COBS 7 COBS 7 CORE RULES — INSURANCE
COBS 7.1 Application
The Rules in this chapter:(a) apply to an Authorised Person with respect to the conduct in or from the Abu Dhabi Global Market of Insurance Business, Insurance Intermediation or Insurance Management to the extent specified in any Rule; and(b) do not apply to an Insurer that is an Authorised ISPV with the exception of Rule 7.2.
COBS 7.2 COBS 7.2 Insurance Business and Intermediation Restrictions
An Authorised Person may conduct Insurance Business or Insurance Intermediation with or for a Client only to the extent specified in this section.
An Authorised Person must ensure that it does not:(a) if it is an Insurer, Effect a Contract of Insurance or carry out a Contract of Insurance through an establishment maintained by it in the Abu Dhabi Global Market; or(b) if it is an Insurance Intermediary, act in relation to a Contract of Insurance;
where the contract is in relation to a risk situated within the U.A.E., unless the risk is situated in the Abu Dhabi Global Market, or the contract is one of re-insurance.
The classes of Contracts of Insurance are set out in Chapter 1 of Part 4 of Schedule 1 of FSMR.
An Insurer must ensure that it does not carry on, through an establishment maintained by it in the Abu Dhabi Global Market, both Long-Term Insurance Business and General Insurance Business unless the General Insurance Business is restricted to Class 1 or Class 2 or both.
An Insurer which is a Protected Cell Company must ensure that all Insurance Business is attributable to a particular Cell of that Insurer.
An Insurer must not carry on any activity other than Insurance Business unless it is an activity in direct connection with or for the purposes of such business. For the purposes of this Rule, Managing Assets is not an activity in connection with or for the purposes of Insurance Business.
The Regulator may give individual guidance on other business activities that may be determined to be in direct connection with Insurance Business.
The following activities will normally be considered in direct connection with or for the purposes of Insurance Business carried on by an Insurer:(a) investing, reinvesting or trading, as investor or rabb ul maal and for the Insurer's own account, that of its Subsidiary, its Holding Company or any Subsidiary of its Holding Company but not any other party, in Securities, loans, investment accounts, Units or Shares in Collective Investment Funds, certificates of Mudaraba, certificates of Musharaka or other forms of Investments that are intended to earn profit or return for the investor;(b) rendering other services related to Insurance Business operations including, but not limited to, actuarial, risk assessment, loss prevention, safety engineering, data processing, accounting, claims handling, loss assessment, appraisal and collection services;(c) acting as agent for another insurer in respect of Contracts of Insurance in which both Insurers participate; and(d) establishing Subsidiaries or Associates engaged or organised to engage exclusively in one or more of the businesses specified above.
COBS 7.3 COBS 7.3 Communication of Information and Marketing Material
COBS 7.3.1 General Obligation(a) When communicating any information in relation to Insurance Business, Insurance Intermediation or Insurance Management to a Person, an Authorised Person must take reasonable steps to ensure that the communication is clear, fair and not misleading.(b) An Insurer, Insurance Intermediary or Insurance Manager must not, in any form of communication with a Person, attempt to limit or avoid any duty or liability it may have to that Person under FSMR.(c) An Insurer or Insurance Intermediary must, when providing or directing Marketing Material to a Retail Client, comply with the requirements in Rule 3.2, if the Marketing Material relates to a Direct Long-Term Insurance Contract.
GuidanceA communication addressed to a Professional Client may not need to include the same information, or be presented in the same way as, a communication addressed to a Retail Client.
COBS 7.4 COBS 7.4 Client's Duty of Disclosure
An Insurer or Insurance Intermediary must explain to a Client:(a) the Client's duty to disclose all circumstances material to the insurance both before the insurance commences and during the continuance of the policy; and(b) the consequence of any failure by the Client to make such disclosures.
An Insurance Intermediary must explain to a Client that all answers or statements given on a proposal form, claim form or any other relevant document are the Client's own responsibility and that the Client is responsible for checking the accuracy of such information.
If an Insurance Intermediary believes that any disclosure of material facts by a Client is not true, fair or complete, it must request the Client to make the necessary true, fair or complete disclosure, and if this is not forthcoming must consider declining to continue acting on that Client's behalf.
COBS 7.5 COBS 7.5 Authorised Person's Duty of Disclosure
An Insurer or Insurance Intermediary must disclose to a Client:(a) the name and address of the insurer or insurers effecting the Contract of Insurance;(b) its own name and address where different; and(c) contact details of the Person to whom a claim is to be notified.
The disclosures in Rule 7.5.1 must be made before effecting or placing the Contract of Insurance, or as soon as reasonably practicable thereafter.
An Insurance Intermediary must, before providing any Insurance Intermediation service to a Person as a Retail Client, disclose whether any advice or information is or will:(a) be provided on the basis of a fair analysis of the market;(b) not be provided on the basis of a fair analysis of the market because of any contractual agreement it has with any particular insurer or insurers to deal with only their products; or(c) even if there are no contractual agreements of the type referred to in Rule 7.5.3(b), not be provided on the basis of a fair analysis of the market.
If Rule 7.5.3(b) or 7.5.3(c) applies, the Insurance Intermediary must, if requested by the Retail Client, provide to that Client a list of insurers with whom it deals or may deal in relation to the relevant Contracts of Insurance.
An Insurance Intermediary must, before providing any Insurance Intermediation service to a Client, disclose to that Client whether it acts on behalf of an insurer or any other Person or acts independently on behalf of Clients.
An Insurance Intermediary must not represent itself as providing advice or information on the basis of a fair analysis of the market unless it has considered a sufficiently broad range of Contracts of Insurance and based its decision on an adequate analysis of those contracts.
COBS 7.6 COBS 7.6 Disclosure of Costs and Remuneration
An Insurer, Insurance Intermediary or Insurance Manager must provide details of the costs of each Contract of Insurance or Insurance Intermediation service or Insurance Management service offered to a Client. The disclosure required by this Rule must include any premiums, fees, charges or taxes payable by the Client, whether or not these are payable to the Authorised Person. The disclosure must be made in terms readily understandable by the Client, taking into account the knowledge held by that Client in relation to the type of insurance in question.
An Insurer or Insurance Intermediary must, where any premium is payable through a Credit Facility made available to a Retail Client, disclose any interest, profit rate or charges payable by the Client for using that facility.
An Insurer, Insurance Intermediary or Insurance Manager must ensure that it does not impose any new costs, fees or charges without first disclosing the amount and the purpose of those charges to the Client.
An Insurer, Insurance Intermediary or Insurance Manager must, on the request of any Client, disclose to that Client all commissions and other economic benefits accruing to the Authorised Person or any member of the same Group from:(a) any Insurance Intermediation business;(b) any Insurance Management business; or(c) any other business connected to or related to the provision of such business;
transacted by the Authorised Person on behalf of that Client.
The requirement to disclose the information under Rule 7.6.4 does not apply where an Insurance Intermediary acts solely on behalf of a single insurer, and this fact has been disclosed to the Client.
COBS 7.7 COBS 7.7 Information about the Proposed Insurance
An Insurer or Insurance Intermediary must provide adequate information in a comprehensive and timely manner to enable a Client to make an informed decision about the Contract of Insurance that is being proposed.
COBS 7.7.2(a) provide to a Client information about the key features of any insurance proposed including the essential cover and benefits, any significant or unusual restrictions, exclusions, conditions or obligations, and the applicable period of cover; and(b) explain, except where the insurance cover is sourced from a single insurer, the differences in and the relative costs of similar types of insurance as proposed.
When deciding to what extent it is appropriate to explain the terms and conditions of a particular insurance the Insurer or Insurance Intermediary must take into consideration the knowledge held by the Client in relation to the type of insurance in question.
COBS 7.7.4 Specific Disclosure for Long-Term Insurance
Where an Insurer or an Insurance Intermediary proposes Direct Long-Term Insurance to a Retail Client, the disclosure for the purposes of this section must include:(a) the method of calculation of any bonuses;(b) an indication of surrender values and paid-up values, and the extent to which any such values are guaranteed;(c) for unit-linked insurance contracts, definition of the units to which they are linked, and a description of the underlying assets;(d) the basis of any projections included in the information; and(e) any facts that are material to the decision to invest, including risks associated with the investment and factors that may adversely affect the performance of the Investments.
COBS 7.8 COBS 7.8 Suitability
An Insurer or an Insurance Intermediary must comply with the suitability requirement set out in Rule 3.4 when conducting any Insurance or Insurance Intermediation Business with or for a Retail Client in respect of Direct Long-Term Insurance.
COBS 7.8.2(a) The Insurer or Insurance Intermediary must obtain from a Retail Client such information as is necessary to identify the Client's circumstances and objectives, and consider whether the terms of the particular contract of General Insurance meet the requirements identified.(b) An Insurer and an Insurance Intermediary may recommend to a Client a contract of General Insurance that does not meet all the Client's requirements only if it clearly explains to the Client, at the point of making the recommendation, that the contract does not fully meet the Client's requirements and the differences in the insurance recommended and the Client instructs the Insurer or Insurance Intermediary to proceed in writing under Rule 7.8.4.
When deciding what level of explanation is appropriate for a Client to whom a contract of insurance that does not fully meet that Client's requirements is required, the Insurer or Insurance Intermediary must take into consideration the knowledge held by the Client in relation to the type of insurance in question.
Where an Insurance Intermediary is instructed to obtain insurance which is contrary to the advice that it has given to a Client, the Insurance Intermediary must obtain from the Client written confirmation of the Client's instructions before arranging or buying the relevant insurance.
COBS 7.9 COBS 7.9 Placement of Insurance
COBS 7.9.1 Instructions
An Insurance Intermediary must not place a Contract of Insurance with or on behalf of an insurer unless it has satisfied itself on reasonable grounds that the insurer may lawfully effect that Contract under the laws of the jurisdictions in which the insurer and the risk are located.
COBS 7.9.2 Quotations
When giving a quotation, an Insurance Intermediary must take due care to ensure the accuracy of the quotation and its ability to obtain the insurance at the quoted terms.
COBS 7.9.3 Confirmation of Cover(a) An Insurer, in Effecting Contracts of Insurance, must promptly document the principal economic and coverage terms and conditions agreed upon under any Contract of Insurance and finalise such contract in a timely manner.(b) An Insurer or Insurance Intermediary must, as soon as reasonably practicable, provide a Client with written confirmation and details of the insurance which it has effected for the Client or has obtained on behalf of the Client, including any changes to an existing Contract of Insurance.(c) An Insurer or Insurance Intermediary must, as soon reasonably practicable, provide the Client with the full policy documentation where this was not included with the confirmation of cover.
COBS 7.10 COBS 7.10 Providing an Ongoing Service
COBS 7.10.1 Amendments to and Renewal of Insurance(a) An Insurer or Insurance Intermediary must deal promptly with a Client's request for an amendment to the insurance cover and provide the Client with full details of any premium or charges to be paid or returned.(b) An Insurer or Insurance Intermediary must provide a Client with written confirmation when the amendment is made and remit any return premium or charges due to the Client without delay.
An Insurer or Insurance Intermediary must give adequate advance notification to a Client of the renewal or expiration date of an existing insurance policy so as to allow the Client sufficient time to consider whether continuing cover is required.
On expiry or cancellation of the insurance, at the request of the Client, an Insurer or Insurance Intermediary must promptly make available all documentation and information to which the Client is entitled.
Where an Insurance Intermediary handles insurance claims it must:(a) on request, give the Client reasonable guidance, inform the Client of applicable procedures and provide the Client with the relevant forms in pursuing a claim under the relevant policy;(b) handle claims fairly and promptly and keep the Client informed of progress;(c) inform the Client in writing, with an explanation, if it is unable to deal with any part of a claim; and(d) forward settlement of any claim, as soon as reasonably practicable, once it has been agreed.
An Insurer must:(a) handle claims fairly and promptly;(b) keep the Client informed of the progress of the claim;(c) not reject a claim unreasonably;(d) if only part of a claim is accepted:(i) provide a clear statement about the part of the claim that is accepted; and(ii) give clear reasons for rejecting that part of the claim that has not been accepted; and(e) settle the claim promptly.
COBS 7.11 COBS 7.11 Insurance Monies
COBS 7.11.1 Application
This section applies to an Insurance Intermediary and an Insurance Manager, in respect of activities carried on in or from the Abu Dhabi Global Market.
COBS 7.11.2 General(a) Insurance Monies are any monies arising from Insurance Intermediation or the Insurance Management business which are any of the following:(i) premiums, additional premiums and return premiums of all kinds;(ii) claims and other payments due under Contracts of Insurance;(iii) refunds and salvages;(iv) fees, charges, taxes and similar fiscal levies relating to Contracts of Insurance payable to a Person other than the Insurance Intermediary or Insurance Manager;(v) discounts, commissions and brokerage payable to a Person other than the Insurance Intermediary or Insurance Manager; or(vi) monies received from or on behalf of a Client of an Insurance Manager, in relation to his Insurance Management business.(b) Monies are not Insurance Monies where there is a written agreement in place between the Insurance Intermediary or Insurance Manager and the insurer to whom the relevant monies are to be paid (or from whom they have been received) under which the insurer agrees that:(i) the Insurance Intermediary or Insurance Manager, as the case may be, holds as agent for the insurer all monies received by it in connection with Contracts of Insurance effected or to be effected by the insurer;(ii) insurance cover is maintained for the Client once the monies are received by the Insurance Intermediary or the Insurance Manager, as the case may be; and(iii) the insurer's obligation to make a payment to the Client is not discharged until actual receipt of the relevant monies by the Client.
In this section, a Client of an Insurance Manager means:(a) any insurer for which the Insurance Manager provides Insurance Management;(b) any shareholder of an insurer mentioned in Rule 7.11.3(a); or(c) any Person on whose behalf the Insurance Manager undertakes to establish that Person as an insurer.
For the purposes of Rule 7.11.3:(a) an Insurer includes a Cell of a Protected Cell Company which is an Insurer; and(b) a shareholder includes a holder of Cell Shares.
COBS 7.11.5 Pooling Event
Following a Pooling Event, an Authorised Person must comply with the Rules in Rule 14.4 and all Money will also be subject to such Rules in the same way as Client Money.
COBS 7.11.6 Insurance Money Segregation
An Insurance Intermediary or Insurance Manager when dealing with Insurance Monies must:(a) maintain one or more separate Insurance Bank Accounts with an Eligible Bank in the U.A.E.;(b) ensure that each Insurance Bank Account contains in its title the name of the Authorised Person, together with the designation Insurance Bank Account (or IBA);(c) prior to operating an Insurance Bank Account, give written notice to, and receive written confirmation from, the Eligible Bank that the bank is not entitled to combine the Insurance Bank Account with any other account unless that account is itself an Insurance Bank Account held by the Authorised Person, or to any charge, encumbrance, lien, right of set-off, compensation or retention against monies standing to the credit of the Insurance Bank Account;(d) pay all Insurance Monies directly and without delay into an Insurance Bank Account;(e) use an Insurance Bank Account only for the following purposes:(i) the receipt of Insurance Monies;(ii) the receipt of such monies as may be required to be paid into the Insurance Bank Account to ensure compliance by the Authorised Person with any conditions or requirements prescribed by the Regulator;(iii) the payment to Clients or to insurers of monies due under Insurance Intermediation Business transactions;(iv) the payment of all monies payable by the Authorised Person in respect of the acquisition of or otherwise in connection with approved Assets;(v) the withdrawal of brokerage, management fees and other income related to Insurance Intermediation Business, either in cash or by way of transfer to an account in the name of the Intermediary which is not an Insurance Bank Account, provided that no such sum may be withdrawn from the Insurance Bank Account before the time at which that amount may be brought into account as income of the Insurance Intermediary;(vi) the withdrawal of monies paid into the Insurance Bank Account in error; and(vii) the withdrawal of any monies credited to the Insurance Bank Account in excess of those required by any conditions and requirements prescribed by the Regulator;(f) ensure that any amount held in the Insurance Bank Account or other Approved Assets, together with any amount due and recoverable from insurance debtors, is equal to, or greater than the amount due to insurance creditors; and(g) take immediate steps to restore the required position if at any time it becomes aware of any deficiency in the required segregated amount.
An Insurance Intermediary or Insurance Manager may not obtain a loan or overdraft for any purpose relating to an Insurance Bank Account unless that advance:(a) is on a bank account which is designated as an Insurance Bank Account, and the loan or overdraft is used for payment to Clients or to insurers of monies due under Insurance Intermediation transactions;(b) does not give rise to a breach of the requirements of Rule 7.11.6(e); and(c) is of a temporary nature and is repaid as soon as reasonably practicable.
An Insurance Intermediary or Insurance Manager must hold Insurance Monies either in an Insurance Bank Account or in Approved Assets.
An Insurance Intermediary must ensure that Approved Assets are:(a) registered in the name of the Insurance Intermediary or Insurance Manager and designated "Insurance Bank Account"; or(b) held for the Insurance Bank Account of the Insurance Intermediary or Insurance Manager at the bank at which such Insurance Bank Account is held.
An Insurance Intermediary or Insurance Manager must ensure that monies, other than interest, arising from Approved Assets or their realisation, sale or disposal are paid into an Insurance Bank Account.
An Insurance Intermediary or Insurance Manager may not hold Insurance Monies in Approved Assets until it has given written notice to and received written notice from the bank referred to in Rule 7.11.9(b) that the bank is not entitled to any charge, encumbrance, lien, right of set-off, compensation or retention against Approved Assets held for the Insurance Intermediary's or Insurance Manager's Insurance Bank Account.
An Insurance Intermediary or Insurance Manager may only use Approved Assets as security for a loan or overdraft where that loan or overdraft is for a purpose relating to an Insurance Bank Account as permitted by Rule 7.11.7.
Where Insurance Monies are held in Approved Assets whose rating drops below the minimum stipulated within the definitions, that investment or asset will cease to be an Approved Asset and the Insurance Intermediary or Insurance Manager must dispose of the investment or asset as soon as possible and no later than within thirty days of the rating change.
An Insurance Intermediary or Insurance Manager may not use derivatives in the management of Insurance Monies except for the prudent management of risks.
An Insurance Intermediary who has a credit balance for a Client who cannot be traced must not take credit for such an amount except where:(a) he has taken reasonable steps to trace the Client and to inform him that he is entitled to the money;(b) at least six years has passed from the date the credit was initially notified to the Client; and(c) Rule 7.11.6(f) will continue to be satisfied after the withdrawal of such money.
An Insurance Intermediary must keep records of all sums withdrawn from the Insurance Bank Account or realised Approved Assets as a result of credit taken under Rule 7.11.15 for at least six years from the date of withdrawal or realisation.