Qatar is increasingly placing itself on the map as a financial centre for the Middle East and beyond. Jason Majid, Partner and Aarij Wasti, Senior Associate from Clyde & Co seek to examine some of the changes in the insurance market from a legal perspective.
Of late, there is particular interest in the Qatari insurance market.
This is a result not just of the recent local construction surge but also due to the recent changes in the applicable regulatory framework.
Single regulatory body for banks and insurance firms:
The Law of the Qatar Central Bank and the Regulation of Financial Institutions (Law No. 13 of 2012) was enacted by His Highness Sheikh Hamad bin Khalifa Al Thani, the Emir of the State of Qatar on 2 December 2012 (the “New QCB Law”).
Jason Majid/Partner, Clyde & Co LLP
Aarij Wasti/Senior Associate, Clyde & Co LLP
The New QCB Law approved the long awaited regulatory reform, which was first mooted five years ago.
The New QCB Law does not consolidate the Qatar Financial Centre and the State jurisdiction into a single financial regulator.
However, it does pave the way for a single regulator by placing authority for the Qatar Financial Centre Regulatory Authority (the “QFCRA”) and the Qatar Financial Markets Authority (the “QFMA”) under the Qatar Central Bank (the “QCB”) to regulate (i) banks, financial services and insurance companies, (ii) the country’s bourse as well as (iii) banking, financial and insurance companies licensed by the QFCRA.
Under the new regime, the QFMA and the QFCRA remain independent regulators under the management and direction of their respective board of directors in accordance with both the law regarding the Qatar Financial Market Authority (Law No.8 of 2012) (the “QFMA Law”) and the Qatar Financial Centre Law (Law No.7 of 2005) (the “QFC Law”).
The QFMA is responsible for the regulation and the supervision of financial markets in Qatar (including the Qatar Exchange) in accordance with the QFMA Law and the regulations and rules made under that law. Authorised firms in the Qatar Financial Centre (the “QFC”) will continue to be subject to authorisation and supervision by the QFCRA in accordance with the QFC Law, the Financial Services Regulations and the QFCRA’s rules.
Specific to insurance, in addition to its existing responsibilities for the supervision of banking and financial services institutions, the QCB acquires through the New QCB Law responsibility for the licensing and supervision of all insurance companies, reinsurance companies and insurance intermediaries that were previously licensed by the Ministry of Business and Trade. The New QCB Law repeals Decree Law No. 1 of 1966 on the Supervision and Control of insurance firms and agents. The QCB will in due course publish further details including regulations regarding the new regulatory framework for the insurance sector in Qatar.
New QCB Law:
The new QCB Law took effect on issuance but is yet to be published in the Official Gazette. The legislation amends Law No. (33) of 2006.
While the above section summarises the effects of the new QCB Law, set out below is a snap shot of some of the provisions in the new QCB Law applicable to the regulation of the insurance and reinsurance sectors. These are not exhaustive. The below is simply an illustration of what the new QCB Law includes:
Licensing Financial Services, Businesses and Activities:
✑ No person shall prior to obtaining the bank’s (QCB) license, use the term ‘bank’ or logo of a bank, investment, financing, or banking company, insurance or reinsurance company, credit card company, credit score or rating company, financial or investment consultation company, investment fund, financial institution, Islamic financial institution, or other financial institutions and services as specified by the bank, in documents, correspondences, advertisements or any other means before.
✑ Subject to the provisions of the Law of Commercial Companies No. (13) of 2000, the QCB may grant a licence for practicing financial services, business and activities provided for in the new QCB Law and the decisions issued to implement the same to the following financial institutions (outside the QFC):
Insurance and reinsurance companies and other companies undertaking insurance activities, provided that they are established as joint stock companies offering their shares for public subscription in accordance with the terms and conditions specified by the QCB.
Insurance and Reinsurance:
✑ Without prejudice to the provisions of insurance prescribed by other laws, insurance operation shall include the following types:
✑ Individuals and money collection operations, including the following: (i) all types of life insurance; (ii) personal accidents including insurance of damages resulting from personal accidents, vocational risks, occupational accidents, theft, mistrust and individual civil liability; (iii) long term medical treatment insurance; and (iv) money collection operations insurance.
✑ Property and liability insurance, including the following: (i) fire and fire related damage insurance; (ii) land, sea, and air transport insurance and related liability insurance; (iii) insurance of ships, airplanes, devices and missions thereof and all that is related to ships and airplanes, including risks related to the construction, manufacturing, use, repair, or anchoring thereof and damages befalling third parties; (iv) insurance of goods and shipments of all types and shipment fees; (v) insurance of vehicles, mechanical vehicles, and related liabilities; (vi) engineering insurance and related liabilities; (vii) insurance of industrial and construction projects and related liabilities; and (viii) insurance of oil, gas and derivatives thereof and related industries.
The QCB may by law issue a decision to add any other types of insurance.
✑ Insurance and reinsurance companies include the following: (i) joint stock companies licensed to undertake insurance and reinsurance operation in Qatar; (ii) local branches of foreign insurance and reinsurance companies whose main offices are located outside Qatar; and (iii) representative offices of foreign insurance and reinsurance companies.
The parties mentioned in (ii) and (iii) immediately above must satisfy the licensing requirements, conditions and procedures stipulated by the QCB Board.
✑ The funds and properties located in Qatar or the liabilities resulting there from may not be insured abroad.
Insurance brokerage shall not be sought in regard of such funds, properties, or liabilities except by companies subject to the provisions of the new QCB Law.
✑ Companies licensed to provide individual and money collection insurance must have technical staff and accountant(s) for such operations and must annually prepare and publish a special budget for these operations, in addition to a balance sheet.
✑ Companies undertaking individual and money collection insurance must not discriminate between insurance policies of a single type of insurance, whether in regard of insurance prices, cumulative monetary values achieved by the policy every year, the profits distributed among policyholders, or other conditions or requirements. There are certain exemptions which apply.
✑ Companies offering individual and money collection insurance may not deduct, whether directly or indirectly, any part of the funds related to the obligations resulting from the insurance policies to be distributed as profits to shareholders or policyholders, to lend the company’s employees, or to settle any amounts not related to the obligations resulting from the insurance policy it issued. Profit distribution shall be restricted to the surplus amount that shall be determined by the actuary in his report.
✑ Insurance and reinsurance companies that decide to transfer its policies, along with the rights and obligations related thereto, regarding all or part of the operations undertaken in the State, to one or more companies, or decide to, suspend their operations, in total or part, in one type of insurance or more, and wish to free all or part of their funds, must obtain the QCB’s prior consent in accordance with the term, conditions, and procedures that shall be determined by the QCB’s Board at its discretion.
✑ If the insurance or reinsurance company is announced bankrupt or liquidated, the policyholders shall maintain privilege over the company’s funds and assets.
Such privilege shall rank second after public treasury debts, judicial fees and the amount of the final judgement.
Rights of policyholders of life, personal accidents, death indemnity, physical damages and money collection insurance shall be given priority over the rights of other policyholders.
✑ Insurance and reinsurance companies may not seek the assistance of experts not employed by them for inspection and damage estimation unless the experts are entered in a special register.
The Governor of the QCB may waive this condition in cases where experts of special technical expertise are needed.
✑ Insurance and reinsurance companies shall obtain the QCB’s approval on the insurance policy forms they plan to publish and any changes thereto; the QCB shall discuss the contents of these policies and may reject any data that contradicts public interest.
Qatar Central Bank
QICDRC insurance initiative:
In September 2012, the Qatar International Court and Dispute Resolution Centre (the “QICDRC”), established in 2009 and having as its current Chief Justice Lord Phillips of Worth Matravers, previously the President of the Supreme Court of the United Kingdom, unveiled a ground-breaking insurance dispute resolution project with a view to developing a specialist dispute resolution scheme for high-value insurance and reinsurance claims.
The scheme once implemented would be the first of its kind in the Middle East and would help secure Qatar’s status as the key hub in the region’s fast-growing insurance market.
In September 2012, the QICDRC undertook a road show consultation in Doha, Dubai and London with leading figures of the international insurance and legal industries. Input from these roundtables was to ensure that the scheme meets current and future international industry needs.
QICDRC’s Chief Justice Lord Phillips of Worth Matravers
Recent trends in Qatar:
It is estimated that Qatar has approximately USD 200 billion worth of new infrastructure projects planned and on the go. Qatar has recently embarked on its Qatar National Vision 2030, which will see huge investment in diversifying the economy beyond the oil and gas sectors.
The award of the 2022 FIFA World CupTM has focussed and accelerated the growth to a new level altogether.
The construction surge as a result of these plans further exemplifies that there is an increased need in Qatar for a comprehensive insurance framework which affords requisite coverage in type and size.
The new QCB Law and the QICDRC scheme discussed above set the stage for the anticipated increase of insurance activity in Qatar. This space will be keenly observed by players in the insurance and reinsurance sectors in the region and beyond in the years to come.
Doha Port Stadium
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