Insurance Risk Management Insurance Requirements in the GCC by Michael Earp WILLIS

Insurance Risk Management: Insurance Arrangements in the GCCMichael Earp – Willis Finex Global

October 2010

Insurance Arrangements in the GCC

CONTENTS OF PRESENTATION

•Is insurance affecting procurement decisions?

•DIFC the new insurance hub for GCC

•Here come the claims - possibly?

•Saudi Arabia – can we learn from UAE?

Is insurance affecting procurement decisions?

WHAT ARE THE ISSUES

• Insurance legislation

• Regional insurance industry

• Reliance on global insurance programmes

• Breadth of insurance cover

• Availability of (indemnity) limits

• Evidence of coverage


INSURANCE LEGISLATION

• Aside from the mandatory insurances you are

not required to buy insurance

• Admitted - if you chose to purchase insurance

on assets or for liabilities in the country you

have to have local insurance

Prohibited

individual

life

insurance

excepted

Non-

Admitted

Prohibited

No

exceptions

Non-

Admitted

Prohibited

No

exceptions

Non

Admitted

Prohibited

Some

exceptions

Non

Admitted

Prohibited

Some

exceptions

Non-

Admitted

Prohibited

No

exceptions

OMANKUWAITKSAQATARBAHRAINUAE


REGIONAL INSURANCE INDUSTRY

• A young industry

• Heavy reliance on reinsurance

• Esoteric cover difficult to obtain

• Global insurers moving into the region


RELIANCE ON GLOBAL INSURANCE PROGRAMMES (1)

• Reliance on a worldwide programme with non

UAE insurers is not acceptable

• A temporary UAE visitor (guest appearances)

might argue that there was no breach of UAE

laws as the liability was not in the UAE

• There are no Insurance Policies registered in

any Free Zone in the UAE

• If you use any broker, irrespective of whether

they are licensed in the UAE or not, it would be

contrary to the legislation for them to sell or

broker a foreign insurance policy


RELIANCE ON GLOBAL INSURANCE PROGRAMMES (2)

• If the policy arranged is not subject to UAE

jurisdiction no rights or remedies will be

available within the UAE

• It is important that consultants who come for a

few days have a legal working permit whether

a mission visa that is valid for 3-6 months or an

actual working visa rather than them working

with a tourist visa

• Not having a local policy can result in: Loss of

work; Withholding of fees; Fines or Penalties;

Loss of Visa


BREADTH OF INSURANCE COVER

• Local policies typically very narrow, for

example:

– Financial and pecuniary Loss are often excluded or

cover is heavily qualified

– Only covers claims brought in the country

– High risk areas and prototype methods excluded

– Buildings not compliant with statutory building

regulations excluded

– Drawing not on time excluded

– Revising or redesigning costs excluded

– Design and build is not covered as in UK/USA

insurance policies


AVAILABILITY OF (INDEMNITY) LIMITS

• Limits of liability capacity in local market for

liability cover relatively small but cost is low

• Higher limits (above USD1,000,000) normally

subject to facultative (specific) reinsurance

• “Any one claim” cover needs to be reinsured

back to London Insurance Market


EVIDENCE OF COVERAGE

• “Fronting” of global policies frequently the best

policy (i.e. local policy is reinsured to global

insurers)

• “Fronting” is difficult where the global

indemnity limit is “in the aggregate” because

each reinsurance is a separate indemnity limit

• Beware broker letters

• Single Project Policies may have a role to play

• Consider evidence of cover for commercial

expediency rather than transfer of risk

DIFC the new insurance hub for GCC

• Western Insurers are using DIFC as a base for

their operations

• Insurance and reinsurance products available

• Market environment

• A new law regulating the Islamic insurance

industry was passed to provide more

transparency and oversight to the UAE takaful

market

Here come the claims -possibly?

Saudi Arabia – can we learn from UAE?

• In March 2010 the Saudi Arabian Monetary

Agency (SAMA) confirmed that the only

insurance and reinsurance companies now

operating in the country are those duly licensed

• All other companies have now left the market

• Insurers are likely to continue to depend

crucially on reinsurance

• The number of new insurance and/or

reinsurance companies to be licensed in the

market in the next three years is likely to be

modest

Saudi Arabia – can we learn from UAE?

• Licensed insurance companies in Saudi Arabia

must retain at least 30% of gross premiums

(contributions), unless prior consent is obtained

from SAMA to retain less

• Fronting in the true sense of the word is not

allowed by SAMA

• Companies are being audited by SAMA and

insurers are worried about potential

ramifications

Insurance Risk Management Insurance Requirements in the GCC by Michael Earp WILLIS

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