Glad you are here ….

I am delighted to present our very first newsletter, a venture that initially struck me as mundane. However, as I delved into conceptualizing the theme and setting the stage, the purpose became abundantly clear – it’s all about our members. Always has been, always will be.This newsletter serves as a bridge, connecting diverse facets of our industry and fostering unity within our community. It brings me immense joy to facilitate this connection, even if it takes the form of a newsletter.

Providing a platform for our members to shine is not just a feature; it embodies the very spirit of the DIFC IA.
I invite you all to savor the content and revel in the collective achievements and aspirations that bind us together

Enjoy
Chantal Sciarappa

DFSA

DFSA (Dubai Financial Services Authority)

News by DFSA

With heightened economic uncertainty and geopolitical tension, rising cost of insurance and the introduction of corporate tax in the region, the current environment is more conducive than ever to consider captive insurance as a practical solution to managing risk.

There are several factors in support of a captive. Firstly, captive owners will have access to the international reinsurance market, potentially at a more competitive rate than the locally licensed insurers. Secondly, captive owners can retain underwriting profit in the group through the captive if it maintains low losses. Thirdly, where it is difficult to obtain insurance coverage for certain emerging risks due to insufficient loss data, corporates may manage the risk through its captive. In addition, there may be tax advantages, such as potential reduction of corporate tax obligations for the group through tax deductibles on premiums.

Of course, to make it a viable proposition, these benefits would need to weigh up against the cost of setting up and maintaining the captive. From a regulatory perspective, captives are subject to less onerous licensing requirements and fewer ongoing compliance obligations because they are used as a risk management vehicle for their owners, rather than competing in the commercial insurance space.

In the DIFC, the DFSA has a bespoke regime for the establishment of captive insurers, as well as Laws and Regulations that allow both Protected Cell Company and Incorporated Cell company structures. The DFSA licence fee for a captive insurer is USD 5,500, whereas it is USD 40,000 for a commercial insurer (see FER Rule 2.1.1). In the DIFC, there are broadly three types of captives (see GLO Module for Captive Insurer):

  • Class 1 – a ‘pure captive’ which only underwrites risks of the captive owner and its group. The minimum capital requirement for a Class 1 Captive is USD 150,000.
  • Class 2 – a captive that can underwrite up to 49% third-party business, where third-party business is defined as being engaged in a ‘commercial relationship’ with the captive owner. The minimum capital requirement for a Class 2 Captive is USD 500,000.
  • Class 3 – includes association captives and ‘other’ captives, where the minimum capital requirement is USD 1m.
    Captives also benefit from a simplified capital calculation compared to commercial insurers (see PIN Rule A4.2.1). For example, for Class 1 Captives, the requirement is the higher of Underwriting or Reserving Risk capital components. Further, the DFSA allows captive insurers to calculate the Underwriting and Reserving Risk Components of capital on a net of reinsurance basis, so allowing captives to take full capital relief for any reinsurance or retrocession arrangements they have in place.

Specialised captive managers with “Insurance Management” licence can take on the regulatory responsibilities of a captive, including ongoing reporting obligations to the DFSA, as well as provision of mandatory functions (such as Senior Executive Officer, Finance Officer, Compliance/Money Laundering Reporting Officer).

With implementation of OECD, economic substance rules in offshore captive jurisdictions it would make a compelling case for Middle East captive owners to set up captives closer to home in financial centres like the DIFC.

Lux

Social Determinants of Health: A Critical Lens for Actuaries in the Arabian Gulf and Africa

News by Lux Actuaries

In the Arabian Gulf and Africa, understanding the impact of Social Determinants of Health (SDoH) is taking centre stage for actuaries seeking to develop equitable and effective insurance solutions. SDoH encompasses the non-medical factors that shape health outcomes – factors like income, education, housing, access to nutritious food, and social support. These profoundly influence mortality, morbidity, and the demand for health insurance.

For actuaries, traditionally focused on individual risk factors, SDoH demands a broader perspective. In regions with high income inequality, disparities in health outcomes starkly reflect social and economic disadvantages. Modelling these requires actuaries to analyse data on income distribution, educational attainment, and the quality of housing within their target markets.

Understanding local context is vital. In the Gulf, migrant labour populations may face specific health risks due to living conditions and occupational hazards. In rural Africa, distance to healthcare facilities and lack of clean water infrastructure are critical determinants of health. Actuaries must tailor their analyses to reflect these unique regional concerns.

SDoH-informed actuarial work has implications for product design. Targeted health insurance plans addressing the specific needs of underserved populations become a possibility. Actuaries can model the potential impact of preventive healthcare initiatives and wellness programs, proving their value to insurers and policymakers.

Collaboration across disciplines is imperative. Actuaries can partner with public health experts, NGOs, and sociologists to gain deeper insights into SDoH and assess the effectiveness of potential interventions. These partnerships offer data, and a nuanced understanding of how social factors translate into health risks.

Addressing SDoH has the potential to reduce inequalities. By designing insurance products that are accessible and relevant to those most disadvantaged, actuaries can contribute to a more inclusive insurance market. This aligns with broader social responsibility goals within the insurance sector.

Proactive steps are needed. Actuaries can encourage insurers to consider SDoH in underwriting practices and pricing models. This approach may require balancing fairness with actuarial soundness and addressing potential adverse selection challenges.

Collecting relevant SDoH data presents its own complexities. Privacy concerns, along with potential biases in data collection, need to be addressed ethically. Actuaries play a vital role in finding responsible ways to incorporate this sensitive information into their models.

Challenges of SDoH, particularly in regions of the Arabian Gulf and Africa with less mature data infrastructures, may seem overwhelming. However, actuaries have a unique opportunity to drive positive change. By championing an SDoH-informed approach, they can contribute to insurance solutions that not only assess risk more holistically but also promote greater health equity for all.

UAE: Shivash Bhagaloo FIA shivash@luxactuaries.com
Kenya: Darshan Ruparelia FIA darshan@luxactuaries.com

Arbitration

The Abu Dhabi International Arbitration Centre’s New Rules

News by

As of 1 February 2024, the Abu Dhabi International Arbitration Centre (arbitrateAD) replaced the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). 

This significant step marks the modernisation and development of international arbitration in Abu Dhabi and will help to further solidify Abu Dhabi as a core business hub in the region. It is also the UAE’s second arbitral development in the last few years, following the abolition of the DIFC-LCIA and EMAC in 2021.
In this article, we discuss the highlights of the new arbitration rules (New Rules), along with a comparison to the 2013 ADCCAC Rules (Old Rules).

New and Existing Cases

Any new arbitrations from 1 February 2024 will be administered by arbitrateAD under the New Rules (Article 1(3) of New Rules). Any existing arbitrations that were initiated under the ADCCAC before 1 February 2024 will continue to be administered by ADCCAC (Article 53 of New Rules).

Where parties have agreed to refer their disputes to arbitration under ADCCAC but have not yet filed any proceedings, Article 1(2) of the New Rules states that the arbitrateAD Rules shall apply, save that Articles 35 (Emergency Arbitrator) and 36 (Expedited Proceedings) of the New Rules shall not apply unless expressly agreed between the parties.

Key Changes

General provisions

Court of Arbitration

The Court of Arbitration of arbitrateAD (the Court) has supervisory authority and operates independently of arbitrateAD.

Its functions include:

  • the appointment and replacement of arbitrators;
  • determining challenges made against arbitrators;
  • reviewing final awards; and
  • disposition of Requests for Joinder and Requests for Consolidation.

Third-Party Funding

Article 48 of the New Rules now expressly permits third party funding (TPF). The Old Rules made no reference to this, which led to uncertainty, particularly in light of the fact that it is still a relatively ‘new’ mechanism used by a claimant or a respondent with a counterclaim.

A party must therefore ensure that it informs the Case Management Office of the third party that has agreed to fund the expenses of a party to the arbitration. This new provision accordingly seeks to provide greater transparency to the financial interest of parties and formally recognises it as a means of funding in modern times.

New Procedures

Unlike the Old Rules, the New Rules contain entirely new procedures that align with the practices of many modernised arbitral institutions, including the ICC and DIAC, as follows:

  • Article 9 covers the procedure for claims involving multiple parties.
  • Article 10 allows claims arising out of multiple contracts to be determined in one arbitration.
  • Article 11 concerns the rejoinder of one or more additional parties to an arbitration.
  • Article 12 sets out the procedure for consolidating two or more arbitrations.
  • Article 35 contains the procedure for the appointment of an emergency arbitrator.
  • Article 36 sets out the procedure for expedited proceedings for claims worth up to AED 9 million, in which a sole arbitrator issues a Final Award within 4 months of receiving the case file.

These mechanisms are positive steps that will enhance procedural efficiency. In particular, expedited proceedings will be of huge benefit for disputes where ‘time is of the essence’ and will lead to more proportionate costs being incurred for claims up to AED 9 million. ArbitrateAD may be a more ‘attractive’ institution for expedited proceedings in the region compared to DIAC, where the threshold for expedited proceedings is AED 4 million.

The arbitration proceedings

Representation

Article 4 of the New Rules contain more detailed provisions on the appointment and authority of representatives of the parties. Most notably, Article 4(4) of the New Rules expressly requires a party representative to provide a power of attorney (POA) or proof of authority where requested by the Tribunal or the Case Management Office.

Obtaining a POA can be time-consuming, and it is best practice for parties to start the process as soon as their representatives are instructed.

Applicable Law

Article 21 states that if the parties have not agreed on the applicable law, the Tribunal has the power to determine the law or rules that it deems to be appropriate. In doing so, Article 21(2) states that the Tribunal should take into account “any relevant provisions of the contract” and may consider “trade usages”.

Article 21(3) states that the Tribunal shall not decide “ex aequo et bono” meaning the Tribunal must determine cases by applying the applicable law, not according to what s/he considers is ‘fair’ and ‘unfair’ in the circumstances.

Seat of Arbitration

Under Article 22(2), if the parties have not agreed on the seat of the arbitration, the seat shall be the Abu Dhabi Global Market (ADGM) by default. This would mean that ADGM Arbitration Regulations 2015 would apply to the arbitration. It remains to be seen what consequences this will have on any conflicts arising between the offshore and onshore Courts.

Scrutiny of Awards

Before the Award is signed, it must be submitted in draft for scrutiny by the Court (Article 40(1)).

Article 40(2) grants the Court the power to suggest modifications to the Award, including any apparent clerical errors, inconsistencies or omissions arbitrateAD. The Court is not however allowed to make any comments on the merits of the underlying dispute.

In contrast to the Old Rules, issues of correction were simply dealt with by the Tribunal (Article 29) and awards did not need to be submitted before the Committee before they were finalised and signed.

Conclusion

Overall, the New Rules are a significant development in modernising arbitration in Abu Dhabi and brings it in line with many other international arbitral institutions, such as the ICC and LCIA.

It is important for parties to ensure that jurisdiction clauses are drafted clearly in light of the New Rules. Parties are encouraged to refer to the model clauses published by arbitrateAD when drafting new contracts or amending existing contracts.

DWIC

7th annual Dubai World Insurance Congress

News by DWIC

Brought to you by Global Reinsurance and the Dubai International Financial Centre Authority (DIFC), the 7th annual Dubai World Insurance Congress (DWIC) continues to re-imagine the traditional conference to deliver unrivalled networking, business and thought leadership opportunities, all under one roof.

With a record number of delegates attending DWIC last year, a venue with a larger capacity is needed for 2024. We’re delighted to be bringing the event to the prestigious Atlantis, The Palm. Hosting the event in it’s dedicated Conference Centre will allow us to accommodate more people, more meeting space, and improve the quality of our plenary and roundtable sessions.

The place to do business

Since it’s launch in 2017, DWIC has focused on providing senior insurance executives with a platform to meet and do business. Working with brokers, insurers and reinsurers, DWIC 2024 will reinforce its position as the regional focal point for (re)insurance transactions.

Networking

As well as a great place to meet existing clients, DWIC offers attendees the opportunity to make new contacts. In 2023, DWIC saw more than 5,000 meetings pre-scheduled via the online Meeting Hub.

Learn

DWIC is a great place to share new ideas and international keynotes will take to the main stage for the opening plenary session. In addition, there will be a series of topic-led c-suite roundtable discussions and delegates will have the opportunity to listen in to a session/s of their choice.

Register here

Learning, knowledge, team, insurance

DIFCIA Launches Knowledge Hub

News by DIFCIA

On the 27th February 2024 the DIFCIA in conjunction with Insight Learning Organisation launched the DIFCIA Knowledge Hub, a cutting-edge platform aimed at enhancing knowledge sharing and collaborative efforts among industry professionals. This significant achievement, supported by Hatta Outdoor, highlights our dedication to ongoing learning and growth

We extend our sincere appreciation to the distinguished guest speakers from the Insight Learning Organisation (ILO) and the Chartered Insurance Institute Middle East (CII). Their invaluable contributions and expertise played a crucial role in the event, emphasizing the significance of working together and embracing innovation to tackle the unique challenges and seize the opportunities within our industry.

The Knowledge Hub stands as an essential tool for professionals aiming to improve their abilities, broaden their professional connections, and keep up with the evolving trends and industry standards.

Benefits offered in terms of professional development, including:

  • Exclusive rates for DIFCIA Members.
  • Unlimited access to all courses for subscribed members.
  • Bespoke and exclusive learning options for subscribed members
  • 101+ courses in management, sales, customer service, employee development, etc.
  • A minimum of 4 new courses per year.
  • Flexible timeframes, measured development and digital certification.
  • Individual Landing pages and tracked development progress records.
  • Mobile access for on-the-go learning and access to the DIFCIA blog for networking.
  • Affordable investment to cater to different companies
  • White Label Branding options to build your Company-branded learning academy.

This initiative demonstrates the power of unity in advancing knowledge and propelling our industry forward, with special discounts available for DIFCIA members.

Member registration is offered directly through the DIFCIA. Please contact Chantal Sciarappa directly at chantal@difcia.org to register your interest. Alternatively, contact Keith Usher at ILO Global directly to discuss how the DIFCIA Knowledge Hub can be incorporated into your employee development initiatives and the many advantages of building your own white-label Learning Academy with ILO Global. Keith can be contacted at keith@kuconsultancy.com  or on his mobile number, 0504581640.

Our heartfelt thanks go to Hatta Outdoor for their generous support and sponsorship, showcasing their dedication to fostering professional development and the exchange of knowledge. Hatta Outdoor is also offering a significant 30% discount for our members for Season 6 and is in the process of creating a tailor-made package for Season 7 that promises even greater advantages. For those interested in team building or corporate retreats at Hatta Outdoor, please reach out to Frank Dixon, Head of Events at Hatta Outdoor, via email at events@hattaoutdoor.com or call +971502297668.

We’re grateful to our partners, speakers, and all who attended, making this initiative a success. We’re eager to witness the positive effects the DIFCIA / ILO Knowledge Hub will have on our field and further afield.

Together, let’s embrace learning, innovation, and growth. Here’s to a future rich in cooperation, enlightenment, and achievement!

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Upcoming Events

  • 22nd April 2024: Insurance and Legislative Developments in the Kingdom of Saudi Arabia – Hosted by HFW
  • May 2024: Implications of Corporate Tax Laws – Hosted by PWC and BSA Law Firm