Statutory Regime Governing Insurance Contracts and Disputes

The primary legislation governing insurance in the UAE is Federal Decree-Law No 48 of 2023 Regulating Insurance Activities (the “Insurance Law”), which regulates the onshore insurance sector (ie, outside the financial free zones). It sets out the regulatory framework, including corporate governance and capital requirements for insurers, and establishes a basic dispute resolution mechanism for insurance claims. This mechanism is further detailed in Federal Administrative Decision No 10-A/1/2024, Federal Law No 14 of 2018, and Central Bank Decision No 1659/2023. Together, they set out the procedural steps for handling insurance disputes.

Insurance contracts and coverage issues are primarily governed by the UAE Civil Code (Federal Law No 5 of 1985).

Onshore Procedural Regime

Onshore, in the absence of a valid arbitration agreement, insurance disputes must first be referred to the UAE’s financial ombudsman, Sanadak. Sanadak reviews complaints by insureds and may refer matters to the Insurance Disputes Settlement and Resolution Committee (IDSRC), which adjudicates disputes between insureds or beneficiaries and insurers. IDSRC proceedings are conducted in Arabic.

IDSRC decisions are appealed directly to the Court of Appeal (CoA), bypassing the Court of First Instance (CFI). Decisions involving claims of up to AED50,000 cannot be appealed by insurers but may be appealed by insureds. Further appeals of CoA decisions may be made to the Court of Cassation. Unless appealed, Sanadak/IDSRC decisions are final and enforceable.

Offshore Procedural Regime

The Insurance Law, and the dispute resolution procedures within it, do not apply to insurance companies operating within financial free zones such as the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).

Within the DIFC and ADGM, insurance disputes are resolved either by their respective courts or through arbitration, depending on the agreed forum and governing law. In the absence of an agreement, the respective laws of the DIFC or ADGM apply.

The DIFC courts have three levels:

• the small claims tribunal (for claims below AED500,000);
• the CFI; and
• the CoA.

They follow a modified English common law system, where certain aspects of English law are codified into specific DIFC laws and regulations, such as the DIFC Contract Law and the DIFC Law on Damages and Remedies. The DIFC courts apply these laws, as well as their own judicial precedent, allowing them to depart from English law at their discretion.

The ADGM courts, similarly structured, comprise:

• the CFI; and
• the CoA.

They directly apply selected English statutes and common law, meaning English case law is binding in ADGM proceedings.

Litigation Process

Onshore

The first step in an onshore insurance dispute is for the complainant (insured or beneficiary) to complain directly to the insurer, who has 30 business days to respond. If the matter is not resolved, the complainant may file a complaint via Sanadak’s website, submitting contact details, the complaint’s subject, and supporting documents (in Arabic or English).

Sanadak may conduct preliminary inquiries or interviews, or request written responses from the insurer. If the complainant remains dissatisfied, they may request referral to the IDSRC. Sanadak will either resolve the complaint or refer it to the IDSRC within five business days. Sanadak’s determinations may be appealed to the IDSRC within 30 business days.

IDSRC proceedings require payment of a fee equal to 4% of the claim value (minimum AED100, maximum AED30,000), or a fixed AED3,000 for unvalued claims.

The IDSRC first explores amicable resolution. Failing that, it proceeds to determine the dispute through hearings or documentary review, potentially involving experts. A decision is issued within 20 working days after the IDSRC concludes its procedures, subject to extension by the IDSRC. Any appeal must be filed within 30 days to the competent CoA (geographical jurisdiction determined by the Federal Civil Procedures Code).

If a dispute falls outside Sanadak/IDSRC jurisdiction, it proceeds through the ordinary course in onshore courts under the Civil Procedures Code, from the CFI to the Court of Cassation. Claims are initiated online with a statement of claim, followed by a court-issued service of summons. Proceedings typically involve multiple “hearings” for filing of written memorandums, expert appointments, case management and argument.

Courts frequently appoint an expert to evaluate the matter. Although not binding, the courts often adopt the expert’s findings. Parties have limited ability to challenge the expert’s findings, and in practice, a complex insurance dispute may be determined by a professional without specific subject matter knowledge or experience.

Appeals are common, with minimal cost consequences. Although costs technically follow the event, awards are generally limited to court fees, court expert fees, and modest legal costs.

Litigation timelines vary, but a full appellate cycle may take up to two years or longer in complex cases.

Offshore

In the DIFC and ADGM, claims are governed by their respective procedural rules, which follow an English-style process. Proceedings are commenced by filing the appropriate claim form and paying the filing fee.

Arbitration

Arbitration can be used to resolve insurance disputes. However, under onshore UAE law, arbitration agreements are unenforceable unless agreed separately in a standalone contract and signed by an authorised person, rather than forming part of a policy’s general terms.

Rules on Limitation

Onshore, there is a default limitation period of 15 years in civil and commercial matters, unless the law provides for a shorter limitation period in particular cases. Some of these are:

• commercial contracts – five years from any breach of contract;
• tort (eg, negligence) – three years from the claimant’s awareness of the harm and responsible party, subject to a 15-year longstop from the date of the event;
• non-marine insurance claims – three years from occurrence or knowledge of occurrence; and
• marine insurance – one year (commencement depends on claim type).

Limitation may be suspended or interrupted by a “lawful excuse”, initiation of judicial proceedings, admission of liability, and waiver. Limitation periods cannot be modified by agreement.

In the DIFC and ADGM, the limitation period for most claims (including breach of contract and tort claims) is six years from the date a cause of action has accrued, which varies depending on the facts. Negligence claims are subject to extension depending on when the proposed claimant had the required knowledge to bring a claim, but subject to an overriding 15-year time limit. In the ADGM, a claim for personal injury is limited to three years from the injury or (if later) the claimant’s date of knowledge (as defined under the Limitation Act 1980 and incorporated into ADGM law); or if the injured person dies, three years from the date of death or the personal representative’s date of knowledge.

Alternative dispute resolution (ADR) is encouraged in the UAE.

Many forms of ADR can be used in the UAE, although arbitration and mediation are the most commonly used.

UAE law recognises a right to refer disputes to arbitration. Moreover, a number of arbitration centres have been established throughout the UAE, including the Dubai International Arbitration Center, and the Abu Dhabi International Arbitration Center (“arbitrateAD”), to manage, regulate and make arbitration more accessible. The rules of these institutions broadly mirror those of the well-established arbitration centres around the world.

Mediation is a less-prevalent form of ADR in the UAE than in other more established jurisdictions like England and Wales. However, it has gained traction in recent years. UAE authorities are promoting mediation and ADR, and Federal Decree-Law No 40 of 2023 on Mediation and Conciliation in Civil and Commercial Disputes was issued to introduce a framework for mediation in the UAE. Court-annexed mediation is also available in the DIFC and ADGM.

One impediment to ADR is that, outside the DIFC and ADGM, the common law doctrine of “without prejudice privilege” is not recognised to protect from disclosure communications and documents created to progress a settlement. Under the civil law system, those documents can be adduced as evidence in court. Unless and until there is a clear equivalent privilege doctrine under onshore law, parties are likely to approach mediation and ADR with caution.

The popularity of ADR is driving an increasing number of commercial entities to integrate it into agreements, either as an alternative to local courts, or as a step to be taken before formal proceedings. Indeed, certain disputes with government entities are obliged to be first referred to mediation.

Onshore

Article 39 of the Federal Civil Procedures Code (Federal Decree-Law No 42/2022) provides that jurisdiction lies with the courts at the insured’s domicile or the location of the risk. Agreements contrary to this are void, but this rule applies only to onshore disputes, given the UAE’s dual court structure.

Read together with the legislation establishing the UAE’s insurance dispute resolution mechanisms, this means that in onshore insurance matters, jurisdiction will ordinarily rest with Sanadak and the IDSRC. These bodies operate at the federal level and handle claims from across all the Emirates. Any appeal of their decisions is heard by the competent Court of Appeal, whose geographical jurisdiction is determined by the insured’s domicile or risk location. Sanadak and the IDSRC lack jurisdiction over subrogated recoveries or disputes between insurers, which are heard by the court of first instance or resolved via arbitration, if validly agreed.

Offshore

DIFC and ADGM court jurisdiction is governed respectively by Dubai Law No 12 of 2004 (the “Judicial Authority Law”), and Abu Dhabi Law No 4 of 2013 and the ADGM Courts Regulations 2015. These courts may assume jurisdiction where: (i) a DIFC/ADGM entity is involved, or the contract is linked to, or performed in, the DIFC/ADGM; or (ii) the parties have agreed to submit to DIFC/ADGM jurisdiction (ie, “opted in”).

Jurisdictional Ambiguity and Conflict

There is, however, tension between the offshore courts permitting parties to opt in, and the onshore Civil Procedures Code prohibiting contracting out of its jurisdictional rules. This can lead to parallel proceedings and forum shopping where both onshore and offshore courts have arguable competence. Choice of jurisdiction clauses should be precise. For example, clauses referring simply to “the courts of the UAE” might include both DIFC and onshore courts. To avoid ambiguity, clauses should identify the specific court, seat, and governing law.

In Dubai, jurisdictional conflicts may be referred to the Judicial Authority for Resolving Jurisdictional Conflicts (Dubai Decree No 29 of 2024). This body has authority over all jurisdictional disputes involving any Dubai judicial body, not just onshore and DIFC courts. Upon referral, proceedings and limitation periods are suspended until a final decision is made, which cannot be appealed.

Conflicts involving the ADGM courts are typically resolved through co-operation between the ADGM, Abu Dhabi courts, and the Ministry of Justice.

Foreign judgments can be enforced in the UAE but are not automatically recognised. The process varies depending on whether enforcement is sought in the onshore UAE courts (civil law jurisdiction) or in the offshore courts (DIFC and ADGM, which follow common law principles).

Treaties such as the GCC Convention and the Riyadh Arab Agreement simplify recognition and enforcement between signatory states by providing special enforcement regimes. The UAE has also entered into several bilateral treaties that address judicial co-operation and the mutual recognition of judgments.

Where no treaty applies, enforcement in onshore courts is governed by Article 222 of the UAE Civil Procedure Law (Federal Decree-Law No 42 of 2022). Reciprocity is essential. A foreign judgment will only be enforced if the originating country would enforce UAE judgments on the same terms.

Even where reciprocity exists, the foreign judgment must meet five substantive criteria under Article 222:

• the UAE courts must not have exclusive jurisdiction over the matter, and the foreign court must have had proper jurisdiction under its own conflict rules;
• the judgment must be duly issued and ratified in accordance with the law of the issuing country;
• the litigants must have been duly summoned and properly represented;
• the judgment must have the force of res judicata, either inherently or by subsequent finalisation; and
• the judgment must not conflict with any UAE court decision and must not violate UAE public order or morals.

These conditions can pose difficulties. For example, default judgments, particularly where the defendant was not substantively represented, may be open to challenge under Article 222(c). Public order objections might include matters involving interest (riba), foreign penalties not recognised in the UAE, alcohol, gambling, family matters, or inheritance.

The DIFC courts, which apply common law principles, routinely enforce foreign judgments without requiring reciprocity or public policy review. In contrast, the ADGM courts still require recognition of reciprocity.

Federal Law

The UAE is a federal state comprising seven emirates. Three of these, Dubai, Abu Dhabi, and Ras Al Khaimah, operate their own court systems. The remaining four emirates, Sharjah, Ajman, Fujairah, and Umm Al Quwain, all operate under the federal judicial framework. Each emirate retains legislative power over matters not assigned to the federal government, and most substantive laws are UAE federal laws. In all cases, federal law takes precedence over local emirate laws.

Court System

The UAE court system is structured in three tiers. The court of first instance serves as the primary venue for hearings and factual examination. Its judgments can be appealed to the Court of Appeal, where parties have an automatic right to challenge both facts and law, provided the appeal is filed within 30 days of the first-instance judgment for most matters. A further appeal may be made to the Court of Cassation, also within 30 days. This is the final appellate stage and is limited to points of law, albeit interpreted broadly. In most cases, no permission is required to appeal, and it is common for parties to appeal as a tactical measure.

Use of Arabic

Arabic is the official language of the UAE courts. All claims, pleadings and evidence must be submitted in Arabic, and any documents in other languages must be translated by a Ministry of Justice-certified translator. Some onshore courts have introduced English as a secondary official language for specialised commercial disputes, but implementation of this is piecemeal, slow and subject to the discretion of each court’s president.

Appointment of Experts

In complex litigation, court-appointed experts play a central role. Judges frequently appoint technical experts to examine evidence and prepare independent reports, particularly in insurance, construction and financial disputes. Courts rely heavily on these reports and often adopt them without modification. While invaluable in clarifying technical matters, expert appointments can significantly extend the duration of proceedings, with first-instance cases involving experts often lasting up to two years, or longer in complex cases.

In conclusion, international insurers litigating in the UAE must be prepared for a civil law environment that emphasises procedural compliance, regulatory oversight, the decisive influence of court-appointed experts, and a court process centred on the Arabic language. Careful contract drafting and early engagement of local specialist legal advice can help navigate these complexities.

While the courts in the UAE have a general tendency to respect and enforce arbitration provisions in commercial contracts of insurance and reinsurance, there are certain distinct provisions of law to be complied with. Failure to comply will almost certainly prove fatal to the enforceability of the arbitration agreement.

Article 1028(d) of the Civil Code states that an arbitration agreement in an insurance contract must not form part of the general conditions. It must be a separate standalone agreement and be signed by persons expressly authorised to bind the entity to arbitration. 

The UAE courts have consistently invalidated arbitration clauses that fall foul of these requirements. 

The UAE adopted the 1958 New York Convention on Recognition and Enforcement of Arbitral Awards in 2006 (Federal Decree No 43 of 2006), and its courts are generally supportive of enforcing foreign arbitral awards in line with the convention’s principles.

The domestic legal basis for enforcement of foreign awards is now found in Articles 222 and 223 of the Civil Procedure Law (Federal Decree-Law No 42 of 2022). This requires, among other things, that the award does not violate public policy, that due process was observed, and that the dispute could be resolved by arbitration under UAE law.

A party seeking the enforcement of the foreign award must submit an application directly to the relevant onshore execution judge, together with the original award and supporting documents. The execution judge is required to render their decision within five days, and their order may be appealed within 30 days. The court’s review is limited; it does not re-examine the merits of the case. While a counterparty may challenge and/or appeal enforcement, for instance on jurisdictional or procedural grounds, in recent years the courts have become increasingly consistent in applying the New York Convention and upholding enforcement unless clear and serious irregularities are present.

Foreign arbitral awards may also be enforced by the DIFC and ADGM courts, each of which has its own arbitration and enforcement regime. Awards recognised in these courts can be executed in mainland UAE using reciprocal enforcement procedures.

Arbitration in the UAE is a well-established and popular method for resolving disputes, especially in the context of international trade, commerce or insurance. The legal regulations provide a structured approach to arbitration proceedings, enhancing the UAE’s position as an arbitration hub.

Arbitration is often preferred due to its efficiency, confidentiality, and the ability to select arbitrators with specialist expertise.

Arbitration in matters of insurance is most often found in commercial lines, such as marine, aviation, reinsurance, and complex property or construction-related insurance.

Generally, awards cannot be appealed and reviewed on the merits, but can nonetheless be challenged or set aside before and by the UAE courts on a number of specific grounds outlined in the UAE Arbitration Law (ie, Article 53 of the Arbitration Law): procedural irregularities, lack of jurisdiction, public policy violations or invalidity of an arbitration agreement.

For foreign awards, the challenge can also be based on the grounds found in the New York Convention of 1958 (ie, Article V), which are generally more limited than those related to domestic awards and found in local regulations.

In general, the grounds for refusing enforcement and appeal of a foreign award under the New York Convention and the UAE regulations are limited and do not ordinarily permit a merits review.

The UAE has an onshore civil law system and terms can only be implied into contracts by a specific code or legislation. This is in contrast to the DIFC and ADGM where legal principles and rules established in case law may also be impliedly incorporated into contracts or agreements.

Certain obligations are implied into all contracts through the UAE’s Civil Code, such as the requirement to perform a contract in good faith (Article 246(1) Civil Code). Insurers specifically are bound to act in accordance with the principle of utmost good faith in their dealings (Article 3, Insurance Authority Resolution 3, 2010).

The Civil Code also mandates that a party’s contractual obligations are not restricted only to what is written in the contract but extend to the contract’s “essentials in accordance with the law, custom and the nature of the transaction” (Article 246(2)). The effect is to convert into a term of the contract anything generally regarded as a mandatory or necessary practice in the relevant sector or industry. Certain ancillary provisions may therefore find their way into a contract in the absence of their explicit inclusion.

Given the lack of binding legal precedent, there is limited guidance on how such provisions should be interpreted and applied in the context of insurance contracts. However, it indicates to both insurers and insureds alike that, even under UAE law, their obligations are likely to extend far beyond the express terms set out in writing in their policy documentation and they will generally be bound to act in accordance with established industry practices.

Similar legislative provisions apply in the DIFC. Article 62 of the Law of Obligations No 5 of 2005 imposes a duty of honesty and utmost good faith on all parties to an insurance contract.

The DIFC’s Contract Law of 2004 also creates implied contractual obligations which arise from:

• the nature and purpose of the contract;
• practices established between the parties and usages;
• good faith and fair dealing; and
• reasonableness (Article 57).

Additionally, DIFC courts will tend to refer to English case law when determining a party’s obligations in any given case, which should provide greater certainty in the interpretation of insurance clauses than in cases decided by the UAE’s onshore courts.

UAE onshore law (Article 1032(b) of Federal Law No 1 of 1987) imposes on the insured an obligation to reveal, at the time of conclusion of the contract, all information that the insurer considers to be of importance in order for it to assess the risks it is being asked to cover.

The position under UAE law is however less clear with respect to:

• the format in which such information must be provided, ie, to avoid data dumping on the insurer; and
• whether the insurer has any corresponding obligations, eg, to act as a prudent insurer in making reasonable enquiries or investigating information provided by the insured. 

Further, under UAE law, the insured must inform the insurer of all matters which occur during the contract period and which lead to aggravation of the risk (Article 1032(c), Federal Law, No 1, 1987).

The consequence of failing to disclose relevant information to an insurer is that the insurer may “cancel” the policy. The immediate effect of this on any ongoing claims is not clearly defined under UAE law and is likely to be determined on a case-by-case basis, having regard to the facts and policy terms. “Cancellation” is not an automatic process and must be obtained via application to the court.

On cancellation, an insurer can retain the premium only if it can prove “bad faith” on the part of the insured (essentially, fraudulent misrepresentation or non-disclosure). Otherwise, the premium is pro-rated for the period during which the insurance policy was on risk.

Slightly different rules apply to marine insurance, with a similar pre and post-contract disclosure obligation on the insured (Article 293, Maritime Code), but with different consequences. The premium can also be retained upon cancellation even after an innocent non-disclosure, but only if the insurer can prove it would not have issued a policy at all had it been aware of the true nature of the risk (Article 298, Maritime Code).

Again, in the DIFC, similar duties are imposed on the insured to disclose to the insurer facts within their knowledge which would influence the judgment of a prudent insurer in determining the conditions of the contract or whether to enter into it, and which duty subsists throughout the life of the insurance contract (Article 61, Law of Obligations No 5, 2005). Knowledge held by an agent is explicitly imputed to the insured.

Further, the duty of utmost good faith contained in Article 62 of the same law involves specific disclosure requirements (of both parties) in relation to every fact relevant to the insurance contract. The parties must also refrain from making any misrepresentations. 

Over the past 12 months, the UAE insurance market has seen a number of coverage disputes arising from extreme weather events, regional instability, and evolving lines of insurance.

Most notably, the April 2024 floods gave rise to a large volume of property, construction and motor claims, with some coverage disputes ongoing. These have focused on issues such as the application of deductibles and sub-limits, the interpretation of relevant exclusions and warranties concerning the actions of or precautions taken by the insured, and the application of wide area damage principles, particularly in relation to business interruption cover where losses were sustained across multiple locations.

The regional geopolitical environment has also contributed to claims activity. In particular, the seizure of vessels by Iranian forces in and around the Strait of Hormuz has led to coverage issues under and between marine hull and war risks policies. These include the proper identification of policy triggers, and whether and when the insured has suffered loss. Attention has also been drawn to the relatively short one-year limitation period for marine insurance claims under the UAE Maritime Code (UAE Federal Decree-Law No 43/2023) and the statutory threshold for constructive total loss under the same law.

Cyber-insurance continues to develop as a line of business. While still relatively young in the UAE, there has been a noticeable increase in claims notifications, particularly for incidents involving ransomware, social engineering, and business interruption. The few disputes that have arisen have involved interpretation of exclusions, questions over whether a loss falls within scope, and challenges in evidencing and quantifying losses.

Onshore

(Re)insurance disputes in the UAE are primarily resolved through court proceedings under a civil law system based on codified legislation. Sharia applies only where statutory gaps exist. The courts follow an inquisitorial approach, focusing on written submissions rather than oral advocacy. There is no case law in the sense of binding precedent. The courts have discretion to determine matters by application of the codified civil law on a case-by-case basis.

In the absence of an arbitration clause, disputes begin with Sanadak and the IDSRC reviewing the case and making a determination before any appeal to the Court of Appeal, bypassing the court of first instance.

Appeals to the Court of Cassation are common and relatively low cost. Costs generally include court fees and nominal legal costs. A full appeal cycle may last up to two years, or longer for complex cases.

Courts do award interest, generally from the date of claim or judgment, with rates up to 9% depending on the emirate.

Where a valid arbitration agreement exists, disputes may proceed to arbitration.

Arbitration

Arbitration of insurance coverage disputes is possible and would be governed by the UAE Arbitration Law (Federal Law No 6 of 2018). This law requires that the arbitration agreement: (i) be in writing; (ii) be separately agreed; and (iii) be signed by an authorised person. UAE law also requires that arbitration agreements be agreed separate to the insurance policy.

Offshore

The DIFC and ADGM courts handle both insurance and reinsurance matters. The DIFC applies its own codified laws, heavily influenced by English law, while the ADGM directly applies English law and a selection of English statutes.

Cases in these jurisdictions are determined under a common law framework following an adversarial approach to litigation similar to what is found in other international common law jurisdictions, like England and Wales. As such, judicial precedent in (re)insurance cases from other common law jurisdictions is influential. English case law is binding in the ADGM.

UAE law generally provides significant consumer protection. In the context of insurance, there is nothing which covers all lines of business, but there is a general understanding that individual policyholders have greater rights and safeguards compared to a commercial entity. This would apply in most coverage disputes, where a court/tribunal is likely to see that individual policyholders are often in a weaker position, lacking legal and technical expertise and negotiation power, leading the court/tribunal to be more “insured friendly”.

There are also certain additional protections and other regulators in respect of certain types of policies. By way of example, for medical insurance policies in Dubai, there are other laws, which include the Dubai Health Insurance Law No 11 of 2013 and its implementing regulations, such as the Dubai Health Authority General Circular 1 of 2020 and Administrative Resolution 78/2022. These restrict an insurer in certain situations from cancelling a policy solely due to a non-declaration of a condition, and where an insurer is able to cancel, it would first need to co-ordinate this with the Dubai Health Authority.

Third parties can enforce an insurance contract or sue an insurer under certain circumstances.

Under UAE contract law, a contract cannot impose obligations on third parties without their agreement, but it may establish a right in their favour. The UAE Civil Code (Federal Law 5 of 1985) also recognises that insurance proceeds may be payable to a policy beneficiary, rather than the direct named insured (Article 1034).

In general, exclusions within an insurance contract that restrict the rights of third parties are not likely to bind those third parties if a UAE court in its discretion determines that the (re)insurance policy confers a benefit on the third party. This heightens the risk of direct third-party action against insurers.

UAE law refers to “bad faith”, but does not provide an explicit definition of what constitutes “bad faith”.

That said, as discussed above, certain obligations are implied into all contracts through the UAE’s Civil Code, such as the requirement to perform a contract in “good faith” (Article 246(1) Civil Code). In addition, if an insurer cancels an insurance policy for misrepresentation and/or non-disclosure, an insurer can retain the premium only if it can prove “bad faith” on the part of the insured (which is, essentially, fraudulent misrepresentation or non-disclosure).

There are no explicit penalties for delayed claim payments, but there are three forms of penalties that could be applied to insurance companies:

• damages (if litigated) – these are rarely (if ever) awarded by the UAE courts, however, as there are onerous requirements to proving actual direct damage caused by the delay;
• interest – which, as discussed above, courts award from either the date of claim or judgment, with rates up to 9% simple interest depending on the emirate; and/or
• regulatory fines and penalties.

As to regulatory fines, the Insurance Authority Board Resolution No 3 of 2010 (concerning the Code of Conduct and Ethics for insurance companies) requires under Article 9.(2) for insurers to settle claims without delay, and under 9.(4) to notify the insured of coverage within 15 days of receipt of complete documents, unless an explanation is provided for a longer period. There is a specific penalty for breach, but Article 33 of the Insurance Law (Federal law 48/2023) gives the regulator, the Central Bank of the UAE (CBUAE), powers to conduct periodic inspections on insurers which include powers to verify if insurers are complying with their obligations. If the CBUAE determines that an insurer has failed to do this, it could, among other things: (i) restrict the insurer’s policy issuance; (ii) suspend the licence; or (iii) apply fines (that cannot exceed AED100 million).

An insured is bound by the representations made by their insurance broker, as the broker is considered the agent of the insured, provided the insurance broker has the requisite authority. This position is reinforced by both insurance regulations and the UAE Civil Code.

• Insurance Brokers’ Regulation 2024: Per Article 12.1 an insurance broker must (i) obtain written authorisation from its client to act on their behalf; (ii) explain to the client the importance of accurate disclosure and the consequences of providing incorrect information; and (iii) provide the insurer with “accurate and adequate information necessary for underwriting purposes”.
• UAE Civil Code (Federal Law 5 of 1985): Article 149 states that a contract can be made through a representative. Article 152 further clarifies that if a contract is made by a representative acting within their scope of authority, the principal (the insured) cannot claim ignorance of any circumstances that the representative knew or should have known.

Delegated underwriting in the UAE is generally limited. The CBUAE does not recognise the concept of managing general agents or managing general underwriters and, while the ADGM and DIFC financial free zones permit the licensing of these activities, this is limited to reinsurance.

In relation to health insurance lines of business, claims handling is commonly delegated by insurance companies to third-party administrators (TPAs). In recent years, there has been increasing use of TPAs for related lines of business such as group life and personal accident. In relation to the administration of health insurance claims, TPAs are regulated by the CBUAE and must operate in accordance with Insurance Authority Board Resolution No 9 of 2011 Concerning the Instructions for Licensing Health Insurance Third Party Administrators and Regulation and Control of their business (the “IA Board Resolution”). Obligations include a requirement for TPAs and insurance companies to enter into an agreement to document the parties’ respective rights and obligations, including the matters specified in the IA Board Resolution. Consequently, any dispute between an insurance company and a TPA would typically be handled as a matter of breach of contract. A TPA acts as an agent of the insurance company and, as such, in the event of a coverage dispute, an insured party would usually pursue the insurance company rather than the TPA.

As in many jurisdictions, in the UAE, insurers commonly fund the legal defence of their insureds in third-party liability claims, provided it is part of the insurance cover.

Defence costs are a standard feature in various liability policies, including:

• Comprehensive general liability (CGL) policies – these cover legal expenses for claims involving bodily injury or property damage that occur during the insured’s business operations.
• Professional indemnity (PI) policies – these cover professionals like doctors, lawyers and engineers against liabilities arising from their services.
• Directors and officers (D&O) policies – these provide coverage for legal costs associated with claims against a company’s leadership for wrongful acts.
• Employers’ liability (EL) policies – these cover legal defence for claims alleging employment practice violations, such as wrongful termination or discrimination.
• Motor liability insurance: this funds the defence for third-party claims resulting from a motor vehicle accident.

Insurance policies are typically drafted with one of the following approaches to managing legal defence:

• Duty to defend – the insurer takes direct control of the defence, appointing legal counsel and covering all reasonable legal costs within the policy’s limits.
• Right to defend – the insurer has the option, but not the obligation, to take over the defence. This provides them with flexibility.
• Claims co-operation – the insurer does not directly manage the defence but agrees to reimburse the insured for reasonable legal costs, provided the insured co-operates fully and obtains the insurer’s prior consent.

In all scenarios, the insured is generally required to get the insurer’s written consent before incurring defence costs, and those costs must be reasonable.

Traditional insurance products are unlikely to change significantly, but evolving risks will drive the development of new solutions and impact existing coverage. Within the UAE, examples include addressing emerging threats related to technology, environmental factors and global politics.

Legal costs and the complexity of litigation in the UAE have increased in recent years due to several key factors, including:

• Inflation in claim values – the overall value of claims has increased, leading to higher financial stakes in disputes. This, in turn, can increase litigation costs as parties invest more resources in the proceedings. A recent ruling by the Dubai Court of Cassation has also signalled a shift (albeit it is still very early days and could be subject to various conditions) towards allowing for the recovery of actual, and not just symbolic, legal fees, which may further drive up the cost of litigation.
• Jurisdictional challenges – the parallel existence of the UAE’s onshore courts and the common law courts in financial free zones (the DIFC and ADGM) often leads to jurisdictional disputes. These conflicts can result in concurrent proceedings, causing significant delays and driving up costs.
• Evolving arbitration landscape – the UAE has become increasingly pro-arbitration, especially following the implementation of the Arbitration Law and recent amendments. While arbitration is often seen as a flexible and efficient alternative to litigation, the process itself can become complex. Jurisdictional challenges related to enforcing awards or disputes over the arbitration clause can add layers of complexity and cost.
• New technologies and expertise – the emergence of new technologies and business models, such as those related to AI and innovative architecture, has introduced novel legal issues. Resolving these disputes often requires the involvement of specialised, and often expensive, technical experts, which contributes to the overall increase in litigation costs.

Claimants in the UAE can obtain protection against the risk of paying costs, but (i) such cover is not widely available; and (ii) the availability and type of protection can vary significantly depending on the court.

Onshore Courts

Onshore UAE courts, which follow a civil law system, generally award only nominal legal costs. This has made third-party litigation funding rare. However, a recent ruling by the Dubai Court of Cassation allows for the recovery of actual legal fees if the contract explicitly permits it. This development could increase confidence in litigation funding for onshore disputes.

Free Zone Courts

In contrast, the DIFC and ADGM common law courts have more developed frameworks. They follow the “loser pays” principle, where a winning party can recover a significant portion of their legal costs. These free zones also have formal rules governing litigation funding, providing claimants with a structured way to finance their cases and protect against adverse cost orders.

Arbitration

Arbitration is also a favourable option for claimants, as most major arbitration rules grant tribunals the discretion to award costs, including legal fees, to the successful party.

Under both onshore and offshore UAE legal frameworks, insurers are generally entitled to exercise rights of subrogation, meaning they have a legal right to recover sums from third parties responsible for causing an insured loss.

Through subrogation, the insurer effectively “steps into the shoes” of the insured and can pursue a recovery action against the liable third party. For subrogation to apply, the insurer must have paid out a valid insurance claim, and the insured must have had a viable cause of action against the third party. The insurer cannot recover more than it paid in indemnity.

Insurance policies commonly include contractual waivers of subrogation. Under onshore UAE civil law, subrogation is expressly excluded in respect of certain categories of persons, including the insured, their ascendants or descendants, spouse, co-habitants, and those for whose acts the insured is responsible. Beyond these limited exclusions, the enforceability of broader contractual waivers of subrogation in onshore UAE policies remains uncertain. By contrast, such waivers are generally considered enforceable in the offshore jurisdictions of the DIFC and ADGM, where common law principles apply and contractual freedom is more robustly upheld.

Under onshore UAE civil law, the insurer’s right of subrogation is codified in Article 1030 of the UAE Civil Code (Federal Law No 5 of 1985). This provision establishes that once the insurer has indemnified the insured for a loss, it is subrogated to the insured’s rights against any third party responsible for that loss, to the extent of the amount paid. Subrogated recovery proceedings in the onshore courts are typically brought in the name of the insurer.

In the offshore jurisdictions of the DIFC and ADGM, the right of subrogation is not codified in a specific statute. However, the right is available under the common law principles that apply in both jurisdictions. Under those principles, recovery actions by insurers are generally pursued in the name of the insured.

The volume and type of insurance-related claims and litigation in the UAE continue to be shaped by macroeconomic factors and external shock events.

The COVID-19 pandemic resulted in a surge of business interruption claims, particularly in the hospitality and retail sectors, while simultaneously contributing to a drop in claims under classes such as motor and aviation, where activity was reduced.

The pattern of single events dramatically shifting claims activity has broadly continued. The April 2024 floods triggered a significant volume of claims across property, motor and construction policies, with many now progressing to formal disputes. These events have underlined the increasing underwriting and litigation exposure associated with extreme weather, and have added urgency to the regional conversation around climate-related insurance risk. While not directly linked to those floods, the publicised practice of cloud seeding in the UAE has come increasingly under the spotlight since then, with some questioning whether it might have any effect on the likelihood or severity of heavy rainfall events, and what that could mean for insurers.

In parallel, economic volatility, rising interest rates and inflationary pressures have heightened the potential for disputes in property and construction, particularly where project delays or cost escalations have occurred.

The impact of more recent macroeconomic developments, such as the imposition of international tariffs by the United States, the widespread integration of AI into society, and the continued development of the UAE’s regulatory and taxation framework, is yet to be seen.

Despite geopolitical instability and regional conflict, 2025 has not been a particularly heavy year for traditional insurance claims in the UAE. The volume of disputes has remained largely event-driven, reflecting the pattern that single shocks can have a disproportionate impact on claims activity. The outlook for the next 12 months will similarly depend on the incidence of such individual events, whether climate-related, geopolitical or economic.

What is more predictable is the effect of claims inflation. Ongoing inflationary pressures are increasing the cost of property reinstatement, construction projects and liability exposure. At the same time, international trade tariffs and supply chain disruptions are expected to drive up costs for materials and equipment, adding to the quantum of claims in property, construction and related classes.

Accordingly, while the frequency of disputes is likely to remain contingent on unpredictable external events, the severity of claims is expected to rise.

One of the key coverage issues that has arisen in the UAE is the impact of claims inflation. Where the cost of reinstatement or repair increases significantly between the date of loss and the adjustment of the claim, a question arises as to whether the insured or the insurer should bear those additional costs. In practice, the answer mostly depends on the policy wording and on the cause of delay in progressing the adjustment.

Increasingly, these matters are resolved through negotiation on a case-by-case basis, rather than by reference to established judicial authority.

The onshore UAE courts do not operate under a binding precedent system, and there is no concept of a “test case” to settle such issues for the wider market. As a result, each dispute is determined on its own facts, and outcomes can vary. The offshore courts in the DIFC and ADGM apply a common law system and publish judgments that may have persuasive value, but their insurance case law remains limited.

Accordingly, questions of allocation of increased costs arising from claims inflation, and other novel coverage issues, will need to be addressed individually in the UAE.

Large loss events such as the April 2024 floods have had a noticeable impact on certain classes of business, particularly motor and property. However, the effect has been felt more in the form of premium inflation than in any restriction of the availability of cover. Insurers are adjusting pricing to reflect their higher loss experience and the rising cost of claims, but capacity has not been materially withdrawn from the market.

At the same time, the UAE insurance sector is experiencing a cycle of new entrants and increased capacity, which is driving competition and exerting deflationary pressure on premium levels across a number of lines. The combination of new market participants and strong regulatory oversight has helped maintain a broad appetite for risk.

Accordingly, while there has been some repricing following recent catastrophic events, there has been no significant reduction in the availability of cover in the UAE. Overall, the appetite for underwriting risk remains stable, and the market continues to offer wide cover options across commercial and consumer lines.

Environmental, social and governance (ESG) factors are increasingly shaping insurers’ portfolios and influencing the litigation landscape in the UAE, as the country advances toward its “Net Zero by 2050 Strategy” and broader sustainability commitments.

In underwriting, insurers are placing greater emphasis on climate-related exposures, particularly in high-impact sectors such as construction, real estate and energy. Projects that fall short of environmental standards or demonstrate weak sustainability practices may face elevated premiums or restricted coverage, while those with strong ESG credentials are often rewarded with more favourable terms. Social factors, such as labour welfare, workforce diversity and human rights compliance, are also gaining prominence, especially in workers’ compensation and liability lines. Governance considerations, including transparency, ethical conduct and regulatory compliance, are now central to underwriting D&O and PI insurance.

On the litigation front, ESG-related claims, such as greenwashing, regulatory violations and environmental harm, are beginning to surface, prompting insurers to reassess and tighten policy language to mitigate exposure. New ESG reporting requirements from UAE regulators like the Securities and Commodities Authority and ADGM are also encouraging insured entities to strengthen their ESG practices or risk legal and financial consequences.

The data protection landscape in the UAE is evolving rapidly, significantly influencing how insurers approach both underwriting and litigation. This shift has been accelerated by the introduction of Federal Decree-Law No 45 of 2021 on the Protection of Personal Data (“UAE DPL”), which came into effect in January 2022.

Insurers must now closely evaluate the data protection compliance of insured entities across both onshore UAE and free zones when underwriting cyber, professional indemnity, and D&O policies. Weak data governance or inadequate cybersecurity measures, particularly in data-intensive sectors such as healthcare, education and retail, can lead to higher premiums, coverage limitations, or even denial of coverage.

On the litigation front, the UAE DPL has heightened the risk of claims stemming from data breaches, improper handling of personal data, and violations of data subject rights. This has increased insurers’ exposure to third-party liability claims, regulatory penalties, and the early signs of “class-action style” lawsuits (though these are still rare in the region). This has led to more cautious policy drafting, particularly in cyber and liability insurance, with tighter terms and exclusions related to unlawful data processing.

Regulators are actively enforcing compliance, increasing legal risk. As data protection enforcement strengthens, insurers must continually adapt underwriting frameworks and policy wordings to manage emerging data privacy risks.

The following legislative and regulatory developments have significantly affected insurance coverage and insurance litigation in the UAE.

New Insurance Authority Law

In force since 30 November 2023, Federal Decree-Law No 48 of 2023 is now the principal onshore framework for UAE insurance. It consolidates prior rules, places the CBUAE at the centre of regulatory supervision, and licenses the full insurance value chain: insurers, brokers, agents, TPAs and loss adjusters. The law divides business into (i) persons/fund accumulation; and (ii) property/liability, which cannot be combined unless CBUAE approval is obtained. UAE-situated risks should be insured by a UAE-licensed insurer (there is an exception for reinsurance). Policy form rules have been tightened. Arabic policy wording prevails over any other policy translations, key exclusions must be prominent, and electronic issuance of policies is allowed. The power to establish a policyholder protection fund adds a future safeguard, particularly in insolvency scenarios.

New Insurance Ombudsman

Sanadak is the UAE’s first financial and insurance ombudsman for consumer policyholder complaints after the insurer’s internal process. Following a complaint, Sanadak undertakes a structured, time-bound dispute resolution process (in Arabic or English) and may request information before upholding, partially upholding, rejecting, or escalating a complaint. Following escalation, adjudication of insurance disputes proceeds through a judge-led committee called the IDSRC before limited appeals to the court. Filings before the IDSRC are in Arabic. The IDSRC may appoint experts, and decisions are enforceable unless appealed within a 30-day window to the Court of Appeal. Insurers cannot appeal decisions worth AED50,000 or less (but policyholders can). The new combined ombudsman and committee structure encourages earlier resolution and tighter procedural discipline in coverage and claims disputes.

New Broker Regulations

The Insurance Brokers’ Regulation 2024 (effective 15 February 2025) has reshaped distribution and payment flows in the insurance market. Claim payments and premium refunds must be paid directly by insurers to policyholders. Premium collection is now an insurer-only function unless a broker obtains specific authorisation. Any authorised-broker collection must use a segregated insurance account (not a general business account). Commissions/remuneration to brokers cannot be taken from premiums and must be paid within ten business days of receipt (pro-rated for instalments). Only insurers may issue policies or endorsements (with a limited exception for motor certificates). Importantly, brokers cannot act in dual capacities (broker and agent) in the same transaction. The regulation strengthens governance and transparency, reducing settlement handling risks and aligning broker incentives with policyholder protection.