Insurance Growth Report 2022
Insurance & Reinsurance
Kuwait has continued the overhaul of its insurance regulatory regime by enacting detailed regulations effective June 2022, to supplement the new Insurance Law it issued in 2019. This repeals the previous insurance legislation dating back to 1961.
Executive Regulation of Law No. (125) of 2019 Concerning the Insurance Regulation (Executive Regulations) was promulgated in March 2021, and comes into effect in June 2022. The Executive Regulations provide detailed provisions which flesh out the regulatory structure envisaged by Law No. 125 of 2019 on the Insurance Regulation (Insurance Law), which became law on 1 September 2019. The Insurance Law provides a new comprehensive legal framework significantly overhauling and repealing outdated Law No. 24 of 1961.
The overhaul of the Kuwait insurance regulatory regime is long overdue. The Executive Regulations seek to provide a comprehensive framework for licensing, conduct of business, and oversight for the insurance industry. However, much will depend on implementation of the new regulations by the new Insurance Regulatory Unit (IRU). There will also be much interest in how the new dispute resolution body will approach the task of resolving insurance disputes.
With the relatively short transition period of initially 12 months, it was anticipated that the Exectuve Regulations would come into force on 16 March 2022, leaving a relatively short period for the industry to transition. However, on 14 March 2022, two days before the implementation date, the IRU issued Decision No. 12/2022 concerning amending the Executive Regulations by extending the grace period by three months ending on 30 June 2022. This decision signals that the Insurance Regualtory Unit is set up but not yet in a position, practically, to enforce the new regime.
The Executive Regulations establish a new regulatory body, the IRU, to supervise the insurance sector in Kuwait. The IRU is tasked with the following responsibilities to:
The IRU is governed by the Supreme Committee (Committee), whose role is to oversee the development and regulation of the insurance sector in Kuwait. Specifically, the Committee’s tasks include:
The Executive Regulations set out the details of the licensing and registration requirements of (re)insurance companies to conduct (re)insurance activities in Kuwait.
Kuwait risks can only be insured by insurance companies licensed by the IRU. The Executive Regulations does not place any restriction on local risks being reinsured outside Kuwait by foreign reinsurers.
Whilst the Executive Regulations do not prohibit the access of foreign insurance business via branches, it should be noted that the Executive Regulations emphasise “Companies shall provide advanced insurance products and services that are not provided by the existing insurance companies, or existing coverage needed by the insurance market in Kuwait.”
(Re)insurance companies must comply with the following minimum capital requirements as a condition of licensing:
The Executive Regulations also set specific capital requirements applicable to insurance brokers and other insurance professionals. (Re)insurance brokers must comply with the following minimum capital requirements to conduct brokerage activities:
The Executive Regulations detail solvency and reporting requirements to strengthen the financial position of Kuwait’s insurance sector and protect policyholders. Licensed (re)insurers are required to comply with a solvency margin and technical provisions that enable the performance of its financial obligations.
Solvency margin and technical provisions must be calculated at least once a year. These calculations must be reviewed once every three years by an independent auditor approved by the IRU.
Establishing a financial regulation for minimum capital, solvency margin, and reporting requirement brings the IRU’s approach in line with international industry standards.
The Executive Regulations set out a number of conduct of business rules.
In relation to intermediaries, the rules oblige an intermediary to:
The rules also provide that Insurance companies:
The Executive Regulations introduce the establishment of the IRU’s Supreme Committee Disciplinary Board (the Disciplinary Board), its jurisdiction and sanction powers for dealing with breaches of the Insurance Law.
The Disciplinary Board comprises three members and is overseen by a judge appointed by the Supreme Judicial Council, and two experienced members in insurance, financial and legal affairs. The members will sit on the board for a term of 3 years renewable once.
The role of the Disciplinary Board is to decide on the appropriate disciplinary action associated with breaches of the Insurance Law referred by the IRU Chairman. The Legal Affairs Department (Legal) will investigate the allegations of misconduct, collate the evidence, and recommend the matter to the Disciplinary Board.
In conducting its investigations, Legal has the following far-reaching powers:
The Disciplinary Board has the power to impose sanctions following a decision on the offence committed, with the most severe sanctions being:
The Executive Regulations establish the Insurance Disputes Arbitration and Settlement Centre (the Centre), which is tasked to settle disputes between licensed entities.
The Centre is comprised of:
Parties can choose to have their dispute dealt with by the Centre. The IRU Chairman will appoint the arbitrators from among the roll of the Centre's arbitrators should the parties choose to have their dispute heard by the Centre. It will be interesting to see what the Centre considers its remit in relation to disputes.
If the parties submit to the jurisdiction of the Centre, an Amicable Settlement Committee (Committee) will be formed comprising 3 – 5 members from the Centre’s roll of mediators. It is intended that the Committee will put forward settlement proposals for the parties to consider.
The Executive Regulations provide a transition period of 15 months until 30 June 2022 for regulated entities to comply with the Insurance Law and accompanying Executive Regulations. (Re)insurers and those subject to the Executive Regulations should be familiar with the obligations imposed on them and put measures in place to ensure compliance.
If you would like further information on any issue raised in this article, please contact Peter Hodgins and Nasteho Muse.
*Disclaimer: Please note the English translation of the Law is an unofficial translation into English of the original Arabic text, and the government officials in Kuwait may interpret the text of the legislation differently.