Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. The Insurance Law applies to all onshore insurance companies, including foreign companies registered and licensed to operate in the UAE, companies engaged in the operations of cooperative insurance, takaful insurance, reinsurance companies and insurance professionals. UAE, along with other GCC countries, is very underpenetrated in terms of the insurance.

In the case of trade credit insurance, for instance, this under penetration is particularly stark.  Despite the importance of international trade to the GCC and the region’s USD $2.4 trillion economy, the penetration of trade credit insurance is 4 times lower than it is in the US and 6 times lower than it is in Europe. Part of the reason for this under penetration is historical.  However, in the UAE, it also has to do with government policy aimed at fostering the local insurance industry and at promoting national investment and the development of UAE’s capital markets, such aspect is further discussed by Insurance Lawyers of Dubai.

The legal aspect

UAE law provides that the UAE courts have jurisdiction over claims brought against UAE nationals or foreign legal entities with a domicile or place of residence in the UAE. Any agreement to the contrary is void under UAE law. Federal Law No. 6 of 2007 serves as the framework which establishes and regulates the functions of Insurance Authority and licenses in UAE insurance companies. By virtue of this law it oversees, regulates and protects the rights of the insured and its beneficiaries and at the same time, improves the performance and efficiency of insurance companies. Companies registered to operate within the free zone areas have their own legal and regulatory framework unless there is a specific provision governing insurance in the respective free zones. Under UAE law, any insurer engage in insurance business within UAE must be license by the Insurance Authority. Except in cases or disputes that include an arbitration clause, the committees are authorized to settle and resolve all types of insurance dispute involving the insured, beneficiaries or other affected party against any insurance companies registered under UAE laws and other foreign insurance companies who are authorized to conduct insurance activities within UAE. The federal court system consists of the court of first instance, which has jurisdiction to hear any civil disputes within the emirate, a court of appeal and a court of cassation, which is the highest court. In insurance disputes, the court will typically appoint an expert to investigate the facts, meet with the parties, gather evidence and prepare a report. For government debt securities, insurers may invest 100% of their assets in securities issued by a UAE Emirate and 80% of their assets in securities issued by a foreign country with an A-credit rating. For a deeper understanding one should always seek expert opinion.

End note

Overall, the Insurance Authority continuously endeavour to secure market conduct concerning every facet of the insurance business, the Authority is significantly focused on regulating and developing commission structures, disclosure obligations and protecting policyholder’s values.