The insurance industry is regulated by a government body in each of the GCC countries, although the scope of regulation and the level of maturity vary considerably across the region.

The UAE has a dedicated supervisory body — the UAE Insurance Authority. In other countries the industry is regulated by financial services regulators such as the Capital Market Authority (CMA) in Oman, the Saudi Arabian Monetary Agency (SAMA), and the central banks in Bahrain and Qatar. In Kuwait, the Ministry of Commerce and Industry oversees the insurance sector. Insurance business transacted in the region’s specialised financial services hubs — the DIFC in Dubai and the QFC in Qatar — is supervised by an independent framework set up by the designated regulatory bodies in these zones.

While the Takaful industry across the GCC is experiencing strong progress, development of a supervisory framework varies substantially between the constituent countries. The UAE, Bahrain and Oman — and the autonomous financial hubs of DIFC and QFC — have introduced regulations specifically for the Takaful market. Kuwait and Qatar (outside the QFC), do not have an explicit rule book for governing the market. Saudi Arabia has a common legislation applicable to both conventional and Takaful companies. The Kingdom prescribes the cooperative model for all insurance companies, which has a few variations from the Takaful model followed in other parts of the world.

Governments across the GCC have identified the immense growth potential of the Takaful sector and have been introducing positive changes in the regulatory landscape. For instance, insurance company executives, insurance experts and clerics in Islamic financial transactions all gathered in Abu Dhabi and Dubai recently to discuss the potential future of the takaful insurance industry both in the region and worldwide, at the Islamic Insurance Conference and World Takaful Conference respectively.

The UAE Insurance Authority has not been approving new licence applications since 2008, apart from a few exceptions. As a result, the most convenient way for overseas players to set up presence in the UAE market has been through a stake acquisition in a domestic insurance provider.

Another option for foreign insurance companies looking to establish a footprint in the UAE is by operating as an offshore company registered in one of Dubai’s Free Zones, such as the DIFC or JAFZA. Such companies are not required to follow the civil and commercial laws applicable elsewhere in the country. They are regulated within the free zones which permit 100% foreign ownership in entities. While these companies cannot sell insurance products in other parts of the UAE outside of the free zone — they are allowed to directly offer insurance cover on risks based within their respective free zones.

The Qatar government established the QFC in 2005, to boost growth of the financial services industry and foreign investment in the country, develop local and regional markets and strengthen the links between the energy based economies and global financial markets. The zone provides a conduit for foreign insurance companies for establishing a footprint in the country. However, unlike Dubai’s DIFC or JAFZA-based companies, entities based within QFC are permitted to seek direct insurance business throughout Qatar. Insurance companies operating from the QFC continue to be independently regulated by Qatar Financial Centre Authority, falling outside the purview of Qatar Central Bank.

Bahrain’s insurance regulator is its central bank, which functions on the basis of well laid-out rules and regulations, thus facilitating a healthy operating environment for companies. Although smaller in terms of market size, the country is considered a major hub for Islamic insurance given the large footprint of Takaful companies and a progressive framework that supports strong governance and innovation.

The insurance regulatory body in Oman is the Capital Markets Authority (CMA), which oversees the industry in accordance with guidelines set under the Insurance Companies Law enacted over 30 years ago. The insurance regulatory framework in the country is regularly updated and this has had positive impact on the overall market structure, and brought insurance legislation closer to international standards.

With GCC countries taking all these steps to develop the regulatory environment in the Gulf’s insurance sector, regulation in the region is developing at a steady rate. There are areas where some countries’ regulators are ahead and others where there is work in progress, in terms of strengthening regulations around solvency requirements increasing transparency standards, and the introduction of guidelines to regulate investments of insurers.

There is no doubt that the insurance industry in the region has experienced steady growth on the back of economic development and the consequent population expansion. We have seen vast improvements to the regulatory environment and in the steps insurers have taken to educate people on the benefits of protecting the things they value most and the requirement to take personal responsibility for their financial future. This has built confidence in the sector as well as increased awareness of the importance of having life, medical and other insurance products. However, there is still some way to go before we have a consistent GCC-wide regulatory environment.

In my opinion, the ideal scenario for insurers with a presence in the GCC is one where there is a cooperative approach to regulation across jurisdictions and one which allows easy ‘passporting’ of propositions between countries.

If the regulators in the various countries worked together to introduce ‘best of breed’, GCC-wide regulation it would create a level playing field and increase competition among insurers throughout the region, with the ultimate beneficiary being the end customer.


— Taher Fakhri is Regional Head of Strategy and Risk at Friends Provident International’s (FPI) Middle East operation