The Qatar Central Bank

 New Executive Insurance Instructions 2016 ('REGULATIONS')

By Roger Phillips,

Legal Director, Pinsent Masons LLP, QFC Branch 



1.                QCB REGULATORY FRAMEWORK LAW : implementing regulations and scope

1.1             The new regulations of the Qatar Central Bank ('QCB') are out for consultation and expected to be finalised in March 2016.

1.2             They follow on from the State Framework  Law No. 13 of 2012 relating to the Qatar Central Bank and the Regulation of Financial Institutions, including insurers, reinsurers, representative offices and branches of foreign insurers.

1.3             Further regulations impacting the insurance sector affecting licencing and conduct of actuaries, insurance consultants, intermediaries, representatives and loss adjusters will be covered by additional QCB regulations that are currently 'in draft' stage and likely to be issued later in the year.

1.4             The Regulations cover the regulation of insurance business including general insurance, long term insurance and health insurance. Long term insurance includes life, personal accident and money savings insurance plans.

1.5             The Regulations confirm that no person can carry on insurance business or representative insurance office business in or from Qatar without a QCB licence and only the insurance business activities within the scope of its licence.

1.6             Banks or other financial institutions may not conduct insurance business unless the insurer is owned by the bank or financial institution.

1.7             Composites are not allowed unless the QCB give special approval, so an insurer cannot carry on both general and long term insurance business. There are some transitional rules to allow composites to adapt to the new Regulations.

1.8             Long term and health insurance can be carried on by the same insurer as can general and health.

1.9             Applications, notices and documentation submitted to the QCB must be in Arabic or a certified Arabic translation of the document in question. QCB can require an English translation.

2.                Applications for QCB Licences

2.1             These must be made in the prescribed application forms and include a 3 year business plan which includes outline of the structure of the insurance business and financial resources as well as future business projection statements. There are specific provisions for on-line insurance business.

2.2             All board members and senior management need prior QCB approval before appointment.

2.3             Applications must provide policy  documents and rate tables for QCB approval.

2.4             For a branch licence, the QCB may require an unconditional letter of guarantee or other security from the applicant or its parent entity. It may also require the applicant to hold financial resources in Qatar to an agreed value.

3.                Legal form

3.1             An insurer in Qatar must be either a public shareholding company, a commercial company approved by the Council of Ministers or a foreign branch.

4.                Eligibility and KEY assessment CRITERIA

4.1             There are usual fitness and propriety conditions for applicants and the board members and senior management must be 'suitable' and have 'sufficient range of skills, knowledge and experience to manage the applicant's affairs soundly and prudently.'

4.2             The use of specialist outsourced functions and capabilities can be taken into account with regard to assessment of the necessary experience and understanding required.

4.3             The applicant must have financial resources adequate for the nature, scale and complexity of its business.

4.4             The applicant must also have adequate systems and controls for the proposed business with adequate staffing by competent individuals; segregation of duties and Financial Crime and AML/CTF compliance


5.1             The Regulations have specific requirements for governance frameworks relating to internal control functions and policies; remuneration; business continuity and outsourcing.

5.2             There are requirements for mandatory internal control functions including Risk Management,  Compliance , Actuarial and Internal Audit functions.

5.3             Reporting of and access to the Board of such functions is highlighted in the Regulations.

5.4             Internal control functions can be outsourced except for the internal audit function.

5.5             There are requirements for the insurer to prepare regular written reports about each internal control function for Board review including requirement to highlight  areas of weakness.

5.6             The Regulations specify the responsibilities of the internal control functions which are in line with international regulatory and best practice requirements

5.7             There is requirement for a Remuneration Policy and there must be notification to the QCB of proposed Board remuneration terms. The QCB may require changes.

5.8             All remuneration rules and policy must be consistent with risk management remuneration and performance-based remuneration. Remuneration packages must encourage behaviour that supports the insurer's long term financial soundness and its general risk management framework.

5.9             Further internal control requirements include detailed provisions for business continuity and outsourcing policies. The latter includes extensive and very detailed minimum requirements for outsourcing agreements with particular focus on claims management, information technology, investment management and underwriting.

5.10           Prior QCB approval of material outsourcing agreements is required. Approval will require consideration of a number of areas including service provider's expertise, financial solvency, risks and control as well as provisions for sub-contracting. If the service provider's headquarters is not in Qatar, the service provider must confirm there are no legal or regulatory restrictions that would prevent internal audit, actuarial, auditor or QCB access to books, records and data.

5.11           Risk Management provisions are very detailed and include requirements for a Board approved  risk management framework that requires information on  risk appetite, strategy, policies and procedures as well as an 'own risk and solvency assessment' process known as ('ORSA') with measurement and stress testing of risks. The Board must make an annual declaration to the QCB regarding compliance with the risk management framework along with the submission of the annual prudential return.

5.12           The ORSA must be conducted annually in accordance with the regulations. This must include an own assessment of capital resources needed to manage the business prudently and to continue to meet insurance liabilities as they fall due.

5.13           Typical with best international regulatory practice, the insurer must assess all reasonably foreseeable risks and, as part of the quantitive evaluation in its ORSA, must conduct stress tests and scenarios. Extensive guidance is provided on the required approach to the ORSA but a degree of flexibility on how to manage it is implied.

5.14           The ORSA report must be approved by the Board and submitted to the QCB

5.15           There is extensive guidance on specific categories of risk to be evaluated together with appropriate policies and procedures for each category.

5.16           The Regulations further detail provisions for Actuarial Reporting including calculation of insurance liabilities , minimum capital requirements and eligible capital in line with the prudential requirements of the Regulations ('Prudential Rules'). There are also requirements and provision for the preparation of annual Financial Condition Reports by the Actuary including QCB reporting obligations.

6.                Prudential RULES

6.1             The absence of transition and requirement for  early implementation of the new Prudential Rules for insurers will require careful planning and production of robust policies and procedures.

6.2             In essence, insurers will need to have adequate financial resources at all timesand comply with a framework for calculating a solvency ratio and minimum capital requirement ('MCR')  in line with QCB instructions. Only eligible capital will be permitted for compliance purposes and the insurers must also meet requirements on investment rules. There are detailed requirements covering the valuation of assets and liabilities.

6.3             An insurer in Qatar must comply with a solvency ratio requirement ('SRR') and have eligible capital of no less than 150% of its minimum capital requirement. The SRR ensures early identification and mitigation of potential risks to an insurer's insolvency. The level of the SRR is a minimum requirement but the Board may determine a higher ratio. It should be set at a level to enable the insurer to absorb losses from external events.

6.4             Breach of the SRR/MCR requires immediate notification to the QCB.

6.5             For branches, the insurer must have branch capital equal to or higher than its MCR. It must be deposited in cash with one of the licensed QCB banks. For branches, the MCR shall not be less than QR 35 million, but the QCB may impose higher levels.

6.6             For listed insurers, the capital must not be less than QR1million but will require  upward adjustment to meet risk-based capital requirements and QCB instructions.

6.7             Detailed provisions on the calculation of the risk-based capital requirement are set out in the Regulations.

6.8             Rules on Tier 1 and Tier 2 Eligible Capital are further detailed in Chapter 9 of the Regulations and include provisions regarding calculation of the capital.

6.9             Reporting obligations to the QCB on prudential matters are onerous and require monthly, quarterly, biannual and annual returns as well as notification of significant adverse events such as financial losses or internal control weaknesses as well as events of fraud or issues involving other regulators.


7.1             The Regulations include extensive Conduct of Business requirements that insurers must comply with when dealing with customers and policyholders.

7.2             Documentation used with customers must be in simple language and in language that the customer understands. If the insurer knows the customer cannot read Arabic, the documentation must be provided in a language he or she can read. The insurer must take steps to ensure the contents and terms of policies are adequately explained and understood which requires extensive control systems extending to broker and other third party advice and sales.

7.3             In the Regulations relating to Conflicts of Interest, volume overrides for commission are prohibited and there are strict requirements to avoid inappropriate cancellation and switching of policies.

7.4             Advertising rules detail minimum requirements for promotional literature and mandatory sign off by Compliance before publication.

7.5             Rules on product development and approval of policy forms and rate tables are onerous requiring extensive systems of control and procedures to secure QCB approvals. The QCB expects a new insurance product to be carefully reviewed by at least the Actuary and Head of Risk Management. The QCB further advocates a Product Development Committee.

7.6             It is recommended that the approach to QCB approval of all types of policy documents and endorsements are discussed and agreed in advance with the QCB.

7.7             The Regulations detail that a standard form policy document to be used for more than one policyholder must be approved by the QCB before used. The approval process is prescribed and requires a form with minimum criteria adhered to ie covering coverage,  commissions, law of policy and other prescribed areas.

7.8             For pricing and rate tables in connection with long term insurance and health insurance, there are detailed provisions that include provision for fairness and prior approval by QCB  before usage.

7.9             Compliance systems for new Data Protection rules are required for insurers and these demand careful assessment and systems of control in terms of disclosures and transfers  or sharing of information with third parties and administrators. The expectation of further new State laws on data privacy and E-Health over the next few months will also require close inspection to ensure comprehensive compliance in this significant area of legal and regulatory change.. It is noteworthy that disclosure of customer's personal data can be made to an insurer or insurance service provider regulated in Qatar by the QCB or QFCRA but authorisation is required from the QCB for disclosure to other persons ie outside Qatar

7.10           Other Conduct of Business requirements include restrictions on 'cold calling' by visit or telephone.

7.11           There are also status disclosure and product disclosure requirements for insurers with requirement for a product disclosure document for each product to be given to a customer prior to sale. The content of the disclosure is prescribed and includes disclosure of costs, premiums, commissions and underling charges.

7.12           With regard to the area of advice to customers, the Regulations introduce 'know your customer' requirements which will oblige insurers to gather information on the customer to ensure only suitable products are offered. The process must include comprehensive record keeping and a 'suitability assessment' must be evidenced. Before a contract is concluded with the customer, a written statement must be prepared detailing reasons for the recommendation of the product which must be signed by the insurer and a copy provided to the customer before a sale is concluded.

7.13           The Regulations also provide for provision of post-sale confirmation of policy information and documentation and specific provisions relating to on-line insurance business – the latter requires specific QCB approvals before it can be conducted. On-line business is not permitted for long term insurance or policies with premiums in excess of QR 20,000.

7.14           Further Regulations cover post-sales service requirements, claims handling procedures and complaint handling procedures and disclosures. This extends to a requirement for insurers to establish a customer complaints department. The regulations include requirements for unresolved customer complaints to be referred to a QCB Complaints Division.

8.                Transitional Rules

8.1             There are transitional provisions that apply to insurers previously licensed by the Ministry of Economy & Commerce ('MEC'). These provide existing MEC licensed firms with some time to comply with the new provisions.

8.2             Particular transition periods for full compliance include the following : Internal control requirements and functions - 12 months.. Outsourcing obligations -12 months . The Risk Management Strategy, Policy and Solvency requirements - 12 months . Actuarial Reporting requirements -12 months . However, the Chapter 9 Prudential Rules and solvency ratios must be met from day one of the new Regulations along with the prudential reporting provisions to the QCB. The Conduct of Business rules including product disclosure, sales and marketing  and data protection requirements allow for a 12 month transition except for on-line compliance where an extended 2 years is permitted to establish compliance.

8.3             Furthermore, MEC licensed firms must notify the QCB within one month of the new Regulations  as to whether it will apply for a QCB licence or not. The MEC licence remains in force for one year after the new Regulations come into force.


Roger Phillips

Legal Director                                                                                               14 January 2016

For Pinsent Masons LLP – QFC Branch