The UAE's Corporate Governance Regulations for the Insurance Sector: A Closer Look

Good corporate governance fosters a company’s culture of integrity, transparency and accountability. It lays the foundation and structure to align a business’ commercial objectives with its legal and regulatory requirements, encouraging effective decision-making through processes, practices, and policies.

Corporate governance regulations in the United Arab Emirates (UAE) primarily focus on listed public companies. Insurance and reinsurance companies onshore in the UAE are required to take the form of a public joint stock company (PJSC) and to be listed on one of the onshore UAE stock markets, the Dubai Financial Market (DFM) or the Abu Dhabi Exchange (ADX).  UAE re/insurers are therefore subject to the Corporate Governance Guide issued and supervised by the UAE Securities and Commodities Authority (SCA), which sets out detailed rules and guidelines in relation to the governance of PJSCs. Amendments to the Corporate Governance Guide in January of this year introduced some significant changes, at a time when corporate governance is under the spotlight globally.

Historically, other than the Corporate Governance Guide applicable to all listed PJSCs, there have been limited corporate governance regulations governing insurance companies in the UAE. To address this gap, in December 2022 the Central Bank of the UAE (CBUAE) introduced, for the first time, corporate governance regulations and accompanying standards specifically for insurance companies (the Regulations).  

In the last few months, the CBUAE  has also issued a consultation paper seeking feedback in respect of proposed new regulations for insurance brokers including corporate governance regulations. This follows the issuance of a new insurance law, which came into force on 30 November 2023 and provides that the CBUAE will lay down the general framework for the governance of insurance companies, signalling a wave of regulatory change in the UAE’s insurance sector in respect of corporate governance.  

Interestingly, the CBUAE and the Insurance Authority (IA) in the Kingdom of Saudi Arabia (KSA) entered into a memorandum of understanding (MOU) in September 2022, whereby the two regulators agreed to promote cooperation and common interests in the supervision and regulation of the insurance sector and its development. The MOU suggests that the CBUAE and the IA will eventually align on the corporate governance requirements for the insurance industry.

While it is anticipated that the CBUAE will soon issue corporate governance regulations for insurance brokers and will initiate a similar consultation for other insurance businesses, such as insurance consultants and third-party administrators (TPAs), in the interim, the CBUAE tends to apply the Regulations, as well as the IA’s corporate governance regulations for insurance companies (as a result of the MOU) to such other insurance businesses as a benchmark. The IA takes a similar approach in KSA in that, in the absence of corporate governance regulations for other insurance businesses, the IA considers the corporate governance regulations applicable to insurance companies to reflect the best practice and encourages insurance brokers and other insurance professionals to comply with such standards.

The Regulations support the CBUAE's aim to promote the effective development of the UAE's insurance sector through enhanced corporate governance practices, with particular focus on the skills, responsibility and accountability of the board of directors (the Board) and instilling minimum corporate governance standards in insurance companies to provide for sound and prudent management and oversight of the business which adequately recognises and protects the interest of policyholders.

In this article, we delve into the key aspects of the Regulations, and their implications for both insurance companies, and, for the reasons mentioned above, other insurance-related businesses (such as brokers, consultants and TPAs) for which the Regulations set a benchmark for corporate governance in the absence of rules specifically applicable to such businesses.

How we can help

We understand the challenges insurance businesses face when implementing an effective corporate governance framework. We support our insurance clients in developing robust corporate governance practices suitable for their size and risk profile that align with the Regulations, SCA’s Corporate Governance Guide and international best practices, balancing it with a pragmatic and commercial approach.  We can help in the following ways:

• assessing the existing corporate governance framework, including the matrix of powers and conducting a gap analysis of the CBUAE regulated positions;
• discussion with the business on the findings of the gap analysis to develop an appropriate governance structure commensurate with the size and scale of the business;
• advising on the establishment of the Board, with the right size and balance of diversity and skills of Board members;
• advising on the appointment of an independent Chair;
• advising on the formation of Board committees and the appointment of Board committee members;
• drafting the Board and Board committee charters;
• updating the constitutional documents of the company, for example, the articles of association, to reflect the revised corporate governance framework;
• drafting new powers of attorney and, to the extent required, revoking existing powers;
• developing a reserved matters list, separating the powers of the shareholders, the Board and senior management;
• conducting a gap analysis of the policies (including related-party transactions, conflict of interest and whistleblowing), ensuring compliance with local laws and regulations;
• advising on banking authorities in line with new corporate governance framework;
• assisting with the preparation of Board meetings;
• conducting Board and senior management training programs.

We will work with our client on the implementation of the corporate governance framework on a phased approach, for example, constituting the minimum required Board committees first (such as, the audit and risk committee), followed by other committees. We will prepare a clear roadmap for implementation, focusing first on the mandatory changes to comply with the Regulations and taking a staggered approach to implement the revised corporate governance framework.

If you would like to read the full article, please register your interest here or if you would like further information on any issue raised in this article, please contact Roshanak Bassiri Gharb and Nasteho Muse.