Greater Regulatory Scrutiny in the UAE Insurance Sector: UAE Central Bank Imposes Sanctions on Insurer

The transparency and integrity of the insurance sector and the UAE financial system is of paramount importance as the UAE continues to bring its regulatory functions in line with the rest of the world as is befitting its status as a global commercial centre. A facet of this drive is a greater scrutiny on regulation and Regulators in the region becoming far more dynamic in taking action when there are perceived abuses.

In order to protect and maintain this integrity, the UAE Central Bank ( “CBUAE“) has recently taken action against an insurer and an insurance broker for regulatory violations which may also have significant impacts in the future.

First, on 12 August 2024, the CBUAE imposed an administrative sanction on an insurance firm after an investigation revealed an insurer was in breach of the “Guidance on Personal Data” (“Guidance”).

The Guidance regulates how client data are collected for insurance policies.

As a result, the CBUAE issued a warning and directed the insurer to refrain from such activity.

Secondly, the CBUAE revoked the license of a Dubai-based insurance broker due to the broker’s weak compliance framework and failure to meet regulatory obligations.

By striking the company’s name off the Insurance Brokers Register, pursuant to Article 22 (2) of the Board of Directors Resolution No.15 of 2013 Concerning Insurance Brokerage Regulations, the CBUAE has sent a stern message that all licensed entities must align their processes with compliance requirements in order to maintain industry standards.

Both actions come not long after the CBUAE imposed a financial sanction of AED 1.2 million on an insurance company operating in Abu Dhabi for its deficiencies in its anti-money laundering procedures and combating the financing of terrorism policies and procedures.

These sanctions should serve as a wake-up call for insurers and brokers operating in the UAE, and all should review and enhance their policies and procedures to prevent similar action being taken.

These actions align with the broader trend of increased regulation in the region, following the release of the New Insurance Law in 2023, and demonstrate the CBUAE’s growing confidence in its ability to enforce compliance.

These actions may also trigger relevant D&O policies that are in place as Emirati Regulators, in common with their counterparts in other countries around the world, are increasingly looking to pierce the corporate veil and bring actions against individuals, rather than the entities for which they work. This should also alert others in other industries beyond insurance to ensure that they have sufficient and relevant cover in the event of similar action by the CBUAE or other regulators. We have previously spoken of the increasing global trend of regulation and these two actions highlight this.

Insurers writing D&O and FI policies in the region will need to consider what questions are asked of their prospective insureds to determine whether they have sufficiently robust policies in place to stand up to regulatory scrutiny and it is likely that brokers in the region will need to delve deeper into their clients’ practices to ensure that sufficient cover is in place, particularly relating to extensions for regulatory investigations which are becoming more and more important in the current climate.