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05 March 2024

New financial reporting rules for insurance firms

By Wam

The Insurance Authority (IA) has released a circular to all insurance companies operating in the United Arab Emirates (UAE) detailing the reporting requirements for year-end 2015.
The new reporting requirements are based on the financial regulations which were signed into law at the end of 2014.
As per the IA's financial regulations, sections (5), (6) and (7), which all have an alignment period of only one year, are now fully in effect.
Accordingly, all companies should have been updating their internal systems and developing procedures so that they can meet all reporting requirements and deadlines starting in 2016.
 In addition, companies should have already:
1)    Appointed an external auditor,
2)    Appointed an actuary,
3)    Established an internal audit department, and
4)    Appointed a regulatory compliance officer.
These internal system updates and new procedures should be based on the eForms that have been on the IA website since May 2015, along with user instructions and responses to industry comments.
The eForms are the cornerstone of the new financial regulation regime in the UAE, which will be used to assess solvency and financial condition, as well as other financial issues. Thus, every company (whether they are Life or Non-Life, Takaful or Non-Takaful, Insurer or Reinsurer, Local or Foreign Branch, etc.) must take all necessary measures to insure accurate data and timely submission to the IA.
Because the eForms are a core part of the financial reporting requirements, the Insurance Authority has held numerous industry training meetings in 2015 to inform the companies about the eForms (and all new requirements) and to solicit feedback. This feedback has been critically important as updates to the eForms have been made and documented on the IA website, and questions about a wide variety of issues have been answered.
The Insurance Authority expects that the eForms will continue to be updated from time to time based on ongoing feedback, but companies should not wait for a new version of the eForms as the release of an update will not change the reporting deadlines.
In a continuing effort to solicit feedback and discuss new issues, the Insurance Authority expects to hold numerous training sessions again in 2016.
Starting in 2016, companies should expect to report results quarterly using the eForms, even without a circular instructing them to report their financial results.
The reporting deadlines will be as per the financial regulations:
a)    Annual (i.e., year-end) reporting is due along with the audited financial statements  and before April of the year.
b)    Quarterly reporting is due within 45 Calendar days from the last day of the stated reporting period.
In addition to full submission of the eForms, companies should also expect to submit the following with their annual reporting:

1)    The external auditor report,
2)    Notes to the financial statements,
3)    The report of the board of directors,
4)    The report of the actuary,
5)    A description of the roles of the Actuary and External Auditor in the preparation and audit of the financial statements, and
6)    The Management report for local companies.
In addition to the full reports noted above, the IA has released guidelines for sign offs from company management, external auditors and actuaries (also on the IA website). The sign offs are intended to be brief, but they must be included with both the annual and quarterly financial submissions.
Looking to the future, the IA is working toward a web based digital platform for financial reporting to replace the eForms. It expects this platform to be ready as early as late 2016, but all companies must use the eForms until this new platform is complete.
Additional requirements from the financial regulations which will come into effect in 2017 include:
1)    Active investment committee with fully implemented investment risk management protocols,
2)    Compliance with all investment distribution and allocation limits, except real estate,
3)    Annual investment risk analysis report,
4)    Full compliance with all technical provisions, and
5)    Financial condition reports.
The final requirements to take effect in 2018 include:

1)    Compliance with investment limits for real estate,
2)    Full compliance with the solvency margin and minimum guarantee fund requirements, and
3)    Compliance with assets being sufficient to meet the accrued liabilities.
Accordingly, all insurance companies should maintain adequate capital during the alignment period for the purpose of protecting the rights of the policyholders as well as the national economy.