SETTING UP A SYNDICATE SERVICE COMPANY IN DUBAI

Transcription

1 SETTING UP A SYNDICATE SERVICE COMPANY IN DUBAI 2016

2 2 Disclaimer This is fr reference nly and is nt cnsidered t be legal advice. Whilst all care has been taken t ensure the accuracy f the infrmatin Llyd s des nt accept any respnsibility fr any errrs r missins. Llyd s is nt respnsible r liable fr any alleged damage arising frm reliance upn the infrmatin prvided. This is a guide t assist Managing Agents/Syndicates with the intentin f setting up a Service Cmpany in Dubai. Fr enquiries relating t this guide, please cntact: Mark Cper Llyd s General Representative in Middle East Llyd s Dubai Precinct Building 2 Office 301 & 401 Dubai Internatinal Financial Centre PO Bx Dubai, UAE Tel: llydsdubai@llyds.cm Or: Cverhlders Llyd s Delegated Authrities Department Llyd s Building One Lime Street Lndn, UK EC3M 7HA Tel cverhlders@llyds.cm

3 Backgrund t Llyd s peratin in DUBAI 3 The Llyd s licence within the Dubai Internatinal Financial Centre (DIFC) allws Llyd s underwriters t appint cverhlders in the DIFC t write insurance f DIFC risks and nn-uae risks (subject t any restrictins and in cmpliance with any requirements gverning the insurance f the risk in the jurisdictin in which that risk is situated), and reinsurance f DIFC, UAE and nn-uae risks. Cverhlders must be authrised by the Dubai Financial Services Authrity (DFSA). Outside f the DIFC Llyd s underwriters may nt appint a cverhlder dmiciled in the UAE fr either insurance r reinsurance business. Nndmiciled cverhlders are permitted t write reinsurance business frm utside the territry. Please nte that the DIFC is the nly free zne in the UAE frm which Llyd s can write insurance business. Other free znes in the UAE are nt znes in, r frm which, Llyd's underwriters are permitted t carry n insurance business. Accrding t UAE Federal Law N. 6 f 2007 a UAE risk is defined as mnies, prperties, pssessins r liabilities lcated within the cuntry. Key cnsideratins fr becming a cverhlder in DUBAI Intermediary regulatin Takaful/ Re-Takaful Insurance Prducts Tax Regulatry reprting Jurisdictin Intermediary regulatin The General mdule f the DFSA rulebk ( GEN ) lists the varius Financial Services. Firms that wish t carry n any Financial Services must, therefre, be licensed and authrised t d s by the DFSA. The Insurance activities prescribed as Financial Services by the DFSA and fr which authrisatin is therefre required, are as fllws; Effecting cntracts f Insurance Carrying ut Cntracts f Insurance Insurance Intermediatin; and Insurance Management Insurance Intermediatin is bradly defined and includes the activities typically undertaken by brkers and managing agents alike. Insurance Intermediatin means Advising n insurance Acting as agent fr anther persn in relatin t the buying r selling f insurance fr that ther Persn r Making arrangements with a view t anther Persn whether as principal r agent, buying insurance Advising means giving advice Which is given t a persn in his capacity as a plicyhlder r ptential plicyhlder, r in his capacity as an agent fr a plicyhlder r ptential plicyhlder n the merits f his entering int a Cntract f Insurance whether as principal r agent ; r That cnstitutes generic advice

4 4 Insurance Management Prviding management services r exercising managerial functins fr an insurer; In (1) management services and managerial functins include administratin and underwriting ; r In (1) an insurer means a Persn effecting r carrying ur Cntracts f Insurance There are a number f imprtant restrictins n Insurance Business that may be cnducted in r frm the DIFC. Ntably, in relatin t the UAE, a DIFC insurance entity may nt enter int, r act as an insurance intermediatin fr any direct cntract f insurance in respect f a risk based in the UAE. Therefre, the intentin is that nly (re) insurance Business in relatin t UAE based risks is t be cnducted frm the DIFC. Hwever, the DIFC des permit reinsurance f UAE cedants n a 100% basis. Hwever, with effect frm 4 th January 2009, DIFC insurers and intermediaries can nw effect r carry ut, r intermediate n, direct insurance plicies in respect f risks situated within the DIFC district (but nt the rest f the UAE) Althugh DIFC is, at present, largely a whlesale insurance market, direct insurance f natural persns utside f the UAE is permitted (subject t cmplying with lcal requirements). Specific rules apply in respect f the classificatin f clients as either a Retail client r a Prfessinal client. Client classificatin affects the requirements cncerning the prvisin f infrmatin and marketing materials, specific disclsures fr Lng Term Insurance Business suitability assessments and recmmendatins. DIFC impses restrictins n insurers undertaking Insurance Business n a cmpsite basis, i.e. bth general and lng-term life insurance peratins. The Cnduct f Business mdule f the DFSA Rulebk states that an insurer must nt carry n, thrugh an establishment maintained by it in the DIFC, bth Lng Term Insurance Business and general (Nn-Life) Insurance Business, unless the general Insurance Business is restricted t accident r sickness cver. Takaful/ Re-Takaful In rder t act as a Takaful peratr in r frm the DIFC, an entity must be authrised by the DFSA t undertake the financial Services f Effecting Cntracts f Insurance Carrying ut Cntracts f Insurance In additin t cmplying with the DFSA s Rules which apply t cnventinal DIFC insurers, Takaful peratrs must als cmply with the Islamic Finance Rules mdule f the DFSA Rulebk (IFR) (Appendix A). Insurance Prducts Insurance Prducts in DIFC The DFSA Rulebk (General Mdule) categrises all types f insurance prducts int 2 categries life and nn-life (r general). Special rules als apply in respect f cntracts f Life Insurance that are categrised as Lng Term Insurance (Appendix B). As cmpsite insurance arrangements are nt permitted where Insurers wish t transact business which falls within these categrises they will als nt be authrised t carry ut general (nn-life) Insurance Business unless that general business is limited t accident and/ r sickness cver. There are 7 classes f Life Insurance and there are 8 classes f Nn-Life (general) Insurance.

5 5 What is the DIFC Authrity? The DIFC Authrity is the bdy charged with verseeing the peratin and administratin f DIFC. Its respnsibilities include develping verall strategy and prviding directin. The DIFC Authrity is als respnsible fr the develpment f laws and regulatins t cver all aspects f nn-financial services activities which are nt regulated by the DFSA. Such laws and regulatins include emplyment law, cntract law, cmpany law and real estate law amngst thers ( What is the DFSA? The Dubai Financial Services Authrity (DFSA) is the integrated regulatr respnsible fr the authrisatin, licensing and registratin f institutins and individuals wh wish t cnduct financial and prfessinal services within the DIFC ( What are the DIFC Judicial Curts? An autnmus bdy, the DIFC Curts statutry functin is that f administering and enfrcing the civil and cmmercial laws f DIFC. It has been established by laws, which set ut the jurisdictin f the DIFC Curts, allwing fr independent administratin f justice in the DIFC. The jurisdictin f the DIFC Curts als extends t the ratificatin f judgements, rders, and awards handed dwn by ther recgnised curts r arbitral bdies dmestic r freign. The jurisdictin f the DIFC Curts is limited t civil and cmmercial matters. Criminal matters cannt be heard by DIFC curts and must be referred t the apprpriate authrity in the UAE. Tax Llyd's tax department des nt handle taxes in this jurisdictin and currently hlds n mre infrmatin n taxes. Any tax liability identified as a result f writing insurance r reinsurance business shuld be ntified t Llyd's tax department. Since the inceptin f the DIFC there is a 50 year Tax break fr all cmpanies registered within the DIFC. This extends t all incme n prfits frm date f inceptin.(2004) Regulatry reprting Llyd s regulatry reprting is cmpiled by Llyd s centrally, using infrmatin that is btained directly frm cverhlders. On a quarterly basis, and annually, Llyd s must submit regulatry statistics t the Insurance Authrity. Jurisdictin A cntract shuld include a clause specifying the jurisdictin that will apply and an underwriter can agree with an insured the jurisdictin that will be specified. Nevertheless, this designatin may nt be effective in the event f a dispute. Additinally, fllwing the expansin f the jurisdictin f the DIFC curts brught abut by Dubai Law N. 16 f 2011, DIFC curts may hear any dispute between tw nn-difc parties, where the parties have agreed t pt in t the jurisdictin f the DIFC curts. Please see Mre Detail belw fr further infrmatin. Dubai Law N. 16 f 2011 amended Articles 5 and 7 f the DIFC Curts Law, dealing with jurisdictin and enfrcement f judgments. Article 5 allws parties nt based in the DIFC, r thse that d nt cnduct business within the DIFC, t chse the DIFC Curts as the frum fr reslving their disputes. The chice f frum, hwever, must be explicitly agreed by the parties in writing. DIFC judgments shuld als be almst autmatically enfrceable in (i) the Dubai Curts, (ii) any Emirates in the UAE and (iii) ther cuntries where the UAE has entered int enfrcement treaties r prtcls (fr example, states f the Gulf Cperatin Cuncil). It is, hwever, unclear whether parties electin t DIFC jurisdictin will be recgnised by ther reginal curts. It remains t be seen whether mainstream curts will stay r dismiss any prceedings that are brught by a party in breach f an agreement t refer the dispute t the DIFC Curts.

6 6 ESTABLISH BUSINESS PLAN Initially a Managing Agent lking t establish a Service Cmpany must make their SUP (Syndicate Underwriting Perfrmance) Executive, and cncurrently, the Llyd s Dubai General Representative, aware f their intentin. Discussins will be held in respect f the classes f business t be underwritten, the experience f underwriters and the entity s business strategy, amngst ther things. Fllwing discussins with the Managing Agent and general agreement by Llyd s ver the prpsal i.e. that it is realistic and achievable, the next step is fr the Managing Agent t submit a business plan (SBF) via the cre market return system specifically fr Dubai with the crrespnding supprting narrative attached. N underwriting r peratinal set up can ccur withut the Capital and Planning Grup s (CPG) apprval f the business plan, nr withut the apprval by Delegated Authrity. If a Service Cmpany intends t perate n the Dubai platfrm with flexible use (i.e. an underwriter has the ability t underwrite n behalf f bth the syndicate and cmpany paper), the Managing Agent must als submit a cmpleted flexible use frm t Dubai fr review, and t Lndn fr apprval, prir t any underwriting taking place. Llyd s Lndn will check the infrmatin matches the SBF and will mnitr this annually. This frm can be fund in Appendix C. Managing Agents are reminded that all Llyd s Service Cmpanies glbally must adhere t the Best Practice f Minimum Standards, and the Underwriting Minimum Standards frm part f the Underwriting Perfrmance Annual Review. Once the Managing Agent has submitted an applicatin t DA fr review it will be sent t Underwriting Perfrmance fr review wh will check that the classes f business are already written by the MA. This is t ensure that the MA has the necessary experience t review and versee the underwriting f this business. Underwriting Perfrmance will check that the line sizes requested are aligned with their SBF. If it is larger than that apprved fr Lndn we will need an explanatin as t why this is s. We will need incme estimates and lss rati estimates bth n a grss basis. The lss rati estimates fr each class shuld nt be less than that apprved fr Lndn. If they are we will need an explanatin as t why. These discussins will have taken place as part f the establishing a business plan prcess. Cverhlder applicatin The Managing Agent must meet with Delegated Authrity (DA) t discuss the prpsed Llyd s Dubai Service Cmpany applicatin. At the meeting with either the DUM (Delegated Underwriting Manager) r cmpliance ffice Llyd s DAT will talk abut the applicatin prcess via ATLAS, ur expectatin regarding the letter f supprt and the steps that we g thrugh at Llyd s in rder t apprve the applicatin. This meeting is able t be held prir t all details being cnfirmed by the prspective Service Cmpany. On preliminary apprval by DA t prceed, the applicatin will be cmpleted n ATLAS. This is required t be stated by Llyd s DAT wh will cnduct this prcess after the clsure f the intrductry meeting. This is subject t a legal name being established and the main pint f cntact being identified fr the Service Cmpany. Prspective Service Cmpanies perating in Dubai must cmply with Llyd s requirements utlined with the Service Cmpany Cde f Practice (Appendix D). The undertaking must be prvided by the Service Cmpany under the terms f paragraph 15 (b) f the Intermediaries Byelaw. Wrds and terms in bld type in this dcument have the meanings given in the Definitins Byelaw (which includes the definitin f a Service Cmpany cverhlder ) Every applicatin requires a Service Cmpany Cverhlder Undertaking t be reviewed, signed and upladed nt the ATLAS applicatin frm (Appendix E). All Service Cmpanies must cmplete and submit with their applicatin a Service Cmpany Self- Assessment frm describing their versight n; (Appendix F) a) Risk Management b) Underwriting c) Claims d) Regulatin, Reputatin and Branding

7 7 In additin t the ATLAS applicatin, a Service Cmpany decisin paper needs t be submitted t Llyd s fr review. This dcument is t be cmpleted in cnjunctin with the ATLAS applicatin and in accrdance with the infrmatin discussed at the preliminary meeting (Appendix G). Once the Service Cmpany has been apprved by Llyd s Lndn and Llyd s Dubai, the cverhlder will be able t enter int a Service Cmpany Underwriting Agreement. This is a binding authrity which authrises a Service Cmpany cverhlder t enter int a cntract r cntracts f insurance nly t be underwritten by members f a syndicate managed by the Service Cmpany cverhlder s assciated Managing Agent (and, where applicable, by its assciated insurance cmpany). Any further changes t the Service Cmpany recrd nce the entity has been apprved will need t be submitted t Llyd s thrugh ATLAS e.g if the Service Cmpany is lking t write an additinal line f business then the Managing Agent will need t submit a class f business extensin and accmpanying checklist (Appendix H). Applicatin fr an Insurance Agency Any applicatin fr a MGA wuld fall under the Categry 4 Insurance Management and/r Insurance Intermediatin. The prcess fr cmpleting an applicatin is set ut in the DFSA guide. (Appendix B). There are n restrictins n hw many markets, agents, cverhlders and Service Cmpanies Llyd s can represent. Psitins There are 4 authrised psitns fr any financial firm in the DIFC Senir Executive Officer,. Finance Officer, AML Officer and Mney Laundering Reprting Officer. Typically, the DFSA will require at least 2 authrised Individuals t be based in the UAE t fulfil the licensed functins fr a DIFC based entity. The requirements can be waived by the DFSA and is decided n a case by case basis. It is necessary t apply fr a frmal waiver t the DFSA in respect f any authrised individual undertaking a mandatry appintment (ther than that f a Finance Officer) intended t be resident utside f the UAE. Please nte the prspective Principle Officer/Senir Executive Officer f any Service Cmpany in Dubai is subject t an interview by the Head f Delegated Authrities in Lndn. Qualificatins There are n minimum qualificatins fr authrised individuals but an imprtant part f the authrisatin prcess will require the applicant t identify the team f individuals wh will staff the peratin. The DFSA will review the Authrised Individuals intended t fulfil the required rles within the firm. Authrisatin is unlikely t be granted until such time as the Authrised Individuals have been identified and their credentials prvided t the DFSA. The DFSA will take 3 key areas int accunt when cnsidering an applicatin fr each Authrised Individual: Integrity Cmpetence and capability Financial sundness Registratin Fee The csts fr setting up a Categry 4 Insurance Manager and/r Insurance Intermediatr are as fllws; One ff Applicatin fee f $15,000 Annual DFSA Prudential Fee $15,000 (Pr-rated fr first year depending n licence date) DIFCA Data One Off Prtectin Fee $1,000 (Renewal $500) Emplyment Fees (e.g. Visas fr staff, Medical, Emirates ID Card) A full list f the Gvernment Service Fees can be fund at:

8 8 DIFC Rulebks Rulebks that apply t insurance managers and/r insurance intermediaries PIB Mdule (Prudential Insurance Intermediatin & Banking) Fr Insurance Intermediaries and Insurance Managers, the PIB mdule sets ut their detailed bligatins cvering the fllwing areas; Financial resurces Financial reprting and submissin f returns Reprting t the DFSA Capital requirements Basic capital requirements Initial and nging requirements Expenditure based capital minimum Calculatin and cmpnent f capital COB Rules (Cnduct f Business) Client Classificatin Cmmissin and fee disclsure Ensuring that cmmunicatins t clients are clear, fair and nt misleading Duties f disclsure n firms and clients Identifying an individual s clients circumstances and bjectives Ensuring the suitability f the recmmendatins fr the custmers demands and needs Manging cnflicts f interest Prviding key features infrmatin abut insurance prducts Restrictins n insurance business and insurance intermediaries frm r within the DIFC Islamic Financial Business Mdule (if relevant) Disclsure requirements Cnstitutinal dcuments System and cntrls The appintment f, and review by, a Sharia Supervisry Bdy Submissin f Frms All frms are submitted t the DFSA fr apprval. Cde f Practice fr the Administratin f Insurance Agents Once a firm is authrised, it will be subject t n-ging supervisin by the DFSA. The varius DFSA Rulebks highlight the primary fcus f the supervisry apprach f the DFSA and the nging relatinship between an Authrised Firm and the DFSA. An Authrised Firm is required t keep the DFSA infrmed f significant events, r anything related t the Firm f which the DFSA wuld reasnably expect t be ntified. The DFSA level f supervisin will be prprtinate t the risk which the Authrised Firm pses t the DFSA s bjectives and will emphasise the respnsibilities f the Authrised Firms senir management in identifying, assessing, mitigating and cntrlling its risks. The greater the impact and prbability f the Authrised Firm s perceived risks, the mre intensive the supervisry relatinship will be. The investigatins and enfrcement pwers granted t the DFSA under the Regulatry Law are expanded upn in detail in the Enfrcement mdule f the DFSA Rulebk ( ENF ). The investigatin and enfrcement prcesses are detailed and cmplex, and at each stage there are a range f ptins available t the DFSA.

9 9 Regulatry reprting The reprting requirements fr Llyd s are specified in sectin 50C f the Insurance Cmpanies (Amendment) Ordinance (ICO) Llyd s prepares the General business return, which is audited, in additin t an actuarial review n the Emplyees Cmpensatin and Mtr classes. Llyd s is required t reprt figures n a quarterly basis t the FCA. These are derived frm data prvided directly frm cverhlders (r the assciated managing agent) n a mnthly basis t the Llyd s Cre Market Return system. After the Dubai cverhlder is established, Llyd s will prvide the relevant reprting templates and guidance n the requirements fr regulatry reprting. Llyd s is als required t prvide the regulatr, n a quarterly basis and within ne mnth after the clse f the quarter, t which it relates, with a list f its cverhlders in Dubai. The list must include details f the classes f business underwritten by each f them. The Llyd s representative ffice btains this infrmatin frm the cverhlders each quarter. APPENDIX A) Takaful Insurance Rules - B) DIFC Rulebk - C) Llyd s Internatinal Offices Flexible User Guide D) Service Cmpany Cde f Practice E) Service Cmpany Undertaking F) Service Cmpany Self-Assessment G) Service Cmpany Decisin Paper H) Class f Business Checklist I) Guide t DFSA Authrisatin & Set Up Nv% pdf