A Quarterly Newsletter from the UAE and Oman member firms of the PKF International Ltd.

VOL 13, Issue 3 July 2011

Oman Update

NEW LICENSING REQUIREMENTS FOR AGENTS OF INSURANCE COMPANIES

The Capital Market Authority of Sultanate of Oman (CMA) has issued, in January 2011, new licensing requirements for agents of insurance companies, which the existing agents would have to implement within a period of six months from the date it comes into force.  As per CMA decision, agents desirous of carrying out insurance agency business have to be a juristic person, and should apply in the prescribed form to the CMA with certain basic documents. The CMA shall issue its initial approval for licensing after being satisfied about the documentation submitted, subject to the condition that the applicant shall complete all the technical and legal procedures within three months from the date of the initial approval.

After the aforesaid initial approval is granted, the applicant is required to submit the prescribed form along with the following important documentation:

  • Evidence that, in the preceding five years, the founders and senior management have not been declared bankrupt or convicted in a felony or dishonourable crime or penalized under any of the various commercial laws in Oman, unless rehabilitated.
  • Copy of the commercial registration certificate, signatories form and membership with Oman Chamber of Commerce and Industry.
  • Detailed statement of employees and evidence that they have received training with an insurance company covering the required insurance activity for not less than 100 hours.
  • Copy of the agreement between the agent and the insurance company.
  • Copy of the professional indemnity insurance policy of the agent valid for the entire term of the license, with adequate value as per the agreement.

 

The CMA decision specifies that the agreement between the insurance company and the agent shall not exceed five years, and shall include each party’s rights and obligations with regard to various important matters to be specified in the agreement, viz. specific duties of the agent, work procedures, regulatory and compliance procedures, training mechanism, agency commission and manner of calculation etc. The agent also has to give a commitment to transfer all insurance premiums collected by him under the agency to the insurance company’s account.

The Executive President shall issue the licensing decision within 30 days of the date of fulfilling all required conditions, and if no decision is made after this period, then it will be considered as an implied refusal of the application. On approval, the agent shall be registered in the Register of Insurance Agents and a certificate will be issued evidencing the registration. The insurance agent is required to file the license renewal application at least one month prior to the expiry date, along with the necessary documentation.

The CMA decision explicitly prohibits insurance agent from the following:

  • Acting as agent for more than one insurance company.
  • Acting as insurance broker and as insurance agent at the same time.
  • Authorising any other person to carry out insurance business assigned to him by the insurance company.
  • Allowing the agent’s management to work for any insurance company or have any relation with another insurance agent.

The insurance agent is required by the CMA to maintain proper books and registers relating to the insurance policies issued by the agent and comply with the professional and ethical code of conduct.  In particular, the insurance agent is required to determine the insurance premium precisely and corresponding to the insurance company’s approved policy. Further, the insurance agent is prohibited from receiving any commission or fees from the insurance applicant, the insured or the beneficiary.

The CMA decision also obliges the insurance company to:

  • Audit the agent’s business and ensure compliance with the applicable laws and regulations.
  • Review the agent’s work procedures, and regulatory and compliance procedures at least once every year.
  • Indemnify the policy-holders for any damage they may suffer due to the agent’s negligence or acts of omission.

The CMA is empowered to inspect the books, accounts and transactions of insurance agents either directly or by appointing an external auditor, and also impose appropriate penalties in accordance with the provisions of the Insurance Companies Law.

(This write-up is contributed by the Oman member firm of PKF International Ltd.)