The legal frameworki Sources of insurance law and regulation
The UAE Civil Transactions Code, Federal Law No. 5 of 1985 (as amended by Federal Law No. 1 of 1987) (the Civil Code) governs civil transactions relating to different types of contracts in onshore UAE. Parties to any contract, including insurance contracts, are subject to the provisions of the Civil Code. Part III of the Civil Code, commencing from Article 1026 to Article 1055, specifically applies to insurance contracts.
The insurance sector in the UAE is governed by Federal Law No. 6 of 2007 (as amended by Federal Law No. 3 of 2018) on Establishment of the Insurance Authority and Organisation of Its Operations (the Insurance Law). This chapter will focus on onshore insurance, re-insurance entities and the prevailing case laws issued by the UAE courts (excluding the offshore).
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.
The Insurance Authority established by virtue of the Insurance Law oversees the onshore UAE insurance sector and issues rules and regulations to support the process of regulating and developing the insurance sector.
The main duties of the Insurance Authority as set out under the Insurance Law include protecting the rights of the insured and its beneficiaries, improving performance and efficiency of insurance companies, receiving applications to establish insurance and reinsurance companies, issuing necessary licences, determining unified tariffs for certain types of insurance and proposing programmes to develop the insurance sector. Apart from the Insurance Authority, there are health insurance regulators in Dubai (the Dubai Health Authority) and Abu Dhabi (the Department of Health – Abu Dhabi). The Insurance Authority supervises the health sector in coordination with the Dubai Health Authority and the Department of Health – Abu Dhabi.
The provisions of the Insurance Law are not applicable to the insurance companies registered to operate within the free zones in the UAE. Unless there is a specific provision governing insurance in the free zones, the Insurance Law refers to the application of the laws and regulations governing insurance in the onshore UAE. The financial free zones have their own legal and regulatory framework. The Dubai Financial Services Authority and the Dubai International Financial Centre (DIFC) Authorities regulate the framework of insurance companies registered to operate within the DIFC. The Financial Services Regulatory Authority of Abu Dhabi Global Market (ADGM) oversees the insurance companies operating within the ADGM.
Insurance and reinsurance companies operating onshore in the UAE must also follow the regulations issued by the chairman of the board of directors of the Insurance Authority in Board Resolution No. 2 of 2009 Issuing the Implementing Regulations of Law No. 6 of 2007 Concerning the Establishment of the Insurance Authority and the Regulation of Insurance Business (Resolution No. 2), and Board Resolution No. 3 of 2010 on Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies Operating in the UAE. Circular No. 19 of 2014 (Circular No. 19) prohibits insurance brokerage companies operating onshore in the UAE from dealing with insurance companies that are unlicensed or not registered with the Insurance Authority; insurance contracts concluded with unlicensed or unregistered companies shall be considered null and void.
In 2019, the Insurance Authority issued Board Resolution No. 33 of 2019 Concerning the Regulation of the Committees for the Settlement and Resolution of Insurance Disputes (Resolution No. 33). The committees established for resolving insurance disputes are authorised to settle and resolve all types of insurance disputes arising from the complaints of the insured, beneficiaries or the relevant affected parties against insurance companies incorporated in the UAE and foreign insurance companies licensed to carry out insurance activities in the UAE, including takaful insurance companies. The committees shall consist of a chairman and two or more members appointed by the chairman of the Insurance Authority. The committees are not competent to hear summary and interim cases or precautionary attachments or insurance disputes that include an arbitration clause. Resolution No. 33 was published in the Official Gazette (659 of 2019) dated 31 July 2019 and will come into effect three months after its publication.
The key regulations issued by the Insurance Authority over the past 12 months with respect to the insurance and reinsurance markets are listed below:
- Board of Directors Decision No. 23 of 2019 Concerning Instructions Organising Reinsurance Operations, which provides new regulations for the practice of reinsurance operations and the necessary licensing and registration requirements;
- Board of Directors Decision No. 15 of 2019 on the Instructions Concerning the Rules of Ownership Ratios in the Capital of Insurance Companies;
- Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority, which sets out a schedule providing for administrative fines for any person, company or insurance-related profession committing any of the violations contained in the schedule;
- Board of Directors Decision No. 12 of 2018 Concerning the Regulation of Licensing and Registration of Insurance Consultants and Organisation of their Operations, which sets out new regulations for the practice, licensing and registration requirements for insurance consultants;
- Board of Directors Decision No. 42 of 2017 on the amendment of some provisions of Insurance Authority Board of Directors Decision No. 25 of 2016 Pertinent to Regulation of the Unified Motor Vehicle Insurance Policies; and
- Board of Directors Decision No. 14 of 2018, Pertinent to the Application of Financial Solvency Requirements Stipulated in Chapter Two of the Financial Regulations for Insurance Companies and the Financial Regulations for Takaful Insurance Companies on the Branches of Foreign Insurance Companies Operating in the State.
Resolution No. 2 provides for three categories of insurance; namely, life insurance and capital insurance; property insurance; and liability insurance.
The life insurance and capital insurance category includes insurance operations with the objective of paying out certain amounts as a result of death, disability or attaining a specific age. Further, it includes health insurance, personal accident insurance and capital insurance.
In addition, property and liability insurance refers to the following categories of insurance:
- insurance against fire risks, risks of land, sea and air transport;
- insurance of ships and aircraft, including machinery and cargo;
- insurance of satellites and spacecraft and their machines and materials;
- insurance of trailers, railway locomotives and land vehicles;
- engineering and oil insurance;
- health insurance of all types, including insurance against various accidents and liabilities, such as personal accidents insurance, security and breach of trust insurance, insurance of currency, deeds, bonds, shares, either during transport or during safekeeping;
- insurance against theft and burglary;
- professional liability insurance, inclusive of the liability in the health, engineering, financial, accounting and legal professions and other professions;
- workers’ compensation insurance and liability insurance by the employer;
- crop insurance and livestock and other animal insurance; and
- other insurance, usually falling within accident insurance for various risks.
Mandatory insurance is applicable to both medical and motor insurance. This is a compulsory requirement applicable for all seven emirates in the UAE. Every owner of a motor vehicle has a compulsory duty to take out an insurance contract covering his or her civil liability arising out of death or injury from accidents involving the vehicle.
Professional liability insurance is mandatory with respect to certain categories of professionals in the field of accounting and in the financial and legal professions. Federal Law No. 12 of 2014 Concerning Auditing Profession Law regulates the profession of auditors and provides for compulsory insurance for auditors against liability for professional mistakes.
Federal Decree Law No. 4 of 2016 on Medical Liability prohibits practising medical professions without obtaining civil liability insurance against medical errors. Health facility providers are required to insure their medical practitioners against civil liability for medical errors.
There is no specific legislation in the UAE that restricts the insurable risks of a policyholder. However, any contract of insurance against the elements of public policy of the UAE and the principles of shariah law, such as risks against speculative gains similar to gambling, are considered uninsurable risks.iii Fora and dispute resolution mechanisms
The UAE local courts have jurisdiction to determine insurance disputes in onshore UAE. The UAE court system is a combination of federal and local systems. The emirates of Ajman, Fujairah, Sharjah and Um Al Quwain are part of the federal court system and the emirates of Abu Dhabi, Dubai and Ras Al Khaimah have local court systems.
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. The UAE Union Supreme Court is the highest court in the federal court system.
The financial free zones have their own independent courts. The DIFC courts, based in the DIFC, and the Abu Dhabi Global Markets Courts, located in the ADGM, have jurisdiction to hear all civil and commercial matters within their respective financial zones.
Insurance disputes are also capable of settlement through arbitration. It is noteworthy that under Article 1028(1)(d) of the Civil Code, an arbitration clause may not be included in an insurance policy, unless the arbitration clause is contained in a special agreement separate from the general printed conditions of the insurance policy.