Insurance business in Kuwait is primarily regulated by the Insurance Law (Law No. 125 of 2019) which came into effect on the 1st of September 2019. This relatively new law revoked the old insurance law, Law No. 24 of 1961 and provided for much needed development of the regulation of this vital sector. The Executive Regulations of the Insurance Law were issued on the 16th of March 2021 pursuant to Ministerial Decision No. 21 of 2021 and came into immediate effect.
The Insurance Regulatory Unit (IRU): The Insurance Law established the IRU which operates under the supervision of the Ministry of Commerce and Industry (MOCI) but has financial and administrative autonomy. The IRU was established to regulate and monitor insurance activity to ensure fairness, transparency and competitiveness while encouraging its development in line with international best practices. It is comprised of a president, a deputy, three part-time members appointed by the MOCI Minister, a representative of the Central Bank of Kuwait and a representative from the MOCI.
The Scope: The Insurance Law regulates and applies to all insurance and reinsurance companies, including takaful (Islamic) insurance and reinsurance companies. It also applies to foreign insurance and re-insurance companies which are licensed to operate through branches in Kuwait. Insurance and reinsurance brokers and insurance professionals (such as risk assessors, loss adjustors, actuaries and insurance consultants) are also regulated by the Insurance Law. It also applies to all insurance activities including life insurance, general and property insurance, liabilities insurance and all other types of insurance activities as determined by the IRU. As a general rule, all entities and professionals who want to engage in any form of insurance business in Kuwait must be registered with and licensed by the IRU.
Insurance Companies: The IRU licenses insurance companies who engage in insurance activities. To ensure capital adequacy, the Insurance Law provides that Kuwaiti insurance and reinsurance companies must be established as joint stock companies in compliance with Kuwait’s Companies Law, with issued capital that is determined by the Insurance Law – which may be increased by the IRU. The minimum issued capital of these companies must be paid up in full upon incorporation. Additionally, in addition to having to deposit 20% of the total premiums collected, licensed insurance companies are required to maintain certain minimum deposits, as determined by the Insurance Law, in one or more Kuwaiti banks to guarantee the fulfilment of their insurance obligations. Similarly, insurance and reinsurance brokerage companies must be incorporated in compliance with the Companies Law and the Insurance Law which shall determine the form of company and the minimum capital requirements. These entities must register with and be licensed by the IRU and their managers must be experienced Kuwaiti nationals.
Foreign Insurance Companies: Under the Insurance Law, foreign insurance companies may apply to the IRU for a license to operate a branch in Kuwait. Foreign insurance companies were also permitted to appoint an insurance agent through whom they could operate. However, Law No. 1 of 2024, issued in January 2024, amended certain provisions of Law No. 68 of 1980 – the Kuwait Commercial Code, by providing in part that a foreign company may now establish a branch in Kuwait and carry out its business without the need to appoint a local agent. Given the novelty of this law, it is yet to be seen how this will be implemented in the insurance sector.
Insurance Professions: The Insurance Law further provides that only those insurance risk assessors, loss adjustors, actuaries and insurance consultants who are registered with the IRU are permitted to provide such services in Kuwait. However, in cases that necessitate special technical expertise, it may be possible, with the approval of the IRU, to obtain the assistance of such experts who are not registered with the IRU for a limited period of time. The merger of insurance companies is contemplated under the Insurance Law which essentially provides that each company wishing to merge with another may do so with the approval of the IRU following submission of an auditor’s and actuary’s report stating that the proposed merger would not prejudice the rights of policyholders, beneficiaries and related third parties.
Penalties: To ensure compliance, the Insurance Law provides for a number of penalties that may be applied by the IRU for violation of the Insurance Law provisions. These include, but are not limited to, a written warning, suspension and the revocation of licenses and monetary fines.
The Civil Code: While the Insurance Law does not define insurance specifically, we note that Chapter 4 (Guarantee and Insurance Section) of the Kuwait Civil Code (Law No. 67 of 1980 as amended) provides for a number of provisions on insurance. In this regard, Article 773 of the Civil Code defines insurance as a contract pursuant to which the insurer undertakes, in consideration of a consideration payable by the insured, to pay to the latter or a beneficiary a sum of money upon the occurrence of the event or the risk stated in the policy. This chapter of the Civil Code goes on to provide for the rules on the conclusion of an insurance contract, the obligations of the insured and the insurer and the transfer and termination of the rights and obligation arising from an insurance contract.
Insurance continues to be a very vital business tool in Kuwait and its clear regulation facilitates its continued use in the support of the business sector. ASAR Al Ruwayeh & Partners has been involved extensively in advising both local and foreign insurance companies on the regulatory and practical aspects of the insurance sector in Kuwait. Please visit www.asarlegal.com to see how we can help you Go Further along your business journey.
