GCC regulatory regimes increasingly attractive to global investors

As African and Chinese companies increasingly look to the DIFC to establish insurance entities, the UAE is hoping it can shrug off its FATF grey list status to boost inward investment.

Regulatory change continues at pace in the GCC region. The continued rollout of data protection legislation across jurisdictions is driving up cyber exposures for corporates here and creating further demand for cyber insurance coverage.

However, for financial services entities operating in or looking to set up in the UAE, the biggest challenge continues to be the ‘grey list’ status assigned by the Financial Action Task Force (FATF) in March 2022. This increased the focus on anti-money laundering (AML) issues.

Although the FATF report in July this year did not recommend removal from the grey list, it did acknowledge the UAE’s commitment to tackling AML. Substantial work has been undertaken in this area by the financial services regulators in the UAE and, if following the next FATF review in April/May next year, it succeeds in getting off the list (as is expected), it will be a huge boost to inward investment in 2024.

Meanwhile, acquisitions by international players (particularly in the insurance broking space) of domestic operations in the GCC continue to be a short-cut to acquiring local licences. However, it remains important for potential purchasers to be aware of government schemes such as the Regional Headquarters Program in Saudi Arabia which can be a material consideration in respect of any acquisition.

The Dubai International Finance Centre (DIFC) continues to see record growth in terms of new applications for setting up financial sector entities, including insurance businesses. A recent trend, expected to continue into next year, involves African companies looking to establish operations in the DIFC, attracted by the good transport links, strong regulatory regime, and skilled domestic workforce.

The DIFC is also seeing a lot of interest from Chinese insurance carriers looking to set up operations, following an influx of Chinese business from other industries (including in the construction and infrastructure sector) into the GCC region. This flow of Chinese investment into the region is expected to be very significant throughout 2024.

At the same time, the Abu Dhabi Global Market (ADGM) has introduced its Distributed Ledger Technology Foundations Regulations, geared towards making the ADGM an attractive jurisdiction for digital assets. It is already attracting a great deal of international interest from the crypto space.