How to set up an insurance brokerage in the UAE

The insurance sector in the UAE is expected to grow at 4.2 per cent CAGR (compounded annual growth rate) between 2019 and 2024. This growth is attributed to increased opportunities for a recovery in economic growth along with the continuation of new major projects in Abu Dhabi, Dubai and other emirates. In addition to projects related to hosting Expo 2020, which will now run from 1st October 2021 to 31st March 2022. There would therefore seem to be significant scope for establishing an insurance company in the country at this time.

There are a variety of different insurers that have permission to operate in the UAE under different insurance activities. These are:

• Insurance companies
• Insurance agents
• Insurance brokers
• Insurance consultants
• Actuaries
• Loss and damage adjusters

This article will focus on the requirements for setting up an insurance brokerage in the UAE.

An insurance brokerage in the UAE cannot carry out its activities in the UAE until it has obtained a licence to do so, either as a Company or a Branch of an Insurance Agent of a Foreign Company. A licence can be obtained from the Insurance Authority (IA) The type which is issued will be dependent on the services which the company intends to provide.

Requirements for obtaining an insurance brokerage licence

In order for a licence to be issued by the Insurance Authority the company must be incorporated in the UAE and registered under the Commercial Companies Law with a share capital of at least AED 3 million. In the case of the entity being a branch of a free zone or a foreign company, the share capital requirement is AED 10 million. The capital, bank guarantee, and Professional Indemnity cover requirements for a free zone broker are evidently much greater than for the onshore broker. Although this may favour the locally situated insurance broker, it also ensures that free zone companies must have both the solvency and capacity to sustain their operations on a long-term basis.

The following are other requirements which must be met to obtain a UAE insurance brokerage licence:

• A Letter of Guarantee produced by a bank must be provided along with the professional indemnity insurance policy in favour of the IA.
• The appointment of the appropriate technical and administrative staff required for company operations.
• Provision of a suitable headquarters, software and technical systems necessary to carry out the company activities.
• The company must have systems in place to ensure the proper application of laws, regulations, instructions, resolutions and circulars issued by the IA.
• Submission of the agreement between the licence applicant and a UAE bank, with details of the account designated to the practice of Insurance Brokerage.
• Full payment of the prescribed fees must be made and the company must meet any additional conditions or requirements made by the IA.

Once licensed, the brokerage is required to ensure that its financial solvency levels (liquid assets) are sufficient to meet 100% of its short-term requirements within two weeks at all times. Its total assets must never be less than its liabilities, and available capital may never be less than the minimum capital set out in the Regulations.

Employee requirements

The Regulations specify that the brokerage must have the following members of staff employed by the company:

• General Manager (or CEO)
• Operations Manager
• Internal Auditor (Controller)
• A specialised professional for each type of insurance the broker provides

These positions are not permitted to be combined into one role. Each role must be held by a separate individual on a full-time basis. In addition, each of these persons must meet strict educational requirements and have a minimum amount of practical experience in the role. These requirements generally consist of a University Degree or equivalent educational credentials and a set amount of practical experience, depending on the position which they hold and whether the person is a UAE national.

Other considerations

An insurance broker cannot also operate as an insurance agent, insurance consultant, loss inspector or adjuster, or actuary. If you intend to carry out these activities concurrently, it will be necessary to obtain the relevant separate licences and restructure your business accordingly.

The contracts that a broker has with each insurance company it deals with is also regulated, and these agreements must contain certain specific provisions as to term, scope, type of cover, and calculation of commissions. The contracts may not include certain provisions, such as permitting the broker to collect premiums directly from its clients for certain types of insurance or to receive compensation from an insurer on behalf of its clients. Additionally, the broker cannot deduct its commissions from premiums even where it is permitted to receive such directly from the clients.

Any insurance broker considering establishing inside the UAE, should carefully review the Regulations to ensure that they possess the capabilities to operate within the legal requirements in the Insurance Authority (IA) Board of Directors Resolution No. 15 of 2013 Concerning Insurance Brokerage Regulations, and Decision No (58) of 2013 Concerning the Implementation of Insurance Authority Board of Directors Resolution No. 15 of 2013.

How can PRO Partner Group help?

PRO Partner Group can assist with the relevant steps in order to set up an insurance brokerage licence to practise in the UAE and can advise you on the practical steps necessary to comply with the legal requirements in this country. If you need assistance on this or any other related company set up, restructuring or local partner matters in Abu Dhabi, Dubai, the wider UAE, Oman or Qatar then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at info@ppg.ae or complete the contact form below and we will be delighted to assist you.