1 Legal framework

1.1 Which legislative and regulatory provisions govern the insurance sector in your jurisdiction?

Several laws and regulations govern the insurance sector in the United Arab Emirates.

Part 3 of Chapter 4 (Articles 1026–1055) of UAE Federal Law 5/1985 on Civil Transactions sets out, among other things, the basic essence of an insurance contract, along with the obligations of the insurer and the insured under an insurance contract.

However, the main law setting out guidelines for the insurance sector in the United Arab Emirates is Federal Law 6/2007 on the Establishment of the Insurance Authority and Organisation of its Operations. Among other things, this law identifies the types of insurance operations in the United Arab Emirates (ie, life insurance, property insurance and life liability insurance) and provides for the establishment of the Insurance Authority to regulate the conduct of the insurance markets in the country.

Marine insurance in the United Arab Emirates is governed by Federal Law 26/1981 on Commercial Maritime Law.

Takaful insurance is governed by the Insurance Authority's Board of Directors Resolution 4/2010 Concerning the Takaful Insurance Regulations

There are various other laws and regulations and ministerial resolutions governing the conduct of insurance business in the United Arab Emirates. In summary, these laws and regulations set out guidelines on ethics, corporate governance, insurance broking and insurance consultancy, among many other aspects.

1.2 Which bilateral and multilateral instruments on insurance have effect in your jurisdiction?

At present, the United Arab Emirates is not a party to any bilateral or multilateral insurance treaties.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

The UAE Insurance Authority was established under Federal Law 6/2007 as a legal entity with financial and administrative independence. The Insurance Authority is the main regulatory body governing the conduct of the insurance market in the United Arab Emirates. As per Article 7 of the law, the objective of the Insurance Authority is to organise and oversee the insurance sector in a conducive manner. The duties of the Insurance Authority include:

  • to protect the rights of insureds and the beneficiaries of insurance operations;
  • to enhance the performance and efficiency of insurers and bind them to observe the profession's code and rule of conduct, to enhance their capabilities to render the beneficiaries of insurance the best services and ensure constructive competition; and
  • to propose programmes and plans to develop the insurance sector and enhance awareness of insurance awareness, and prepare studies and researches relevant to the insurance operations.

The Insurance Authority also monitors the solvency of insurers.

1.4 What is the regulators' general approach in regulating the insurance sector?

The Insurance Authority is proactive in implementing best international practices applicable in foreign jurisdictions that accord with Sharia principles.

The Insurance Authority aims to:

  • organise and oversee the insurance sector in a way that creates a conducive environment for its development and that enhances the role of the insurance industry in securing lives, properties and liabilities against risk, in order to protect the national economy;
  • collect, develop and invest national savings to sustain the economic development of the state;
  • encourage fair and effective competition; and
  • facilitate the provision of the best insurance services with competitive premiums and coverage.

2 Insurance contracts

2.1 What are the main types of insurance available in your jurisdiction?

As per Article 4 of Federal Law 6/2007 on the Establishment of the Insurance Authority and Organisation of the Insurance Operations, the three main types of insurance in the United Arab Emirates are as follows:

  • Life insurance and funds accumulation: This includes life insurance, health insurance and personal accident insurance.
  • Property insurance: This includes marine and aviation hull insurance, railway locomotive insurance, vehicle insurance and fire and allied peril insurance.
  • Liability insurance: This includes liability insurance on account of accidents involving vehicles, ships, aircraft and other liabilities that might arise.

Article 6 of Insurance Authority Board of Directors Resolution 2/2009 prescribes that the Insurance Authority may at any time determine other types of insurance to be enlisted.

Additionally, the United Arab Emirates allows for takaful insurance, which is a type of insurance based on Sharia or Islamic law. This is a cooperative insurance system modelled on the concept of shared contributions that are accumulated to compensate individual participants in case of the occurrence of loss. Participants pay contributions (on subscription) to a takaful fund which is managed by the takaful operator (insurance company) on their behalf.

2.2 Are all insurance contracts regulated? What terms do they typically include?

All insurance contracts/policies are regulated in the United Arab Emirates, primarily by the Insurance Authority. Furthermore, general laws on insurance contracts are set out in the UAE Civil Code, which also stipulates that provisions concerning the various insurance contracts which are not mentioned in the present law shall be governed by special laws. Insurance policies must identify the insurer and the insured, along with the subject matter of the policy (eg, a vehicle, a ship, an aircraft or real estate). The terms of the insurance policy also typically set out the risks insured (the insured perils), exclusions to the insurance cover and warranties.

2.3 What are the formal and documentary requirements for conclusion of an insurance contract?

An insurance contract is a contract of good faith, meaning that the parties executing the contract (ie, the insured and the insurer) must make full disclosure in respect of the subject matter being insured. For instance, in obtaining medical insurance, it is the insured's obligation to make an advance declaration of all pre-existing (medical/health) conditions which might affect the insurer's decision to offer coverage or calculation of the premium. If the insurance to be obtained is for property (eg, vehicles, ships, aircraft or real estate), the insured must provide documentary evidence regarding its ownership and value. Similarly, the insurer must clearly and unequivocally set out the policy details, the premium amount, the scope of coverage, the warranty clauses, insured perils and the exclusions which might be relied upon to reject a claim.

2.4 What are the procedural requirements for conclusion of an insurance contract?

There are no particular procedural requirements for the conclusion of an insurance contract. However, as detailed in the response to Question 2.3, the insured must make full and frank disclosure in respect of the subject matter being insured.

2.5 What are the respective obligations and liabilities of insurer and insured, both on concluding an insurance contract and during its term? What are the consequences of any breach?

The general obligations of the insured are specified in Article 1032 of the UAE Civil Code as follows, and are similar to those in other jurisdictions:

  • to pay the agreed amounts on the term fixed in the contract;
  • to reveal, at the time of conclusion of the contract, all information which the insurer considers important for it to know in order to assess the risks assumed by it; and
  • to inform the insurer of all matters occurring during the contract period which lead to the aggravation of risks.

The general obligation of the insurer is to pay an amount to the insured or beneficiary upon occurrence of the risk (Article 1034 of the Civil Code).

According to Article 1035 of the Civil Code, in the case of insurance covering civil liability, the insurer's obligation shall have no effect unless the injured party files a claim against the beneficiary after the occurrence of the event from which such liability resulted.

According to Article 1029 of the Civil Code, upon agreement between the insurer and the insured, the insurer may be exempted from its obligation to pay an insured who compensates a victim without the consent of the insurer.

Otherwise, the insurer must pay the indemnity or the sum due to the insured or the beneficiary in the manner agreed upon when the risk materialises or at the time specified in the policy.

3 Making a claim

3.1 What are the formal and documentary requirements for making a claim?

Once an event for which indemnity is sought under an insurance policy occurs, the insurer should be notified and a claim should be filed within the timeframe stipulated in the policy. To this end, a claim form must be duly filed by the insured with the insurer, setting out all details of the event for the insurer to assess and evaluate the claim. Upon satisfaction, the insurer will indemnify the insured as per the terms of the policy and a discharge receipt must be executed by the insured in favour of the insurer.

3.2 What are the procedural requirements for making a claim?

As mentioned in the response to question 3.1, the insurer should be notified and a claim should be filed within the timeframe stipulated in the policy. Thereafter, a claim form must be duly filed by the insured with the insurer for evaluation of the claim.

3.3 On what grounds can the claim be denied? How can the insured challenge the denial of claim?

A claim may be denied on the following grounds:

  • breach of warranty;
  • that the event was not an insured peril; or
  • that the event falls under the exclusion clause of the policy.

The decision to deny the claim must be made in writing, along with the reasons therefor. Upon denial of a claim, the insurer may file a written complaint with the Committee of the Insurance Authority, which in turn may ask the insurer for clarification. It is a mandatory requirement for the insured first to bring an action against the insurer before the Committee of Insurance Authority; either party has the right to appeal the decision of the Committee before the Dubai Court of First Instance.

3.4 How can third parties make a claim?

While an insurance contract is a contract between the insured and the insurer, there are cases in which a third party may make a claim. This is particularly common in liability insurance, which covers accidents caused by the insured to third parties. This is common in motor insurance claims and contractors' all risks policies covering third-party liability.

4 Form and structure of insurers

4.1 What types of insurance companies are typically found in your jurisdiction?

Insurers are regulated by:

  • Federal Law 6/ 2007;
  • Federal Law 2/2015 Concerning Commercial Companies and its amending laws; and
  • Federal Law 4/2012 on the Regulation of Competition.

According to Article 11(4) of the Law Concerning Commercial Companies, only public joint stock companies may conduct insurance activities.

According to Federal Law 6/2007, that company may be:

  • a company incorporated in the United Arab Emirates; or
  • a foreign company licensed by the Insurance Authority in the United Arab Emirates to carry out insurance activities in the United Arab Emirates, either through a branch or through an insurance agent.

According to Article 24 of Federal Law 6/2007, insurance and reinsurance operations may be carried out by the following entities which are licensed and registered by the Insurance Authority:

  • a public joint stock company established in United Arab Emirates;
  • a branch of a foreign insurance company; or
  • an insurance agent.

The prior approval of the Insurance Authority must be obtained before incorporating any insurance company, opening a branch of a foreign insurance company or carrying out the operations of an insurance agent in the United Arab Emirates.

Any insurance contract concluded by a company that is not duly registered according to the provisions of the law shall be deemed invalid and the affected party may claim compensation due to such invalidation.

4.2 How are these insurance companies typically structured and funded?

As mentioned in Question 4.1, insurance operations in the United Arab Emirates are typically carried out by public joint stock companies, whose structure is set out in the Law on Commercial Companies. In summary, a public joint stock company must have a minimum of five members. The federal government, the local government and any company or entity that is fully held by the federal government or local government may be a shareholder of a public joint stock company or incorporate by itself a public joint stock company, and may also join in contribution to the capital. The founders can subscribe to shares from 30% to 70% of the issued capital of the company before the invitation for public subscription to the remaining shares of the company.

4.3 Are there any restrictions on foreign ownership of insurance companies?

Cabinet Decision 16/ 2017 on the Amendments to Cabinet Decision 42/ 2009 Concerning Insurance Company Minimum Regulations provides that foreign ownership of insurers is restricted to 49%. However, the Insurance Authority is reportedly considering permitting 100% foreign ownership.

5 Authorisation

5.1 What authorisations are required to provide insurance services in your jurisdiction? What activities do they cover?

In order to set up a business in the insurance industry in Dubai, as first a step, one must register with the Dubai Economic Department and then obtain approval from the Insurance Authority as mandated in Article 24(2)(A) of Law 6/ 2007. The law identifies three types of insurance operations in the United Arab Emirates: life insurance, property insurance and life liability insurance. As insurers in the United Arab Emirates are public joint stock companies, the incorporation procedures for such entities are set out in the Law on Commercial Companies.

5.2 What requirements must be satisfied to obtain authorisation?

In summary, among other things, in addition to satisfying the requirements for setting up a public joint stock company, the prior approval of the Insurance Authority Board is required.

5.3 What is the procedure for obtaining authorisation? How long does this typically take?

There are no specific procedures laid down for obtaining authorisation; please see questions 5.1 and 5.2.

6 Regulatory capital and liquidity

6.1 What minimum capital requirements apply to insurance companies in your jurisdiction?

Cabinet Resolution 42/2009 Concerning Insurance Company Minimum Capital Regulations stipulates that:

  • the minimum subscribed and paid-up capital of an insurer is AED 100 million; and
  • the minimum subscribed and paid-up capital of a reinsurer is AED 250 million.

The law initially prescribed that at least 75% of the capital of an insurer in the United Arab Emirates must be owned by UAE or Gulf Cooperation Council (GCC) nationals, or by juridical persons wholly owned by citizens holding UAE or GCC nationality. However, this provision was amended in 2017 by Cabinet Decision 16/2017, as a result of which the law now requires that 51% of the capital of an insurer in the United Arab Emirates be owned by UAE or GCC nationals, or by juridical persons wholly owned by citizens holding UAE or GCC nationality.

6.2 What liquidity requirements apply to insurance companies in your jurisdiction?

The Insurance Authority must ensure that insurers and reinsurers in the United Arab Emirates maintain their solvency. To this end, under Article 41 of Federal Law 6/2007, the Insurance Authority is permitted to conduct periodic inspections of insurers and reinsurers to ensure the safety of their financial situations. Among other things, should the director general of the Insurance Authority learn or be informed that an insurer has not fulfilled its obligations or is unable to continue with its operations, that its losses exceed 50% of its paid-up capital or that it has ceased carrying out its operations for over a year without legitimate reason, he may take certain measures, including:

  • preventing the insurer from concluding or issuing further policies;
  • setting an upper limit on the total premium amounts received by the insurer against issuing insurance policies;
  • dissolving the insurer's board of directors;
  • appointing a provisional neutral administrative committee; and
  • restructuring or liquidating the insurer.

The law also mandates that all insurers must make bank deposits as a guarantee for fulfilling their obligations – this stands at AED 4 million for life assurance and fund accumulation operations, and AED 2 million for property and life liability insurance.

7 Supervision of insurance groups

7.1 What requirements apply with regard to the supervision of insurance groups in your jurisdiction?

Article 179 of the Law on Commercial Companies stipulates that the UAE Central Bank or the Insurance Authority may send one or more controllers to attend the general assembly meetings of companies licensed by the Central Bank and the Insurance Authority, without having the right to vote. The presence of such controllers must be stated in the minutes of the general assembly meeting. Accordingly, under Article 36(2) of Law 6/2007, an insurer's board of directors must invite the director general of the Insurance Authority to attend the general assembly meetings. The director general may in turn send a representative.

8 Reporting, governance and risk management

8.1 What key disclosure requirements apply to insurance companies in your jurisdiction?

Article 36 of Federal Law 6/2007 requires insurers to provide any data or information at the request of the director general of the Insurance Authority, either on the insurer itself or on any company related or associated thereto, within the timeframe specified by the director general, in addition to any data or information submitted by it to any other regulatory body and any data or information received by the insurer from those bodies.

Additionally, under Article 37, insurers are obliged to provide the Insurance Authority with a detailed report on their operations with their final annual accounts and all related information, including the annual budget and detailed profit and loss accounts.

Insurers and reinsurers are also required to observe the doctrine of disclosure and transparency in their dealing with clients and in respect of all documents, papers, bulletins, advertisements, propaganda, articles and scientific materials that they issue.

8.2 What key reporting requirements apply to insurance companies in your jurisdiction?

Ministerial Decision 518/2009 (as amended) on Governance Restrictions and Corporate Discipline Standards sets out the various corporate governance measures pertaining to the management and functioning of commercial companies in the United Arab Emirates. The regulation mandates that companies in the United Arab Emirates must commit themselves to a code of ethics in compliance with the laws and regulations in force, and applies to the board of directors, employees and internal auditors. A corporate governance report signed by the chairman of the board of directors must be submitted to the Securities and Commodities Authority once a year, or upon request.

8.3 What key governance requirements apply to insurance companies in your jurisdiction?

The key governance requirements are set out in the Insurance Authority's Board Resolution 3/2010 – Instructions Concerning Code of Ethics to be Observed by Insurance Companies Operating in the United Arab Emirates. Among other things, the resolution requires insurers to ensure that their conduct is consistent with the laws of the United Arab Emirates, including Federal Law 6/2007. The resolution also mandates that insurers act in good faith and comply with legitimate practices towards insured and beneficiaries. There are various other provisions on ethics set out in the resolution.

8.4 What key risk management requirements apply to insurance companies in your jurisdiction?

Board of Directors Decisions 25 and 26/2014 on Financial Regulations for Insurance Companies and Takaful Insurance Companies, respectively, govern the solvency aspect of UAE insurance companies. The decisions include provisions on a minimum guarantee fund, solvency margins, solvency capital requirements and certain disclosure obligations of financial and data governance. These are some of the noteworthy risk management measures; a uniform regulatory structure has been established to maintain capital adequacy and risk management standards for the insurance sector.

9 Senior management

9.1 What requirements apply with regard to the management structure of insurance companies in your jurisdiction?

Article 30 of Federal Law 6/2007 prescribes that no one may be a member of the board of directors, a general manager or an authorised manager if he or she has ever been:

  • convicted of a crime or a felony of dishonour, distrust or public morals;
  • pronounced bankrupt and never been rehabilitated; or
  • held liable for grave violations of any provisions of law in his or her capacity as general manager or board member of a company, including liability for causing a company to enter into compulsory liquidation.

Additionally, Article 31 stipulates that the chairman and the members of the board of directors of the insurer, its general manager, its authorised manager and anyone acting on his or her behalf, and any managers or senior officers must not, among other things:

  • participate in the management of another competing insurer or compete with its operations;
  • conduct any activity in conflict with the insurer's interest; or
  • carry out the operations of an insurance agent or a broker.

9.2 How are directors and senior executives appointed and removed? What selection criteria apply in this regard?

The management structure of companies in the United Arab Emirates is set out in Article 3 of Ministerial Decision 518/2009 on Governance Restrictions and Corporate Discipline Standards. This stipulates that, among other things, an insurer must be administered by a board of directors. The composition of the board, the number of members and the term of membership must be determined in the insurer's statute; and there must be at least one female candidate for membership of the board. Members of the first board shall be elected by the founders and successive members of the board by the shareholders for a fixed term.

An adequate balance between executive, non-executive and independent members must be observed in the composition of the board of directors as follows:

  • At least one-third of the members must be independent; and
  • A majority of the members must be non-executive directors, who must have the necessary technical skills and expertise to benefit the company.

The decision further stipulates that each non-executive member must be in a position to dedicate sufficient time and attention to his or her membership, and such membership should not be inconsistent with his or her other interests. It is not permitted to combine the chairmanship of the board with the position of managing director and/or deputy.

9.3 What are the legal duties of directors and senior executives of insurance companies?

Article 4 of Ministerial Decision 518/2009 on Governance Restrictions and Corporate Discipline Standards stipulates certain duties of the chairman and the board of directors. Among other things, they must ensure the effective functioning of the board, setting and accrediting the agenda of every board meeting, taking into consideration matters proposed by the members. In addition, it is the duty of the chairman and the board of directors to encourage all members to participate fully and effectively, to ensure that the board acts in the best interests of the company.

9.4 How is executive compensation regulated in your jurisdiction?

Article 7 of Ministerial Decision 518/2009 on Governance Restrictions and Corporate Discipline Standards stipulates that the remuneration of board members shall be composed of a percentage of the net profits. The company may pay additional expenses, fees or monthly salary, the amount of which is decided by the board of directors. However, in all instances, the remuneration of the board members must not be in excess of 10% of the net profits after deducting consumptions and the reserve fund, and after distributing the profits of at least 5% of the capital to the shareholders.

10 Change of control and transfers of insurance companies

10.1 How are the assets and liabilities of insurance companies typically transferred in your jurisdiction?

N/A.

10.2 What requirements must be met in the event of a change of control?

N/A.

11 Consumer protection

11.1 What requirements must insurance companies comply with to protect consumers in your jurisdiction?

As per Federal Law 6/2007 on the Establishment of the Insurance Authority, it is the duty of an insurer to pay the indemnity provided for in the policy to the insured or the beneficiary, as the case might be, as soon as the insured peril or risk occurs; thereupon, the insurer shall legally subrogate the insured or the beneficiary in respect of the rights or obligations.

11.2 What other measures has the state implemented to protect consumers in the insurance sector?

Pursuant to Federal Law 24/2006 on Consumer Protection, the Ministry of Economy has a set up a Consumer Protection Department which, among other things, coordinates with the relevant authorities in the country to curb unfair commercial practices which harm consumers. The department is also empowered to receive consumer complaints and adopt procedures in this regard or refer them to the competent authorities. A complaint may be submitted directly by the consumer or may be submitted by the Consumer Protection Association, which is considered a representative of the complainant. However, consumer complaints against insurers are extremely uncommon and it is usually the Insurance Authority which hears such complaints.

12 Data security and cybersecurity

12.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have for insurance companies?

There is no specific or dedicated data protection law in the United Arab Emirates. However, Article 378 of the Federal Penal Code stipulates that it is a criminal offence to publish personal data relating to an individual's private or family life; the punishment is imprisonment for up to one year, a fine of AED 10,000 or both.

12.2 What is the applicable cybersecurity regime in your jurisdiction and what specific implications does this have for insurance companies?

The United Arab Emirates has enacted Federal Law 5/2012 on Combating Cyber Crimes, which sets out a number of violations and penalties for certain cyber offences.

13 Financial crime

13.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction and what specific implications do these have for insurance companies?

The United Arab Emirates has enacted Federal Law 20/2018 on Anti Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations. The law provides for the establishment of an independent Financial Intelligence Unit to receive and investigate all reports submitted by financial institutions and other corporate establishments regarding suspected illicit financial activity.

As per the Anti-money Laundering Policy Statement of the Insurance Authority, the authority aims to protect the insurance sector in the United Arab Emirates from money launderers and take all possible measures to deter and detect money-laundering operations by applying relevant laws and international standards. Accordingly, the Insurance Authority works alongside the Financial Intelligence Unit, reports cases upon discovery and takes coercive measures where necessary. All insurers and branches of foreign insurers in the United Arab Emirates, and all insurance-related professionals, must report suspected money-laundering activity to the Insurance Authority.

Accordingly, Cabinet Decision 10/2019 Concerning Implementing Regulation of Decree Law 20/2018 on Anti-money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations clearly stipulates that all insurance transactions are considered financial activities for the purposes of the law.

14 Competition

14.1 What specific challenges or concerns does the insurance sector present from a competition perspective? Are there any pro-competition measures that are targeted specifically at insurance companies?

The Insurance Authority aims to:

  • organise and oversee the insurance sector in a way that creates a conducive environment for its development and that enhances the role of the insurance industry in securing lives, properties and liabilities against risk, in order to protect the national economy;
  • collect, develop and invest national savings to sustain the economic development of the state;
  • encourage fair and effective competition; and
  • facilitate the provision of the best insurance services with competitive premiums and coverage.

Accordingly, the Insurance Authority works effectively towards enhancing the performance and efficiency of insurers and binding them to observe the profession's code and rule of conduct, to enhance their capabilities to render the beneficiaries of insurance the best services and ensure constructive competition.

15 Restructuring and insolvency

15.1 What provisions govern insolvency in your jurisdiction and what specific implications do these have for insurance companies?

The laws pertaining to insolvency in the United Arab Emirates are primarily Federal Law 9/2016 on Bankruptcy and Federal Law 19/2019 on Insolvency. The 2016 law applies to companies governed by the Law on Commercial Companies, whereby an insurer is established as a public joint stock company. However, insolvency or bankruptcy proceedings against an insurer on account of indemnity claims are not common in the United Arab Emirates, and such claims are initiated by way of the dispute resolution process stipulated in the policy.

16 Trends and predictions

16.1 How would you describe the current insurance landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

There are no new developments, considering the COVID-19 pandemic situation. However, the Insurance Authority of the United Arab Emirates has been extremely vigilant in monitoring the functioning of insurance claims. In the past 24 months, it has issued various rules and regulations, so insurers should ensure that they are well versed in these developments.

17 Tips and traps

17.1 What are your top tips for insurance companies operating in your jurisdiction and what potential sticking points would you highlight?

We recommend that insurers in the jurisdiction strictly adhere to the guidelines laid down by the Insurance Authority and conduct their business within the specified parameters. It is advisable for insurers to be transparent with the Insurance Authority in respect of the conduct of their operations, and demonstrate a prudent and policyholder-focused approach to their business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.