Ta’ameen Qatar talks to Michael Earley, senior associate, Clyde & Co LLP, on the topical issue of insurance regulation in Qatar.

Michael Earley/senior associate, Clyde & Co LLP

What is the current regulation structure in Qatar?

Qatar has two distinct sets of insurance legislation regulating the sector at present.

First are the laws of the State of Qatar issued in Arabic. Second are the laws of the Qatar Financial Centre (QFC), issued in English. The QFC operates to international standards and its laws, governing all entities licensed to operate within, are structured more towards those of the UK Financial Services Authority. This situation essentially came about with the establishment of the QFC in 2005, with the aim of attracting international financial services companies and longer-term objective of supporting the development of Qatar and the wider region.

What are the implications of having two separate laws?

With no single dedicated insurance regulator, the concern is a lack of consistency within the Qatar market as insurance companies outside of the QFC are largely self-regulated. That said, there are certain practices they have to adopt to be rated internationally and do business outside of Qatar. The State law itself has only been amended three times since being established in 1966. The most significant amendment was made in 1971, decreeing that no more trade licenses would be issued to foreign insurance companies. Perhaps the most significant event affecting the local insurance market occurred in 2005, when the QFC was established allowing 100 percent foreign ownership to businesses operating inside the then newly-established centre. It should be noted that the QFC itself is not technically offshore as such, hence is not strictly a free zone – although firms within do enjoy the benefits of 100 percent foreign ownership, unrestricted repatriation of capital/profits and independence from some state laws that apply to other firms.

What moves have there been to create a single unified regulation?

Although the initial idea of integrating government and QFC laws under a single unified regulator was first suggested in 2007, the integration was put on hold as a result of the global economic crisis. In April 2011 an initial step towards the transition was announced in New York. It was declared that the regulatory functions of the QFC, Qatar Financial Markets Authority (QFMA) and Qatar Central Bank (QCB) in relation to banking, insurance, securities, asset management and other financial services would be unified. Although the announcement signalled that the wish for a unified regulatory was alive and well, it did not set out the way in which such a merger would take place. A single regulation would most likely fall under the ruling of the QCB – and as mentioned would not end at the insurance sector but also regulate banking, the financial markets and anything else related to the financial services sector.

What might be some of the challenges in moving toward a single set of regulations?

Because the current two sets of regulations are structured very differently from each other, it is not clear how the single regulator would align the two.

The different languages used in each jurisdiction also pose an interesting issue.

The official language in Qatar is Arabic and its laws are published in Arabic in the Official Gazette. However as mentioned, the rules and regulations of the QFC are produced in English, and submissions to the QFC authorities are required to be in English, or translated into English if originally in another language. In the event the authorities determine that, for the sake of continuity, one language should take precedent over another, it may well be the case that the relevant rules and regulations will have to be translated into the alternative language.