Instructions No. 4 of 2005 Regarding Reinsurance Broker Licensing, Regulation of Activities and Responsibilities and Amendments

Instructions No. 4 of 2005 Instructions on Licensing Reinsurance Brokers, Regulating Their Activities and Responsibilities and Amendments Issued by the Board of Directors of the Insurance Authority

Pursuant to the provisions of paragraph (y) of Article (23), Article (55), and paragraph (b) of Article (108) of the Insurance Activities Regulation Law No. (33) of 1999 and its amendments

Article (1): These Instructions shall be known as (Instructions on Licensing Reinsurance Brokers, Regulating Their Activities and Responsibilities for the Year 2005) and shall be effective from the date of their publication in the Official Gazette.

Article (2): a- The words and expressions contained in these Instructions shall have the meanings assigned to them in Article (3) of the Insurance Activities Regulation Law No. (33) of 1999 and its amendments, unless the context indicates otherwise. b- For the purposes of these Instructions, the following words and expressions shall have the meanings indicated below: The Law: The Insurance Activities Regulation Law in force. Reinsurer: A reinsurer operating within or outside the Kingdom. c- For the purposes of these Instructions, the term "Reinsurance Broker" refers to both natural and legal person reinsurance brokers, unless otherwise specified.

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• These Instructions were published in the Official Gazette on June 1, 2005, in Issue (4709) on Page (2243). These Instructions were also amended by Instructions No. (8) of 2008 (Amended Instructions on Licensing Reinsurance Brokers, Regulating Their Activities and Responsibilities No. (4) of 2005), published in the Official Gazette on January 4, 2009, in Issue (4945) on Page (6603); Instructions No. (5) of 2009 (Amended Instructions on Licensing Reinsurance Brokers, Regulating Their Activities and Responsibilities), published in the Official Gazette on September 1, 2009, in Issue (4979) on Page (4516); and Instructions No. (14) of 2010 (Amended Instructions on Licensing Reinsurance Brokers, Regulating Their Activities and Responsibilities), published in the Official Gazette on May 2, 2010, in Issue (5028) on Page (2520). ** After the abolition of the Insurance Authority by the Law on Restructuring Government Institutions and Departments No. (17) of 2014, all powers of the Board of Directors of the Insurance Authority were transferred to the Minister of Industry, Trade and Supply, and all powers of the Director General of the Insurance Authority were transferred to the Secretary General of the Ministry of Industry, Trade and Supply.

Article (3): No person shall practice the activities of a reinsurance broker in the Kingdom unless they obtain a license from the Authority in accordance with the conditions specified under the provisions of these Instructions and the decisions issued pursuant thereto, under penalty of legal liability.

Article (4): a- A reinsurance broker shall be licensed according to the type of insurance for which licensing is sought. b- A natural person shall not be granted a license to practice both life reinsurance brokerage and general insurance brokerage activities simultaneously. c- A reinsurance broker may combine reinsurance brokerage activities with consulting, absolute agency, and underwriting agency activities in accordance with the provisions of these Instructions and related decisions. d- Subject to the provisions of paragraph (c) of this Article, no person shall be granted a license combining reinsurance brokerage or loss adjusting, surveying, or any other supporting insurance services, in accordance with the provisions of these Instructions and related decisions. e- It is a condition for licensing a legal person reinsurance broker that its General Manager or any of its managers, and all personnel performing activities falling within the scope of reinsurance brokerage, are licensed in accordance with the provisions of these Instructions and decisions issued pursuant thereto.

Article (5): The following conditions must be met by the license applicant: a-1- Possession of a university degree or an insurance certificate from any specialized institute accredited by the Authority pursuant to a decision issued by the Director General for this purpose. 2- The Director General may exempt the license applicant from the provisions of item (1) of this paragraph if the applicant possesses practical experience of no less than any of the experiences listed in paragraph (b) of this Article, provided that their total experience in insurance activities is not less than twenty years. b- Possession of any of the following practical experiences: 1- Practiced insurance activities for no less than (12) years. 2- Practiced reinsurance activities in a company or worked for a reinsurance broker for no less than (7) years. 3- Worked as a General Manager of an insurance company for no less than (5) years. 4- Worked as a licensed reinsurance broker outside the Kingdom for no less than (3) years. c- Meeting the conditions stipulated in Article (31) of the Law. d- Being dedicated to working in a suitable, private office. e- Not having had their license or registration for practicing reinsurance brokerage, brokerage, agency, actuarial, loss adjusting, surveying, consulting, absolute agency, underwriting agency, or any supporting insurance services activities revoked as a disciplinary penalty, or not meeting the conditions for re-licensing or re-registration by the authority that suspended or revoked their license. f- Passing the assessment prepared or approved by the Authority for this purpose.

Article (6): The license application shall be submitted using the form prepared for this purpose, including the data and attached with the following documentary evidence: a- Name, nationality, and address of the license applicant. b- Two personal photographs. c- The type of insurance for which reinsurance brokerage activities are to be practiced. d- A written declaration confirming the fulfillment of the conditions stipulated in paragraphs (c) and (e) of Article (5) of these Instructions, and undertaking to notify the Authority if these conditions are not met during the year, according to the form prepared for this purpose. e- A copy of the passport or national ID card. f- A certified copy of academic qualifications. g- An original copy of practical experience certificates. h- A copy of training course certificates. i- A written declaration that all data and documents submitted in accordance with the provisions of this Article are correct. j- Proof of payment of the fees and allowances prescribed in accordance with the systems and instructions issued for this purpose pursuant to the provisions of the Law. k- Any other data, documentary evidence, or information requested by the Director General.

Article (7): Subject to the provisions of paragraph (e) of Article (4) of these Instructions: a- The application for licensing a legal person to practice reinsurance brokerage activities in the Kingdom shall be submitted using the form prepared for this purpose, including the following: 1- Proof of meeting the conditions stipulated in Article (5) of these Instructions by providing all the data and documentary evidence stipulated in Article (6) of these Instructions for its General Manager or any of its managers, as appropriate, and for all key employees performing reinsurance brokerage activities in the Kingdom, or providing an undertaking to fulfill all these conditions before the license is granted. 2- A signed copy of the company contract or memorandum of association, as appropriate. b- If the legal person to be licensed is a branch of a foreign legal person, a certified copy of the license of the foreign legal person issued by the home country shall be submitted in addition to the documents mentioned in paragraph (a) of this Article. c- The objectives of the legal person to be licensed shall be limited to reinsurance brokerage activities, except in cases where combining a reinsurance broker license with other insurance service providers is permitted in accordance with the provisions of paragraph (c) of Article (4) of these Instructions and related instructions. d- A legal person may be granted a license to practice both life reinsurance brokerage and general insurance brokerage simultaneously, provided that both types of insurance are not practiced simultaneously by the same agent with the legal person reinsurance broker, and that the conditions for practicing reinsurance brokerage activities in the type of insurance sought to be practiced are met in accordance with the provisions of these Instructions.

Article (8): a- The Director General shall notify the applicant either of the completion of the application with all data and documentary evidence submitted in accordance with the provisions of Articles (6) and (7) of these Instructions, or of any deficiencies therein and details of the assessment stipulated in paragraph (f) of Article (5) of these Instructions, within a period not exceeding ten working days from the date of submission of the application. b- In case of deficiency, the applicant shall complete this deficiency within a period not exceeding thirty days from the date of notification; otherwise, the application shall be considered cancelled, and the applicant shall not submit another application before three months have passed from the date of cancellation of the application.

Article (9): a- The application for licensing submitted in accordance with the provisions of Articles (6) and (7) of these Instructions shall be decided upon by a decision of the Director General within a period not exceeding thirty days from the date of notifying the applicant of the completion of their application with all data and documentary evidence and passing the assessment condition prepared or approved by the Authority for this purpose. b- In case of approval of the application stipulated in paragraph (a) of this Article, the Director General shall notify the applicant thereof in accordance with the provisions of the Law, and the reinsurance broker shall be registered in the special register for this purpose at the Authority after providing proof of: 1- Completion of establishment and registration procedures with the competent authorities in the Kingdom, as appropriate. 2- Obtaining a valid insurance policy to cover professional liability risks for the reinsurance broker, the conditions of which shall be determined by a decision issued by the Director General for this purpose. 3- Payment of the fees and allowances prescribed in accordance with the systems and instructions issued for this purpose pursuant to the provisions of the Law. c- In case the applicant fails to pass the assessment stipulated in paragraph (a) of this Article, the Director General shall notify the applicant thereof in accordance with the provisions of the Law, and the applicant shall, within one year from the date of submitting their application, pass the assessment in accordance with any of the courses held for this purpose after paying the allowances prescribed in accordance with the instructions issued for this purpose pursuant to the provisions of the Law; otherwise, the submitted license application shall be cancelled, and the license applicant shall not submit a new application to practice reinsurance brokerage activities in the Kingdom unless they provide proof of enrollment in specialized courses in reinsurance activities of no less than fifteen hours.

Article (10): a- The reinsurance broker is obliged to notify the Director General of any changes to any of the data and information for which they were licensed immediately upon occurrence, provided that this change is consistent with the provisions of these Instructions and decisions issued pursuant thereto. b- The legal person reinsurance broker shall inform the Director General of the vacancy of the position of its General Manager or any of its managers in the Kingdom, as appropriate, or upon the vacancy of the position of any of its personnel performing reinsurance brokerage activities in the Kingdom, and shall fill the vacant position, if necessary, within thirty days from the date of vacancy and notify the Director General thereof, for the purposes of licensing by the Authority in accordance with the provisions of these Instructions and decisions issued pursuant thereto.

Article (11): a- The reinsurance broker shall submit an application for license renewal annually, no later than forty-five days before the expiration of the license period, which falls on December 31 of each year, using the form prepared for this purpose, attached with the following: 1- A statement including the reinsurance brokerage activities practiced during the year, according to the form prepared for this purpose. 2- A written declaration in accordance with the provisions of paragraph (d) of Article (6) of these Instructions. 3- A valid insurance policy in accordance with the provisions of item (2) of paragraph (b) of Article (9) of these Instructions. 4- Proof of enrollment in specialized courses in reinsurance activities or participation in conferences or seminars in reinsurance activities or reinsurance brokerage of no less than fifteen hours. 5- A written declaration that all data and documents submitted in accordance with the provisions of this Article are correct. 6- Proof of payment of the fees and allowances prescribed in accordance with the systems and instructions issued for this purpose pursuant to the provisions of the Law. b- The legal person reinsurance broker shall submit, in addition to what is stipulated in paragraph (a) of this Article, a statement including the name of its General Manager, managers, as appropriate, and all personnel performing reinsurance brokerage activities. c- The application for license renewal shall be decided upon within a period not exceeding fifteen working days from the date of completion of submission of all documentary evidence stipulated in paragraph (a) of this Article.

Article (12): a- A reinsurance broker wishing to suspend their license may submit an application for this purpose, and may submit an application for re-registration in the special register prepared for this purpose, provided that they submit a written application using the form prepared for this purpose, subject to the following provisions: 1- If the suspension period does not exceed one year from the date of the application, the provisions of Article (11) of these Instructions shall apply. 2- If the suspension period exceeds one year from the date of the application, the reinsurance broker shall, in addition to what is stipulated in paragraph (a) of this Article, provide proof of enrollment during the license suspension period in specialized courses in reinsurance activities or participation in conferences or seminars in reinsurance activities of no less than fifteen hours. 3- If the suspension period exceeds three years from the date of the application, the reinsurance broker shall submit a new license application in accordance with the provisions of these Instructions and decisions issued pursuant thereto. b- A reinsurance broker shall not practice their activities during the license suspension period, under penalty of legal liability.

Article (13): The reinsurance broker shall perform the following tasks and responsibilities during the practice of their activities: a- Register their registration number with the Authority on all their papers, correspondence, and documents. b- Provide advice and consultation to the company regarding reinsurance programs available in local, regional, and global insurance and reinsurance markets, including the best terms and prices, in accordance with the technical methods customary in this profession. c- Monitor the development of local, regional, and global reinsurance markets and inform the company, within a reasonable time, of the implications thereof on their insurance activities and reinsurance programs. d- Recommend one or more reinsurers to the company to whom the company's activities will be entrusted, to choose what suits those activities. e- Negotiate with reinsurers on behalf of the company. f- Assist in negotiations for the settlement of claims between the company and reinsurers. g- Comply with the company's instructions and provide it, whenever requested, with reports containing the activities performed on its behalf. h- Prepare the necessary reports for settling the company's accounts with reinsurers if entrusted with this task. i- Transfer any amounts permitted to be received from the company as insurance premiums to the reinsurer, and transfer claim amounts paid by the reinsurer on behalf of the company in the agreed manner, and open a special bank account in the Kingdom to hold these amounts, without collecting any commission or interest on these amounts held in this account.

Article (14): The reinsurance broker shall adhere to the rules of practicing the profession of reinsurance broker, as follows: a- Adherence to integrity, uprightness, and good conduct in all their actions and activities at all times. b- Adherence to the provisions of the Law, systems, instructions, and decisions issued pursuant thereto related to their work, and in particular the reinsurance standards instructions in force. c- Not underwriting, managing, or reinsuring insurance risks. d- Maintaining the confidentiality of information regarding the company and reinsurer obtained in the course of their work. e- Not entrusting other reinsurance brokers or sub-brokers to perform reinsurance brokerage activities for the company on their behalf without obtaining the company's prior written consent. f- Verifying that reinsurance agreements issued by the reinsurer meet the requirements of the company's reinsurance arrangements and are consistent with the initial agreement between the reinsurer and the company, particularly facultative reinsurance agreements. g- Explaining to the company the reasons for choosing their reinsurance programs, including their terms, benefits, and exclusions, and providing a comparison between the price and coverage offered by the proposed reinsurance programs and others if requested. h- Advising the company and reinsurer on the necessity of disclosing any changes in the nature of the reinsured risk after the issuance of facultative reinsurance agreements and during their validity and renewal, if the reinsurance broker provides the company or reinsurer with special services for renewing facultative insurance agreements. i- Verifying that the company or reinsurer receives the renewal notice of facultative insurance agreements at an appropriate time before their expiration, if the reinsurance broker provides the company or reinsurer with special services for renewing facultative insurance agreements. j- Having an appropriate mechanism to receive complaints and comments regarding their work from the company or reinsurer and follow up on them. k- The commission rate received by the reinsurance broker shall not be the main and influential factor in their choice or recommendation of a specific company or reinsurer over others. l- Not providing the company with incorrect or unfair information or criticism about any reinsurer with the aim of changing the company's opinion on the reinsurance policy it adopts or on contractual or facultative reinsurance arrangements, unless this is in the technical and/or financial interest of the company.

Article (15): a- The reinsurance broker is obliged to provide the Authority with their annual balance sheet and accompanying accounts, as appropriate, within a period not exceeding two months from the date of the end of the financial year. b- For the purposes of these Instructions, the financial year of a reinsurance broker begins on January 1 and ends on December 31 of the same year, except for the first year of licensing, which shall be from the date the reinsurance broker is granted the license until December 31 of the same year.

Article (16): a- The reinsurance broker shall record data and information regarding the reinsurance brokerage activities they practice in books and registers, as appropriate, including the following: 1- Name and address of the company for which they practice reinsurance brokerage activities. 2- Memos and correspondence related to their activities. 3- Copies of reinsurance agreements concluded by the company with the reinsurer. 4- Documents with serial numbers related to receipts, payments, entries, settlements, and other financial transactions related to the reinsurance brokerage activities they practice. 5- Bank accounts related to the reinsurance brokerage activities they practice. b- The books and registers referred to in paragraph (a) of this Article shall be in the form of papers, copies thereof, or other electronic storage means. c- The reinsurance broker shall retain the records and books referred to in this Article for a period of no less than five years from the date of the end of the financial year associated with them.

Article (17): a- If the Director General has sufficient information indicating any of the following: 1- The reinsurance broker violated the provisions of the Law, systems, instructions, or decisions issued pursuant thereto. 2- The reinsurance broker lost any of the conditions under which they were licensed, or if it becomes apparent that any of the data or documentary evidence submitted by them is incorrect. 3- The reinsurance broker failed to renew their license in accordance with the provisions of Article (11) of these Instructions and continues to practice their activities. 4- The reinsurance broker has not practiced their activities for two years from the date of licensing or license renewal, whichever is later. b- The Director General may take any of the following actions if it becomes apparent that any of the information in paragraph (a) of this Article is true: 1- Request the reinsurance broker to take specific measures to rectify their situation within the period specified for this purpose. 2- Suspend the license of the reinsurance broker for the period specified by the Director General, and may request the reinsurance broker to take specific measures to rectify their situation. 3- Revoke the license of the reinsurance broker. c- If the reinsurance broker does not rectify their situation in accordance with the provisions of item (1) of paragraph (b) of this Article, the Director General may suspend or revoke their license. d- If the license suspension period expires and the reinsurance broker has not taken the necessary measures to rectify their situation in accordance with the provisions of item (2) of paragraph (b) of this Article, the Director General may revoke their license. e- If the Director General issues a decision to revoke the license of a reinsurance broker, they shall not submit a new license application before three years have passed from the date of the license revocation decision if the cause of revocation was a serious error, as determined by the Director General.

Article (18): If the Director General issues a decision to suspend the license of a reinsurance broker or to revoke the license, the reinsurance broker shall continue to perform the tasks they committed to before the date of the license suspension or revocation decision, for a period not exceeding one month from that date, for the purpose of completing them or distributing the activities previously entrusted to them to other reinsurance brokers with the company's approval.

Article (19): The Director General may request the company to stop dealing with a reinsurance broker in any of the following cases: a- If it becomes apparent that the reinsurance broker has not complied with the provisions of these Instructions and decisions issued pursuant thereto. b- If the reinsurance broker fails to fulfill their obligations or is likely to fail or is unable to continue their activities. c- If there is information indicating financial difficulties of the insurance broker or affecting their credibility and professional conduct. d- If the reinsurance broker fails to provide the Director General with any of the data or documents required pursuant to the provisions of these Instructions and decisions issued pursuant thereto.

Article (20): a- The Director General may assign one or more of the Authority's employees or appoint an external party to audit any of the reinsurance broker's transactions, records, or documents at appropriate times, and the reinsurance broker shall make any of them available to them and cooperate with them to enable them to perform their work fully, and the reinsurance broker shall bear the fees determined by the Director General for this external party, unless the Director General decides otherwise. b- The reinsurance broker is obliged to provide any data or information requested by the Director General within the period specified for this purpose.

Article (21): The Director General may delegate to any senior employee of the Authority the powers stipulated in these Instructions, provided that the delegation is written and specific.

Article (22): Any person not residing in the Kingdom and who has not established a main office there, and is licensed or registered to practice reinsurance brokerage activities outside the Kingdom, may deal with any company within the Kingdom after obtaining the Director General's approval for this purpose and in accordance with the bases and conditions specified for this purpose.

Article (23): Every person practicing reinsurance brokerage activities at the time these Instructions come into force shall submit an application for licensing or registration with the Authority within a period not exceeding six months from the date of entry into force of these Instructions.

Article (24): The Director General shall issue the necessary decisions to implement the provisions of these Instructions.

Board of Directors of the Insurance Authority