Firas Abd-Alhadi Insurance awareness officer Insurance Commission of Jordan


in recent years, annual insurance growth in the region ranged between 15 and 20 percent. However, the combination of low penetration levels of less than one percent of gross domestic product (compared to 7.5 percent globally), changing public attitudes and the growing need for insurance products, all suggest substantial investment opportunities for both conventional and captive insurance.


Takaful insurance growth has also had a significant impact, particularly


when one considers that the region accounted for around 50 percent of takaful businesses worldwide in recent years, with a greater contribution expected in the future. Furthermore, socio-economic development has brought a new generation of executives and managers to the fore who are constantly striving for more cost-effective value in their businesses’ insurance allocations. Captive insurance is starting to provide the answer.


In the wider context, Jordan’s population is increasingly responsive


being drafted and issued, with regulation relating to protected cell companies expected to be introduced soon.


Captive instructions issued by the Insurance Commission of Jordan


(ICJ) include various provisions designed to ensure captives’ adequate performance. These ensure sufficient corporate governance, making captive performance the responsibility of the company’s board of directors even when a captive management company is assigned. The ICJ also includes provisions to ensure that captives apply accounting policies and disclosure requirements in line with International Accounting Standards and International Financial Reporting Standards, which were adopted by the Commission in 2001.


As is the case with traditional insurance companies, the ICJ applies the supervisory ladder as a criterion to assess the profile of captives based on the adequacy of capital, quality of assets, sufficiency of technical capacity, management, liquidity, subsidiaries and affiliate companies.


Finally, and acknowledging the standards of the International Centre


for the Settlement of Investment Disputes (ICSID), Jordan has an effective dispute resolution mechanism in the form of an Insurance Dispute Resolution Committee at the ICJ.


The wider regional and national context These legislative developments are timely, and considered against


the backdrop of wider regional circumstances, make prospects for a viable captive domicile in the region a strong likelihood. The insurance sector in the MENA region is rapidly growing, propelled by a sweeping expansion of major enterprises, improved insurance awareness, the revision of national legal and regulatory frameworks, and a tendency towards regional and international co-operation and tax flexibility. Thus,


to insurance services and boasts a highly qualified workforce that has been pouring into neighbouring insurance markets, while at the same time, retaining enough talented executives to spearhead rapid national growth. The entrepreneurship of these executives is being boosted by further opportunities through the country’s political stability and security, strategic location as a junction linking the Gulf States, the Levant, North Africa, Europe and Asia, and political and economic ties with the countries of these regions. Another distinct strength is a set of official policies emphasising integration with the global economy and the liberalisation of the national financial market. Indicative of this effort is the fact that foreign companies are permitted to 100 percent own local companies.


A closer look at these policies will also show a solid legal system, several bilateral double taxation treaties and anti-money laundering guidelines. These aspects are further enhanced by a well-developed infrastructure, the low cost of starting and maintaining businesses in the Kingdom, and a high standard of living.


The major player in channelling these advantages to the benefit of


the insurance sector is the ICJ, which has been credited as being a regulator that is highly responsive to investors. In addition to continuous interaction with parties in the Jordanian insurance sector, the ICJ has been actively involved in upgrading the regional insurance arena to attract global insurance investments. The ICJ assumed a major role in the establishment of the Arab Forum of Insurance Regulatory Commissions (AFIRC) and continues working with supervisory entities in the region to improve insurance supervision standards. The ICJ’s close affiliation with the International Association of Insurance Supervisors (IAIS) has likewise been beneficial to the Jordanian insurance sector.


ICJ’s efforts to provide a conducive environment for regional captives


are described by the ICJ’s acting director general, Rana Tahboub, as befitting the natural flow of “our activities and achievements in the past decade”, which initially began as a quest to realise the royal vision of Jordan as a regional insurance hub.


Firas Abd-Alhadi is insurance awareness officer at the Insurance Commission of Jordan. He can be contacted at: fabdelhadi@irc.gov.jo


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