Regulatory Alerts2024-04-22
Added · Updated
Draft Decision on Professional Liability Insurance Contract for Insurance Agents
The Central Bank of Jordan mandates that corporate insurance agents obtain professional liability insurance covering negligence, errors, or omissions for themselves, their management, and employees. The minimum coverage amount is calculated as twice the agent's previous year's production value, rounded up to the nearest 25,000, with a floor of 50,000 Jordanian Dinars, and a single incident payout capped at 20% of the total annual limit. The deductible cannot exceed 5% of a single claim value, and the policy term must be at least one year. Agents must submit renewal copies to the Central Bank within two weeks, report cancellations or rejected claims immediately, and regularize their status by September 1, 2024.
CENTRAL BANK OF JORDAN البنك المركزي الأردني
Subject: Draft Decision on the Professional Liability Insurance Contract for Insurance Agents
In order to implement Item (3) of Paragraph (b) of Article (18) of the Instructions for Licensing Insurance Agents and Regulating Their Work and Responsibilities No. (10) of 2023, I have decided the following:
First: A corporate insurance agent is obliged to obtain an insurance contract covering their professional liability resulting from any negligence, error, omission, or unintentional failure during or as a result of performing their duties as an insurance agent. This liability coverage must extend to the insurance agent, the management, and their employees, whether they are currently employed or have left their positions, towards insurance applicants, insured parties, and beneficiaries of insurance contracts.
Second: a. The minimum value of the insurance amount for the professional liability insurance contract for insurance agents is determined according to the following equation:
- Compensation amount for the total incidents during one insurance year = The insurance agent's production value for the previous year (rounded up to the nearest 25,000) * 2. And in no case less than 50,000 (Fifty Thousand Dinars).
- Compensation amount for a single incident during one insurance year = (Compensation amount for the total incidents * 20%).
b. For the purpose of applying the provisions of Item (Second) above, the term "insurance agent's production value" refers to the total insurance premiums for insurance contracts concluded between the insured parties and insurance companies through the corporate insurance agent during the previous year, according to the agent's work statements provided to the Central Bank by the insurance agent and/or the relevant insurance company.
Third: The deductible (retention) percentage in the professional liability insurance contract shall not exceed (5%) of the claim value for a single incident.
Fourth: The insurance period in the professional liability insurance contract must not be less than one year.
Fifth: The corporate insurance agent must comply with the following regarding the insurance contract covering their professional liability: a. Provide the Central Bank with a copy of the renewal of the professional liability insurance contract within two weeks from the date of its issuance.
b. Immediately notify the Central Bank in the event of the contract's cancellation by the insurance company and immediately provide the Bank with another replacement contract covering their liability. c. Immediately notify the Central Bank of any claims rejected by the insurance company related to the contract submitted under this decision.
Sixth: The corporate insurance agent to whom this decision applies must regularize their status in accordance with the provisions of this decision within a period not exceeding September 1, 2024.
Seventh: The provisions of this decision shall be effective as of its date.