The Financial Regulatory Authority (FRA) has issued its decision on reinsurance requirements for insurance companies. The decision was published in the Official Gazette on 17 June 2026.
The objective of the new regulation is to enhance the efficiency of risk management and raise the levels of governance and control in insurance companies, to support the stability of the sector and protect the rights of policyholders and beneficiaries.
Under the new requirements, an insurer must prepare a reinsurance policy that explains the reasons for resorting to reinsurance as a risk transfer tool and the economic feasibility of the company taking up reinsurance. This policy must include, at a minimum, the following:
1- The extent of the willingness to bear risks (risk appetite) and the extent of diversity in the portfolio, according to the different types of risks the insurer faces. This includes the company's perception regarding the concentration of risks and the limits of assignment.
2- The extent to which the company can bear the credit risks it is exposed to as a result of its dealings with reinsurance companies.
3- The target markets for reinsurance operations and the criteria that the company relies on in selecting reinsurers.
4- Cases in which the company uses external parties such as reinsurance brokers, general management agents or others in the reinsurance process, and the criteria for selecting them.
5- A statement of the procedures to be followed to manage the liquidity risk associated with reinsurance contracts.
6. Preparing a reinsurance programme that is commensurate with the size of the company’s activities and capital, including acceptable risk limits, net retention and various insurance coverages, as well as determining the maximum financial liability that the company can bear as a result of a single risk or event, with a statement of the impact of this on the company’s insurance portfolio.
The Authority stresses the need to develop integrated procedures for assessing and managing reinsurance risks, including periodic monitoring and analysis of risks and early intervention, reviewing the suitability of reinsurance policies in accordance with market developments, in addition to preparing contingency plans to deal with potential crises, including cases of insolvency or bankruptcy of reinsurance companies.
The decision requires companies to conduct periodic stress tests and scenarios annually or whenever necessary, to measure the impact of various risks on capital requirements and the company’s ability to meet its obligations, while establishing clear mechanisms for monitoring, assessing, and following up on risks and plans to deal with them if they occur.
To enhance levels of disclosure and transparency, the decision obliges insurance companies to ensure that reinsurance contracts are clear and explicit, allowing for an assessment of the extent of risk transfer, and that they include provisions regulating dealings in the event of bankruptcy of any of the contract parties, as well as providing the Authority with all issued and received reinsurance agreements within two months of the date of their conclusion or renewal.
The FRA also requires companies to submit detailed annual data, including the names of reinsurers, management agents and reinsurance brokers they deal with, their credit ratings, the geographical concentration ratios of premiums, the claims that were rejected and the reasons for rejection, enabling the Authority to monitor the levels of risks and obligations associated with reinsurance operations.
According to the decision, insurance companies are obligated to provide the Authority with their reinsurance policy after it is approved by the board of directors, and to notify the Authority of any amendments thereto, while reviewing the policy periodically, ensuring the efficiency of its implementation and addressing any observations or shortcomings that are detected.
The decision grants insurance companies a three-month grace period to adjust their situations in accordance with the new provisions and to provide the Authority with the approved reinsurance policy.