Electronic Insurance Regulations Issued

The United Arab Emirates (UAE) Insurance Authority recently published the Insurance Authority Board of Directors’ Resolution No. 18 of 2020 on Electronic Insurance Regulations dated 27 April 2020 (“the Regulation”). The first draft of these regulations was published in January 2019, and after public consultation and discussion, a revised draft was published in December 2019, which has now been finalised. The Regulations and the timing of it are very relevant in the current circumstances, i.e. the impact of COVID-19 and the social distancing measures by the government, marketing, and solicitation of insurance by physical means is at an all-time low.

The term electronic has been widely defined as anything relating to technology having electrical, digital, magnetic, wireless, visual, electromagnetic, automated, optical or similar capabilities. The scope of the Regulations extend to all electronic and smart insurance operations carried out on the internet address of the company, social media such as Facebook, Linkedin, multimedia such as YouTube, Instagram, blogs, applications such as google doc, Wiki, AI-based systems, text messages, instant chat channels, smart applications, etc.

All insurance companies and related businesses such as insurance agents, actuary, broker, surveyor, insurance consultant, carrying out operations through electronic mode, require prior approval from the Insurance Authority. The application for such approval must be accompanied by an action plan for electronic operations, approved by the Board, and contain analysis of the risk, projected volume and contingency plan for the electronic operations.

Life insurance policies with investment components cannot be transacted online, while the sale of life insurance policies with standard underwriting (less the investment component), such as term life is allowed. Health and general lines of business on property and liability risk, including marine cargo insurance can all be sold online and are subject to the Regulations.

The website of the insurance companies must be maintained by the IT department of the company, but if the management of such a website is being outsourced to a third-party, then prior approval of the Insurance authority must be obtained in this regard. Insurers currently use multiple online platforms for online marketing and selling, often procured through third-party entities. The intent of the Regulations is to capture and regulate, where possible all such third-party entities who are engaged in insurance distribution.

The Regulations also put much impetus on provisions of information security and also requires that storage of data must be in the UAE. It is however not clear whether the Regulations require any Cloud server to be based within the UAE.

In addition, the Regulations recognise that the electronic platforms and systems of the companies may not be developed enough to carry out these operations and hence allow outsourcing of electronic operations for this purpose. The Regulations also allow usage of third-party websites for sale of insurance but require the prior consent of the Insurance Authority to be obtained for any such arrangements.

The Regulations also recognise, for the first time, the “Price Comparison Websites” and interestingly state that only an insurance broker can deal with a price comparison website. The Regulations also require Price Comparison Websites to be registered with the Insurance Authority and a copy of the agreement signed between Insurance Broker and Price Comparison Websites must be shared with the Insurance Authority. The prerequisites for registration of Price Comparison websites has also been listed in the Regulations but state that the application for registration must be made in accordance with the applicable regulations, implying that the Insurance Authority may be issuing further regulation on Price Comparison Websites shortly.

The Regulations state that the provisions shall apply from the date of publication of Regulations in the official gazette, but also allow insurance companies and insurance-related professions a time period of 6 months from the date of publication in the official gazette to align their position and operations with the Regulations.

While the recognition of Price Comparison Websites is a step in the right direction from the UAE Insurance Authority given the global trends in this regard, the requirement for a Price Comparison Website to deal only through a broker creates an extra layer of regulatory requirement and therefore unnecessary costs, the benefit of which could have been passed on to end customers in the absence of such requirement. Nonetheless, insurance markets globally have noticed a surge in demand for insurance policies through online mode and therefore this Regulation brings much-needed clarity, which will help in further growth of the UAE insurance market.

Dentons adds Insurance Regulatory duo in Los Angeles

Dentons, the world’s largest law firm, today announces that Robert P. Barbarowicz and Kathleen M. McCain have joined the Insurance Regulatory practice. Focused on complex insurance transactions and regulatory disputes, the pair will be resident in the Firm’s Los Angeles office.

Both highly experienced in regulatory proceedings and transactions, the pair bring a balance of Barbarowicz’s transactional experience in complex transactions involving insurance companies and agencies and McCain’s perspective from litigating insurance disputes at the trial and appellate levels.

“We’re delighted to welcome Bob and Kathleen to our world class insurance practice,” said Keith Moskowitz, co-chair of Dentons’ US Insurance practice. “Our insurance clients will benefit from their wealth of experience and their transactional and litigation experience serving the industry.”

Barbarowicz has more than 30 years’ experience in the insurance industry with a particular focus on large and complicated insurance transactions, purchase transactions, redomestications, securing regulatory approvals for complex transactions in many states, force-placed insurance, rate regulation and rate filings. His experience includes representing property and casualty, life and title insurance companies. Prior to entering private practice he held leadership roles at several large insurance companies, including Balboa Insurance Group and the Ahmanson Insurance Companies. In addition to counseling insurance clients Barbarowicz advises clients on corporate finance transactions including substantial capital extraction. He holds both a JD and a BA from Pennsylvania State University.

McCain represents insurance companies and regulators in navigating rate regulations, policy review, insurance M&A, compliance, financial and market conduct examinations, litigation strategy, holding company matters, reinsurance, corporate governance, insolvency and asset recovery. Experienced across all lines of insurance including property and casualty, life, title insurance and surplus lines matters, she also uses her litigation background to offer clients unique perspective and insight. McCain is an Accredited Insurance Receiver for Legal and Reinsurance by the International Association of Insurance Receivers. She holds a JD from Valparaiso University Law School and a BA from Ohio Northern University.

Pinsent Masons gets cloud guidance improved for insurers

International law firm Pinsent Masons has seen a number of its recommendations enacted following its response to EIOPA’s consultation on cloud guidance, making it easier for insurers to comply with their regulatory requirements.

The guidance, which sets to place strict regulatory demands on insurers in respect of both the contents of their contracts with cloud providers and their governance of those contracts, has been under review since June 2019, with the final guidelines now being issued.

In its response to the consultation, the firm raised a number of concerns about both the wording of and rationale for some areas of EIOPA’s draft guidance. Those concerns addressed fundamental matters such as the scope of the guidance and potentially confusing concepts and terminology. They also focused on the requirements around the content of insurers’ cloud contracts, their exit planning, the extent of information that insurers would have to document about their contractual requirements, and the location of data in the cloud.

Pinsent Masons’ recommendations have led to the re-drafting of certain definitions, the removal of unclear language and greater clarity and alignment with the European Banking Authority (EBA).

Some of the changes included the removal of references to ‘material outsourcing’ to describe the concept of a ‘critical or important operational function’. EIOPA also agreed to drop plans that require insurers to assume that their purchase of goods or services from, or entry into arrangements with, cloud providers constitute outsourcing arrangements that are subject to its guidance in cases where the matter is unclear. They also deleted wording around having ‘directly measurable’ service levels specified in contracts after the firm said it was it was unclear how insurers could comply with that obligation.

Commenting on the guidelines, head of Fintech propositions at Pinsent Masons, Luke Scanlon said: “When regulators bring out guidance and impose rules which vary slightly from other requirements for regulated entities, this can lead to unintended consequences and cost for financial institutions. Ultimately, this cost is borne by the customer and therefore it is positive to see that EIOPA has taken the views of the sector into account and made some adjustments to its final guidance.

“In our response to the consultation we put forward the views of our clients impacted by this guidance to ensure that the final guidelines are fit for purpose. This is particularly important following recent data from the Bank of England which shows that insurers are falling behind with regards to the adoption of cloud based technology in comparison to banks. We hope that these changes will now facilitate far greater adoption across the sector.”

All new cloud outsourcing arrangements entered into or amended on or after 1 January 2021 will be subject to the guidelines, while insurers will have until the end of 2022 to bring cloud outsourcing contracts entered into prior to that date into line with the new requirements.

KPMG hires Zurich veteran

KPMG has announced the appointment of Graham Boffey as insurance partner in its financial services consultancy team, effective October 01.

In his new role, Boffey will work closely with Simon Ranger, head of insurance at KPMG, to support clients across the UK market. Boffey brings considerable insurance industry experience and most recently acted as head of UK distribution at Zurich Insurance. He began his career at IBM and Barclays, and spent more than a decade at Aviva, where he fulfilled many roles including chief executive officer of Aviva Healthcare, and, later, managing director of corporate benefits.

“It’s great to be heading back to KPMG – its UK leadership team is bold and braced for change and I want to take that mentality out to clients,” said Boffey. “Customers, and society at large, are putting ever greater pressure on big businesses to demonstrate their value and nowhere is that more prevalent than in insurance; a sector designed to help people protect what’s important to them. Simon and the team at KPMG understand that we have to change now to be relevant in the future. I’m looking forward to getting to know the team and their clients to help them make that change.”

“Graham brings with him a huge amount of experience and a practical understanding of how the industry needs to change,” said Ranger. “He’s helped some of the biggest insurers navigate some of the choppiest waters over the last few decades. I’m sure our clients will appreciate his knowledge, and, most importantly, our colleagues will benefit enormously from working with him.”