UAE Corporate Governance Regulation For Insurance Companies

Do you have a corporate governance framework in place at your insurance company? Does it comply with the laws of the United Arab Emirates (UAE)? Check out this comprehensive guide on corporate governance regulation for the insurance sector 


The Central Bank of the United Arab Emirates (“Central Bank”) seeks to promote the effective and efficient development and functioning of the insurance sector. To this end, Insurance Companies in the UAE are required to implement comprehensive corporate governance frameworks to enhance overall financial stability. 

The Central Bank expects that each company will establish and implement a framework that provides sound and prudent management of its business, and adequately recognises and protects the interests of policyholders.



As per the Regulations, the Corporate Governance framework must contain the following components, at a minimum: 

  • Policies to define and support the Company’s strategy and objectives
  • Definitions of managerial and supervisory roles and responsibilities
  • Description of decision-making processes
  • Sound compensation practices
  • Requirements for active engagement and communication with the Central Bank related to the management and supervision of the Company
  • Corrective actions for non-compliance or weak supervision, controls or management
  • An appropriate corporate culture that promotes integrity, transparency and accountability, which leads to achieving the Company’s long-term objectives and the protection of the rights of policyholders and other stakeholders
The Company must ensure that its Corporate Governance frameworks are appropriate to its structure, business, and risks. In addition, when setting up a Group, the following factors must be taken into consideration, at both the Group and entity levels: 
  • Clear division of roles and responsibilities
  • Legal obligations, governance and risks associated at each level
  • Effective coordination and communication

The Board must oversee the Group while respecting the independent legal and governance responsibilities that might apply to each entity.

Finally, a Company offering Takaful Insurance must demonstrate full compliance with Islamic Shari’ah rules and establish sound mechanisms and functionalities to ensure effective and independent Shari’ah review, as per the requirements set out by the Central Bank and the Higher Shari’ah Authority.

Structure and Governance of the Board

  • A Company’s Board must be sufficiently diverse in its composition. 
  • Collectively, the Board must have knowledge of all significant businesses of the Company and, if applicable, the Group. 
  • The Board must have, and continue to maintain, an appropriate balance of skills, diversity, and expertise according to the size, nature of activities, complexity, and risk profile of the Company and, if applicable, the Group. Such skills include, but are not limited to, the lines of insurance underwritten by the Company, actuarial and underwriting risks, investment analysis, the role of control functions, finance, accounting, and obligations related to fair treatment of customers. 
  • A Company’s Board must be comprised of at least seven (7) members and a maximum of eleven (11) members, each with a maximum three (3) years renewable term of membership. 
  • All members of the Board must be non-executive, of which at least one third (1/3) must be Independent Members. It is recommended the chairman of the Board is an Independent Member. 
  • The Board should not comprise any executive members with management responsibilities in the Company. 
  • The chairman and the majority of members of the Board must be UAE nationals. 
  • The maximum tenure as an Independent Member of the Board in the same Company is twelve (12) consecutive years from the date of the first appointment. At the expiration of the tenure, the Member is no longer regarded as Independent. On the effective date of the Regulation, the calculation of the twelve (12) years will consider the time already spent by a Board member in their directorship at the Company. Independence of a Board Member shall not be affected solely on the basis of being an employee of the Parent Company or any of its subsidiaries if any of them is a Government entity or when at least 75% of a company which is owned by the Government or any of its subsidiaries. 
  • The chairman and the Board members must prevent or manage conflicts of interest, and, in particular, must not: 
  1. Participate in managing other Companies
  2. Compete with the Company’s operations or perform any actions or activities in a private or business capacity that could conflict with the Company’s interests
  3. Carry out operations of an Insurance Agent or an Insurance Broker
  4. Receive any commission from any insurance operations
  • A member of the Board must obtain permission from the Company’s Board before accepting nomination to serve on another board of a PJSC and no conflict of interests must be presented.
  • A member of the Board may hold membership in the Board of only one (1) Company in the UAE. A member of the Board may hold memberships in the boards of up to a total of five (5) PJSCs in the UAE including the Company’s Board, Board memberships of PJSCs inside the Group are included within this limit. 
  • At least 20% of candidates for consideration for the Board’s membership must be female. 
  • The non-objection of the Central Bank must be obtained prior to the nomination, appointment, or renewal of any person for membership of the Board. In all cases, a Company must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fit and proper assessment of a member of the Board. The non-objection of the Central Bank must be obtained prior to the removal of a member of the Board during their term of membership. 
  • The Board must meet at least six (6) times a year. The Company must appoint a secretary to the Board who is not a member of the Board and independent of the Company’s management. The Board and its committees must maintain appropriate minutes, which reflect details of issues discussed, recommendations made, decisions taken, rationales and dissenting opinions. 
  • The chairman of the Board is responsible for providing leadership and for the overall effective functioning of the Board and its committees. 
  • The Board may delegate specific authority, but not its responsibilities to specialized Board committees. Each committee created by the Board must have an approved charter or other instrument that sets out its membership, mandate, scope, working procedures and means of accountability to the Board. 
  • The Board operational structure must include committees with responsibilities for audit, risk, nomination, investment, and compensation. The Board may also establish other specialized committees (e.g. ethics, assets and liabilities, etc.). 
  • The audit and risk committees must not be merged neither with each other, nor with any other Board committees. Both committees’ chairman must be Independent Member. 
  • Members of the Board must exercise independent judgement and objectivity in their decision-making taking into account the interests of the Company, policyholders and stakeholders. 

Duties Related To Risk Management and Internal Controls

A Company must have an appropriate Risk Governance Framework pursuant to the Financial Regulation and Takaful Regulation, as the case may be. 

The Company’s risk management function must be independent of the management and decision-making of the Company’s risk-taking functions and have a direct reporting line to the Board and/or the Board risk committee. 

The Company’s compliance function must have primary reporting obligations to the Chief Executive Officer and a right of direct access to the Board, the Board audit committee, and the Board risk committee. 

The Company’s actuarial function must have primary reporting obligations to the Chief Executive Officer and a right of direct access to the Board or Board audit committee and/or Board risk committee.

Duties Related To Compensation

A Company must have a Board-approved compensation system that supports sound Corporate Governance and risk management, including appropriate incentives aligned with prudent risk-taking. 

The Board must approve the compensation of Senior Management and oversee the development and operation of compensation policies, systems and related control processes. 

  • Members of the Board must be compensated only with fixed compensation comprising the payment of an annual fixed amount and the reimbursement of costs directly related to the discharge of their responsibilities. Bonus or any incentive-based on the performance of the Company must be excluded; 
  • The compensation of Staff in the control of the functions of risk management, compliance and internal audit must be predominantly fixed to reflect the nature of their responsibilities; and determined independently of the performance of the Company. The variable compensation can be reduced or reversed based on realized risks and violations of laws, Regulations, codes of conduct or other policies, before compensation vests. 
  • For Senior Management and Material Risk Takers, a proportion of the total compensation must be performance-based. Provisions must be included so that compensation can be reduced or reversed based on realized risks and violations of the laws, Regulations, codes of conduct or other policies, before compensation vests. 
  • The annual individual bonus for Senior Management and Material Risk Takers must not exceed 100% of the fixed proportion of their total compensation. A higher bonus of up to 150% must be approved by the Board. A bonus of up to 200% requires approval by the general assembly of the Company. 
  • The annual total bonus for all Staff must generally not exceed 5% of the Company’s net profit. A higher bonus must be approved by the general assembly of the Company before disbursement, along with an attestation signed by all the members of the Board that the Company is in compliance with all relevant laws and Regulations issued by the Central Bank.

Financial Reporting And external Audit

A Company must maintain appropriate records, prepare financial statements in accordance with the International Financial Reporting Standards (“IFRS”) frameworks pursuant to the Financial Regulations and Takaful Regulation, as the case may be, and the instructions of the Central Bank; and publish annual financial statements bearing the opinion of an external auditor approved by the Central Bank. 


The Company’s Corporate Governance policies and processes must ensure effective engagement with the Central Bank, as well as timely and accurate disclosure on all material matters regarding the Company, including the financial situation, performance, ownership, and governance of the Company. 

A Company must publish a comprehensive Corporate Governance statement in a clearly identifiable section of its annual report. The following, at a minimum, must be included in such a report: 

  • Clear, comprehensive and timely information about its compensation practices to facilitate constructive engagement with all stakeholders
  • Details of transactions with related parties during the reporting period and the aggregate amount of a Related Party exposure at the end of the reporting period
  • An attestation in the form of a detailed report must be signed by the chair of the Board confirming that all internal policies required to ensure compliance with the Central Bank’s Regulations and Standards on Corporate Governance, risk management, internal controls, compliance, internal audit, financial reporting, external audit, outsourcing and, where applicable, compliance with Islamic Sharia’ah and internal Sharia’ah audit, have been implemented and reviewed for adequacy by the Board, within the last year; otherwise, the attestation must specify those requirements not met and the date by which the Company intends to comply fully

Duties for Senior Management

  • A Company must have a clearly defined organizational structure and decision-making process with authorities delegated by the Board to the Senior Management.
  • Under the direction of the Board, the Senior Management must manage the Company’s activities in a manner consistent with the business strategy and other policies approved by the Board. 
  • The Senior Management must provide the Board with the information it requires to carry out its responsibilities, including the supervision and assessment of the Senior Management’s performance.
  • The Senior Management must report and take timely remedial action towards any breach of any applicable laws and Regulations or internal policies, and must maintain adequate and orderly records of the Company.
  • A member of the Senior Management may not hold a Staff position in any other entity, neither inside nor outside of the Group, where applicable. A member of the Senior Management may hold memberships in the boards of up to two (2) non-insurance entities outside of the Group. 
  • In addition, members of the Senior Management must obtain approval from the Board before accepting nomination to serve on a board in any other entity, and no conflict of interest must be presented.
  • Non-objection must be obtained from the Central Bank prior to the appointment or renewal of employment contracts of any member of Senior Management and other persons as determined by the Central Bank from time to time. 
  • In all cases, a Company must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the proper assessment of a member of the Senior Management or any other teams, as determined by the Central Bank. 
  • The Senior Management is subject to the same requirements as specified for the Board above, including managing conflicts of interest and obtaining permission before joining the board of another company.
  • Staff, including the Senior Management, may not represent on the Board, any of the shareholders of the Company.

Takaful Insurance​

A Company offering Takaful Insurance products must: 

  • Ensure that its Corporate Governance framework complies with the Takaful Regulation, and provides for i) internal Shari’ah controls review and Shari’ah governance reporting to ensure compliance with Shari’ah rules; ii) the processes and controls for protecting the rights of the participants in line with the general terms and conditions and Shari’ah requirements; iii) the establishment of the Internal Shari’ah Section or Control Division (“ISSC”) in the governance of the Company; and iv) transparency of financial reporting in respect of the participants’ rights.
  • Ensure compliance with the Takaful Regulation and any direction or guidance issued by the Higher Shari’ah Authority with respect to its Shari’ah governance framework
  • Immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the proper assessment of the independence of an ISSC member; and 
  • Issue an annual Shari’ah report stating the extent of the Company’s Compliance with Islamic Shari’ah and publish it within the financial statement in the Company’s disclosures and other available mediums

General Assembly

  • In all cases, the national shareholding percentage should not be less than the percentage specified in the Cabinet Resolution No. 42 of 2009 concerning Insurance Company Minimum Capital Regulation (i.e. 51%), as amended. 
  • The Board should ensure that voting decisions of a shareholder, or shareholders, at a general assembly meeting comply fully with the Central Bank Law and Federal Law No. 6 of 2007 concerning the Organization of Insurance Operations. 
  • Companies must inform the Central Bank at the time of the invitation by the Company’s Board to a general assembly meeting when a proposed shareholding change is on the agenda. The Central Bank may send one or more representatives to attend a general assembly meeting including when a proposed shareholding change is on the agenda. 
  • The Central Bank may take all measures it deems appropriate to maintain conduct of operations of Companies, within the frameworks and limits set by the Bank’s Board of Directors. 
  • The Central Bank may:
  1. Request to hold a meeting of a general assembly of the Company to discuss any issue the Central Bank deems important
  2. Request to include any item that the Central Bank deems necessary into the agenda of a general assembly meeting of the Company
  3. Stop the implementation of any decision issued by a general assembly of the Company in the event that it violates the laws or Regulations in force

Enforcement And Sanctions​

Publication And Application​

Violation of any provision of this Regulation and the accompanying standards may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank. 

Any Company which does not comply with this Regulation on the Effective Date, must, within ninety (90) days, provide the Central Bank with a detailed plan for coming into compliance with the requirements. 

The Central Bank will decide on the adequacy of the proposed plan. The plan should not exceed three (3) years to ensure full compliance with the requirements of this Regulation. 

This article has been written by the experts at OH LLP.

*It reflects the personal opinion of the law firm and does not constitute legal advice*

OH LLP has legal consultants in the UAE, offering a wide range of legal services to new and established companies. For further details, please contact us on: or +97124110619

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