Qatar: Streamlining insurance regulation

The Qatar Central Bank’s (QCB) February takeover of responsibility for licensing and supervising insurance companies, reinsurance companies and insurance intermediaries, part of an effort to streamline doing business in the country, should enhance regulation and level the playing field for insurance companies.

The Law of the Qatar Central Bank and the Regulation of Financial Institutions, which came into effect in February, designates the QCB as the supreme regulatory authority for the financial services industry, transferring a role that previously belonged to the Ministry of Business and Trade, and the new regulatory system is expected to be fully in place later this year.

The reforms will bring regulation for insurance companies operating in the country in line with international industry standards and the Insurance Core Principles set by the International Association of Insurance Supervisors (IAIS). Insurance firms operating in the Qatar Financial Centre (QFC) are already subject to a regulatory regime that meets this IAIS framework. Previously, local insurance companies set up outside the QFC were regulated by the statutes of a law that has been on the books since 1966.

The new law replaces the older one, which was widely seen as antiquated, and brings companies operating outside the QFC under the QCB’s regulatory oversight. However, companies based inside the QFC will remain under the supervision of the Qatar Financial Centre Regulatory Authority (QFCRA). Michael Ryan, the CEO of the QFCRA, told OBG the new law is “a welcome development that is extremely dynamic for the financial services industry of Qatar”.

The low penetration rate of 0.89%, according to the Qatar Financial Centre Authority (QFCA), constitutes an attractive growth opportunity in a sector that has witnessed consistent expansion over the past few years. The country’s young population, robust economic foundations and a programme of infrastructure and oil and gas developments make it highly attractive to both local and international insurers.

Another reason to expect growth is that there are very few compulsory insurance rules in Qatar. Third-party motor liability and professional liability for engineers are the only two categories currently obligatory, far fewer than in many other countries. It is expected that the next few years will see more categories added to this list – the most widely anticipated being mandatory health insurance for Qataris and expatriates.

However, there are “gaps in the market”, according to Ryan, “particularly in product innovation, reinsurance and captive insurance”. Reinsurance has traditionally been an area in which Qatari companies have gone outside the country to access. The GCC in general has very high cession rates – the percentage of the total premium that goes to reinsurers – due to a generally low level of capital among Gulf insurers. Making the country a more attractive target for investment is an objective of both the Qatar National Vision 2030 and Qatar National Development Strategy 2011-16.

In this vein, the new law also established the Financial Stability and Risk Control Committee (FSRCC) under the auspices of the QCB as a mechanism for coordinating the activities of Qatar’s three supervisory bodies and implementing a consistent regulatory regime across the financial industry. It is chaired by the central bank’s governor, Sheikh Abdullah Bin Saud Al Thani, and its membership includes Sheikh Fahad bin Faisal Al Thani, the deputy governor of the central bank; Nasser Ahmed Al Shaibi, the CEO of the Qatar Financial Markets Authority (QFMA); and Michael Ryan.

The FSRCC is charged with identifying, assessing and managing risks to the financial sector, facilitating cooperation and communication among the various financial regulatory authorities, and proposing policies for the regulation of the financial markets.

Ryan told OBG that the FSRCC’s coordination function would “create opportunities to implement international standards consistently across all three regulators, eliminate potential regulatory arbitrage, and achieve the long-term objective of building a more robust financial sector”.

The appointment of the QCB’s governor to the chairmanship of the QFCRA in March 2012 marked the beginning of the two organisations’ harmonisation. That same month, Yousef Hussein Kamal, the minister of economy and finance, announced that plans were in motion to set up high-level regulatory coordination under the umbrella of the QCB.

The announcement of the new law in December 2012 and its implementation in February has fulfilled long-held hopes for streamlining Qatar’s regulatory architecture. It has also brought about the enhanced regulation of the insurance sector, and opportunities to level the playing field for all insurance companies -- whether located in the QFC or not.