Month: November 2025

The ADGM Financial Services Regulatory Authority has released Consultation Paper No. 13 of 2025, outlining an extensive set of proposed enhancements to insurance regulation, climate risk governance and the long-term development of ADGM as a reinsurance centre. This follows the FSRA’s ongoing work to strengthen alignment with international standards issued by the IAIS, BCBS and IOSCO.
 
The proposals apply across Insurers including Captives, Insurance Intermediaries, Insurance Managers, Authorised Persons and Recognised Bodies.
 
1. Strengthening Alignment with IAIS Insurance Core Principles
 
The FSRA sets out targeted updates to improve consistency with the IAIS Principles. These focus particularly on reinsurance risk management and market conduct.
 
Reinsurance and Risk Transfer
 
Key proposals include:
• More detailed requirements for reinsurer selection, including financial strength, expertise and claims performance.
• Enhanced expectations for reinsurance claims reporting, monitoring and oversight.
• Clear obligations for insurers to consider reinsurer or ceding insurer insolvency within their risk management frameworks.
• Strengthened governance expectations for Insurance Special Purpose Vehicles, including collateral management, investment restrictions and confirming that investors cannot seek recourse to the ceding insurer.
 
Market Conduct
 
The FSRA also proposes enhancements to COBS to reflect international expectations for fair customer treatment. These include:
• Ensuring that business is only conducted with appropriately licensed persons.
• Stronger requirements for product design and distribution, including target market assessments, suitability considerations and product understandability.
• A specific obligation to withdraw any information that is not clear, fair or accurate, with reasonable steps taken to notify parties who relied upon it.
• Clearer rules on the distinction between giving advice and not giving advice, along with documentation requirements where advice is provided.
• Stronger expectations for identifying, preventing, managing and disclosing conflicts of interest.
These enhancements are intended to support the continued development of ADGM as a centre for more complex insurance activity.
 
2. Adoption of IFRS 17 for Insurance Contracts
 
The FSRA proposes full implementation of IFRS 17 for insurance reporting within ADGM. This will:
• Replace IFRS 4 as the applicable standard.
• Promote consistency and transparency in the accounting treatment of insurance contracts.
• Require updates to the PIN and CIB Rulebooks to align regulatory obligations with IFRS 17 principles.
This brings ADGM in line with leading international insurance jurisdictions.
 
3. Miscellaneous Enhancements Across the Framework
 
The consultation introduces several practical refinements designed to improve clarity and reduce unnecessary burden. These include:
• Clearer articulation of insurance activity restrictions, particularly regarding risks situated in other financial free zones.
• Automatic treatment of ceding insurers and insurance brokers as Market Counterparties, removing the need for classification checks in reinsurance business.
• Removal of quarterly reporting obligations for Captive Insurers unless otherwise required by the FSRA.
• Streamlining complaints handling through a single online submission channel, replacing email based reporting.
 
4. New Expectations for Climate Related Financial Risk Management
 
The FSRA proposes a proportionate and principles-based approach to the management of climate related financial risks. All Authorised Persons and Recognised Bodies will be required to:
• Assess whether climate related risks are material to their business.
• Manage any material risks in a way that reflects the nature, scale and complexity of the firm.
• Consider climate related risks as part of capital adequacy assessments.
Additional guidance will help firms determine when a climate related risk becomes material and how it can be appropriately managed within existing risk frameworks.
 
5. Establishing ADGM as a Regional Reinsurance Hub
 
The FSRA outlines its long-term intention to position ADGM as a regional centre for reinsurance and eventually home to Internationally Active Insurance Groups. A forthcoming discussion paper will set out proposals covering:
• Capital and solvency requirements
• Group supervision approaches
• Exit and resolution planning
• Public disclosure expectations
This is part of a broader multi-year programme to develop a high-quality regulatory environment for reinsurance operations.
 
Next Steps
 
The consultation remains open until 30 January 2026. Following review of industry feedback, the FSRA will finalise and implement the amendments.
 
How Clarity Can Help
 
Clarity Consulting Solutions supports firms across ADGM and DIFC with interpreting and implementing regulatory change. We work with insurers, intermediaries and broader financial institutions to provide:
• Regulatory gap analysis aligned to the proposed amendments
• Governance and operating model enhancements
• IFRS 17 readiness support
• Integration of climate related risks into risk and capital frameworks
• Conduct of business and product governance improvements
 
Our team combines deep regulatory expertise with practical insight to help firms meet expectations confidently and proportionately.
 
If you would like to discuss how these proposals may affect your business, our team is ready to assist.

The ADGM Financial Services Regulatory Authority (FSRA) has published Consultation Paper No. 12 of 2025, setting out a wide-ranging package of reforms to modernise the funds regulatory regime. The proposals reflect a holistic review of the framework and focus primarily on private funds, with further changes to follow in 2026.

The objective is clear: ensure proportionality, support industry growth, enhance regulatory clarity, and align ADGM with international best practice while maintaining robust investor protections.
 
Below is a structured overview of the key reforms.
 
1. A New Streamlined Framework for Sub-Threshold Fund Managers (STFMs)
 
The FSRA proposes a new category of Fund Manager designed for smaller private fund managers with lower risk profiles. This framework is broadly inspired by international sub-threshold AIFM regimes but adapted for ADGM.
 

Eligibility
 
• Up to USD 200 million committed capital across all funds managed
• May manage closed-ended Exempt Funds and QIFs (and equivalent foreign funds)
• Not permitted to operate a host-manager model (i.e., no delegation of investment management to sponsors or third parties)
 
Key Features
 
• Streamlined authorisation and reduced governance requirements
• No mandatory Finance Officer or internal audit function
• Base Capital Requirement (BCR): USD 50,000 (with no EBCM)
• Mandatory PII coverage (aligned with VCFM rules)
• Required disclosure to investors that the manager falls under a lighter-touch regime
 
Additional Points
 
• FSRA is seeking feedback on imposing a 100% NAV leverage cap for funds managed by STFMs
• Existing managers may “opt-in” if they meet eligibility
• Firms exceeding the USD 200m threshold would need FSRA approval to transition into the full-scope regime
 
2. Integrating the Venture Capital Fund Manager (VCFM) Regime
 
The FSRA proposes consolidating the existing VCFM regime into the new STFM category.
 
Key Developments
 
• VCFMs become a sub-category of STFM, preserving certain VC-specific flexibilities
• VCFMs would also be subject to the USD 50,000 BCR
• Clarification that the fundraising cap applies across all funds, not per fund
• VCFMs will be required to manage the Master Fund in a master–feeder structure (not only the feeder)
 
This consolidation aims to reduce complexity and ensure consistency across smaller fund manager types.
 
3. A Streamlined Framework for Institutional Fund Managers (IFMs)
 
A new regime is proposed for managers exclusively targeting institutional investors such as sovereign wealth funds and pensions.
 
Eligibility
 
• May manage only QIFs or equivalent foreign funds
• Minimum subscription USD 5 million
• No natural persons may be unitholders
 
Key Features
 
• Streamlined authorisation similar to VCFMs and STFMs
• No mandatory Finance Officer or internal audit function
• Higher of USD 50,000 BCR or 6/52 of annual audited expenditure
• Exempt from PII requirements due to the institutional-only investor base
 
Transition
 
• Existing managers may opt-in; those no longer eligible must transition to full-scope with FSRA approval
 
The FSRA is also seeking feedback on extending the IFM framework to certain investment managers with an FSP for Managing Assets, where they act only for affiliated fund managers and do not hold client assets.
 
4. Facilitating Employee Investment Vehicles (EIVs)
 
To support alignment of interests between fund managers and investors, the FSRA proposes a new framework enabling employees to invest in the funds they manage through an Employee Investment Vehicle.
 
Key Features
 
• EIVs explicitly excluded from the definition of a Fund
• Exempt from minimum subscription thresholds
• Client classification rules in COBS do not apply
• Participation limited to front-office staff directly involved in investment decision-making
• Fund Managers must:
o Provide clear disclosures on risks
o Demonstrate participants possess sufficient financial knowledge
o Obtain written risk acknowledgements
 
If non-eligible employees are admitted, the EIV would immediately lose its exempt status.
 
5. Strengthened Requirements for Foreign Fund Managers (FFMs)
 
The FSRA proposes several measures to increase oversight and establish a stronger nexus between FFMs and the ADGM.
 
Key Enhancements
 
• FFMs may manage closed-ended QIFs only
• Domestic funds must appoint a UAE-resident director (or UAE-resident director of the GP for investment partnerships)
• Mandatory appointment of an ADGM-based Fund Administrator
• Mandatory appointment of an ADGM-licensed Corporate Service Provider
• FFMs must submit to ADGM laws and ADGM Court jurisdiction
• FFMs cannot operate a host-manager model
 
Certain changes will not apply retrospectively to funds launched before the effective date.
 
The FSRA also proposes giving itself discretion to waive the requirement for an Eligible Custodian where impractical or disproportionate—consistent with current practice for authorised managers.
 
6. Feedback on Specialist Fund Categories
 
The FSRA is seeking industry input on the effectiveness and relevance of:
 
• The Private Credit Fund framework
• The eligibility and attestation requirements for Green Funds and Climate Transition Funds
• The framework for private REITs
 
This reflects ADGM’s intention to ensure specialist regimes continue to meet market needs.
 
7. Miscellaneous Amendments
 
The consultation also proposes targeted updates to COBS, FUNDS and PRU, including:
• New obligations for MTFs trading units of Professional-Client Funds
(e.g., controls to prevent trading by non-Professional Clients)
 
Next Steps
 
Consultation closes on 30 January 2026. Following industry feedback, the FSRA will finalise the amendments ahead of a second consultation paper in 2026, which will include further changes to the private funds regime and updates to the Public Funds framework.
 
How Clarity Can Help
 
At Clarity, we support firms across ADGM and DIFC in interpreting and implementing regulatory change. Our team advises Fund Managers, Asset Managers and Foreign Fund Managers on:
 
• Gap analysis and implementation planning
• Optimising governance, operating models and fund structures
• Interpreting eligibility for the STFM, IFM or VCFM categories
• Designing compliant EIV arrangements
• Preparing for changes to the FFM and specialist fund regimes
 
We combine technical depth with practical insight to help firms meet regulatory expectations confidently and proportionately.

Strengthening trust across Payment Services, Virtual Assets, and Fiat-Referenced Tokens

The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has issued significant updates to its Conduct of Business Rulebook (COBS), effective from 1 January 2026. The revised framework aims to reinforce client asset protection, operational resilience, and regulatory clarity across both traditional and digital financial activities.
 

Enhanced Safeguarding Framework

The amendments introduce stricter requirements for the segregation and record-keeping of Client Money, Relevant Money, and Safe Custody Assets — including Reserve Investments and Fiat-Referenced Tokens (FRTs). Firms will now require prior regulatory non-objection when appointing third-party custodians to hold reserve assets.
 

Strengthened Oversight of Fiat-Referenced Tokens

A new Chapter 19A establishes a comprehensive regime for FRT issuers, mandating monthly independent attestations of reserves, restricting the conduct of additional regulated activities, and prohibiting the issuance of tokens denominated in AED. The FSRA has also set out clearer guidance on how it will determine an “Accepted Fiat-Referenced Token”.
 
Elevation of the Payment Service Provider Regime
 
The revised Chapter 19 aligns ADGM’s Payment Service Provider (PSP) framework with leading global standards. Key provisions address client disclosures, safeguarding of both money and tokens, operational restrictions (including prohibitions on cash handling), and ongoing reporting. PSPs must now segregate Relevant Money and Fiat-Referenced Tokens into dedicated Payment Accounts, ensuring robust end-to-end protection for users.
 
Custody and Virtual Asset Governance
 
The treatment of Virtual Assets and FRTs under the Safe Custody Rules (Chapter 15) has been clarified, introducing weekly reconciliations and enhanced due diligence requirements for custodians. New governance measures on wallet management, transaction traceability, and technology oversight have also been formalised.
 
Greater Transparency and Accountability
 
From enhanced client disclosures to independent attestations, the updated COBS framework underscores the FSRA’s focus on transparency, accountability, and proactive regulatory engagement.
 
At Clarity Solutions, we help firms interpret and implement regulatory developments across ADGM and DIFC, ensuring compliance frameworks remain robust, proportionate, and aligned with supervisory expectations. Our team supports payment service providers, virtual asset firms, and regulated entities through practical advice, tailored implementation planning, and ongoing compliance support.