Insurance companies in the UAE are gearing up to implement Solvency II capital adequacy rules approved by the European ParliamentThe rules will limit the amount of risk that insurance and reinsurance companies can undertake in relation to their capital bases. The rules are due to be implemented by 2012 and will set a new regulatory standard for insurance companies across the world. Industry sources said the rules could lead to major changes in the UAE.Many insurance companies in the Middle East are monitored by credit rating agencies such as Moody's and Standard & Poor's. As Dubai is trying to become a global financial centre, insurance companies here are watching the Solvency II developments clo,Many leading insurance companies, such as the American International Group (AIG) collapsed because they took on more risk than their capital bases could handle.The new rules are the industry's first response to the global financial crisis. Insurers have to demonstrate strong risk management practices that extend across their business decision-making processes at senior executive and board levels. "Solvency rules dictate how much capital insurers must hold in relation to their liabilities," Fareed Lutfi, Secretary General of the Emirates Insurance Association, told Emirates Business. "Companies have to balance their capital bases with the risk that they underwrite. An insurance company with Dh10 million of capital cannot insure a risk o"Members of the Emirates Insurance Association are advised to adjust their capital risk balance in line with the new solvency rules adopted by the Economic and Financial Affairs Council of the European Commission on May 5, 2009."f Dh40m.
Source;business24/7.ae
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