follows:

Broker	Insurance amount according to the draft regulation	Current regulatory insurance amount
Local broker	AED 3 million	AED 1.5 million
Foreign broker	AED 5 million	AED 1.5 million

7. 
   In the draft regulation a new principle has been introduced related to the rules governing the relation of the insurance company and the insurance broker where it’s provided that a written agreement to determine the broker’s powers and organize the financial and technical matters of the two parties has to be included. Though the new regulation did not arrive at designing a model agreement for the relation of the company and the broker and obliging the parties to comply with the provisions stated therein (a matter left to the parties to decide), it handled those aspects influencing the rights of the insurance applicants and the policyholders. The draft regulation did not decide on the amount of commission entitled to the broker from the insurance company against the broker’s services as it opted to leave such matter for the parties to decide.
   

8. 
   Another innovation in the new draft regulation is the act of setting down some of the rules governing the relation between the broker and the client as the broker has been obliged in order to initiate the brokerage procedures to obtain a written authorization from the insurance applicant. Further, the broker has to prepare the text of the authorization and present it to the insurance Authority for consideration, sanction and introduce any amendments in order to protect interests of the insurance applicant.
   

9. 
   The major innovation introduced by the new draft regulation is in the field of the financial relation between the insurance company, the broker, and the client. This is the area where most of the problems are found in UAE insurance market; same as the case with the clients and the insurance companies. Therefore, it’s necessary for the new draft regulation to handle organization of this matter by way of radical solutions as follows:
   

1. 
   The premiums due to the insurance companies should be paid directly to these companies except those premiums related to only one single class of insurance owing to its special nature. Accordingly, payment by the client to other than the insurance company will not lead to discharge the client from his liability towards the insurance company.
   

It’s worth mentioning that the Insurance Authority issued a circular indicating that cheques written by the clients to settle the insurance premiums have to be in the insurance companies’ name.

However, the notion established by the new draft regulation is considered a radical solution not for this problem alone but also for the problems the insurance market are facing. Thus, there is no room to express one’s displeasure of such a notion as long as the broker receives the due commission within seven days as from date of receiving the premium by the insurance company and these are the fees for the services rendered by the broker. This being the case, supposedly no other fees for the broker’s services.

2. 
   The due indemnities should be paid to the stakeholders and not to the broker and in case the insurance company paid to other than those, the companies’ liability will not be discharged unless they actually receive their compensations.
   

10. 
    Penalties imposed on the brokers when they commit violations have been tightened in a way that would lead to write the broker off the register if the broker commits a violation for the third time. This procedure was forced by the circumstances of some insurance brokers who committed serious and repetitive violations.
    

11. 
    An indication has been given in the draft regulation to the importance of referring disputes may arise due to operations of insurance brokerage to the Insurance Authority to attempt to find a compromise before seeking a Court ruling.
    

12. 
    One year grace period was granted to those brokers currently registered in the Insurance Authority’s register to adjust their status according to the provisions of the new regulation. The given period is suitable and sufficient and forms an incentive for the brokers not having the required technical and financial capabilities to merge.