Middle East and Africa based Clyde & Co lawyers answer important questions in the Reinsurance industry.

CONTENTS

1. Kingdom of Bahrain 2. Kingdom of Saudi Arabia 3. State of Kuwait 4. State of Qatar 5. Sultanate of Oman 6. United Arab Emirates 7. South Africa

(1) When does the limitation period start to run for insurance contract?

Pursuant to Article 722 of the Bahrain Civil Law, cases arising from an insurance contract shall not be heard upon the lapse of 3 years from the occurrence of the incident from which such cases arise unless the law otherwise provides.

In relation to contracts of marine insurance, the Bahrain Maritime Law provides that claims must be brought within 2 years, although the date form which the limitation period runs depends on the nature of the claim. Reinsurance contracts are likely to fall within these limitation periods if the reinsurance contract is governed by Bahraini law.

(2) When does the limitation period start to run for reinsurance contracts?

There is no specific law relating to reinsurance contracts, and we expect that the default position that applies to insurance contracts is likely to govern the position - please see responses to question 1.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

The time limit shall not be applicable:

(a) in case of withholding information relating to the insured risk or providing untrue or inaccurate details about such risk except from the date on which the insurer becomes aware thereof;

(b) in case of the occurrence of the insured accident except from the date on which the concerned persons became aware of its occurrence; and

(c) when the insured's cause of action against the insurer arises from recourse by third parties except from the date of filing the legal action by such third party against the insured or from the date on which the third party receives compensation from the insured.

Article 697 of the Bahrain Civil Law stands for the proposition that the delay would be excused and the statute of limitations tolled if there is an acceptable excuse for the delay in reporting the loss. “Acceptable excuse” is not defined under the law.

There is no established authority or practice under Bahrain law whereby a standstill agreement between the parties can be agreed which will have the effect of interrupting or suspending the running of a limitation period. Accordingly, unless one fo the above specific scenarios apply, parties are advised to initiate formal proceedings before the expiry of the limitation period in order to protect against limitation.

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

Whilst the terms of the policy cannot alter the start date for the limitation period, it is possible to extend or renew the applicable limitation period by indicating that cover has been confirmed, in whole or in part.

(1) When does the limitation period start to run for insurance contract?

KSA law is based upon Islamic law (Sharia). Sharia is supplemented from time to time by various laws, regulations and rules issued by the KSA government.

Sharia law does not have a concept of time-bar and for this reason the courts of the KSA will not generally enforce time limits on a party's substantive ability to bring a claim/dispute a matter.

In relation to insurance and reinsurance specifically, Sharia law in KSA is supplemented by the Law On Supervision of Cooperative Insurance Companies Law issued pursuant to Royal Decree, its Implementing Regulations and the Insurance Market Code of Conduct Regulations (together the KSA Insurance Law). Consistently with the Sharia law, the KSA Insurance Law does not include any provisions relating to time-bar for claims.

Since neither Sharia law nor the KSA Insurance law utilises a concept of time-bar. Accordingly, it is an issue as to the interpretation of the particular notice provisions contained in the reinsurance contract in question as to when any contractual limitation commences.

(2) When does the limitation period start to run for reinsurance contracts?

There is no specific law relating to reinsurance contracts, and we expect that the default position that applies to insurance contracts is likely to govern the position - please see responses to question 1.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

Neither Sharia law nor the KSA Insurance law addresses a concept of time-bar. Accordingly, there is no express law governing the suspension of a limitation period. The Insurance Committee has a broad discretion to consider whether there is any "lawful excuse" for the late notification of claim. It is possible that written agreements, correspondence or even oral discussions may be considered sufficient to give rise to a "lawful excuse." However, this will be determined by the Insurance Committee on a case by case basis.

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

Neither Sharia law nor the Insurance law utilises a concept of time-bar. Accordingly, there is no express law governing the forfeiture of a right to rely on a limitation period. As per question 3, the Insurance Committee has a broad discretion to determine whether to apply contractual notice provisions.

(1) When does the limitation period start to run for insurance contract?

Insurance policies are interpreted as contracts and governed by the general provisions relating to "contracts" on the enactment of the Kuwait Civil Code.

Article 807 of the Kuwait Civil Code provides that actions arising from insurance policies shall be brought within 3 years which runs from the time of occurrence of the event which gave rise to the action except where the law provides otherwise For example, the Kuwait Marine Trade Law provides that marine insurance contracts shall elapse by the lapse of 2 years from, amongst others, the date of entitlement of premium in respect of the law suit claiming the same, or from the date of bringing a law suit by third parties against the insured or from the date of fulfilment by the insured, in respect of the insured's law-suit against the insurer due to recourse to third parties.

(2) When does the limitation period start to run for reinsurance contracts?

There is no specific law relating to reinsurance contracts, and we expect that the default position that applies to insurance contracts is likely to govern the position - please see responses to question 1.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

Pursuant to Article 807 of the Kuwait Civil Code, the time limitation shall not run;

(a) in the case of concealment of particulars relating to the insured risk or of providing incorrect or inaccurate particulars in respect of the risk that is the object of the insurance except from the day on which the insurer became aware of the same; (b) in case of the occurrence of the insured risk except from the day on which the interested parties became aware of it; and (c) when the cause of the claim filed by the insured against the insurer is as a result of a claim exercised against the insured by a third party. In which case the limitation period will start to run from the date the third party filed the case against the insured or the date the insured paid compensation to such third party.

Pursuant to Article 448 of the Kuwait Civil Code, the limitation period may be suspended by:

(a) the institution of a suit, even if it is made in a court without jurisdiction; (b) by the application of a creditor for the inclusion of his rights in a bankruptcy proceeding; and (c) by an act of the creditor to invoke his right in the course of a legal proceeding.

The limitation is also interrupted if the debtor makes an implied or express admission of the creditor's right (Article 449 of the Kuwait Civil Code).

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

Notwithstanding, the parties cannot agree to prolong or abridge the time limitation of the actions provided for in Article 807 even where the same serves in the interest of the insured or of the beneficiary.

Additionally, Article 453 of the Kuwait Civil Code provides that the limitation defence cannot be waived until the time limit has expired. The defence may be waived expressly or impliedly once established but never to the detriment of the beneficiary.

(1) When does the limitation period start to run for insurance contract?

The Qatar Civil Code applies uniformly throughout Qatar (save for the Qatar Financial Centre (QFC) which is subject to its own laws and regulations based on common law principles).

Time limitations in respect of contracts of insurance are governed by the Civil Code and the Qatar Maritime Law.

According to Article 800 of the Qatar Civil Code, claims of general insurance will lapse by prescription after the expiration of 3 years from the date of the occurrence giving rise to the claim.

Where a claim arises pursuant to a contract of marine insurance, the Qatar Maritime Law provides in Article 265 and Article 266 that the claim shall expire after a period of 2 years.

Qatar does not have specific legislation addressing contracts of reinsurance, although Article 238 of the Qatar Maritime Law does provide that an insurer may reinsure the property already insured. Accordingly a marine reinsurance contract should be subject to the 2 year limitation period provided in the Qatar Maritime Law.

The applicability of the Qatar Civil Code provisions in respect of contracts of reinsurance is not as clear. According to Article 802, the insurance section of the Qatar Civil Code (including the provisions of Article 800) will apply to "all types of insurance". This may include contracts of reinsurance, in which case the time limitation for bringing a claim will be 3 years.

In the event that Article 800 does not apply to contracts of reinsurance, then it is likely that Article 403 of the Qatar Civil Code would be applicable, and accordingly a claim would lapse after the expiration of 15 years, however there is no specific authority to confirm this.

Article 800 of the Qatar Civil Code provides that the limitation period begins from the day on which those concerned become aware of the event giving rise to a claim.

According to Article 265 of the Maritime Law, the limitation period begins to run:

(a) from the date upon which the insurance premium became due in connected with a demand; (b) from the date of the incident from which the claim arose where a claim for compensation for loss sustained by the vessel is involved; (c) from the date on which the vessel arrived or the date on which it should have arrived in connection with a claim for compensation for damage caused to the goods, but if the loss occurred subsequent to the two said dates the period shall begin to run as from the date of the occurrence of the loss; (d) from the date of the occurrence of the accident in connection with a claim for settlement of damages by means of abandonment and in the case of a specification of a period in the contract to institute the abandonment suit, the prescription period shall begin to run from the date on which that specified period expired; (e) from the date upon which the insured has made payment in connection with a claim for contribution in general losses and any claim for remuneration due in respect of assistance and salvage; (f) from the date on which a third party makes a claim against the insured or from the date on which the insured makes payment in connection with his claim against the insurer by way of a course against the third party (it is not clear from the legislation how these provisions interface with each other). The QFC does not have regulations in place that specifically address the issue of time limitations for claims arising from a contract of reinsurance. The QFC Contract Regulations generally govern contracts in the QFC. In relation to a claim for breach of contract, Article 108 of the QFC Contract Regulations provides that an action for breach of any contract must be commenced within 6 years after the cause of action has accrued. The cause of action accrues when the breach occurs, regardless of whether the aggrieved party is aware of the breach. The parties may reduce the period of limitation in the original contract to not less than 1 year, but the period may not be extended.

The expiration of the limitation period does not extinguish the right to a claim. For the expiration of the limitation period to have effect, the obligor is required to assert it as a defence. A party may still rely on the right as a basis for a set-off defence even though the limitation period for an action in respect of the right has expired.

(2) When does the limitation period start to run for reinsurance contracts?

There is no Qatar jurisprudence in respect of reinsurance law. However, it would certainly be arguable that limitation in respect of a claim under a reinsurance contract would begin to run on: (a) the date that the liability of the reinsured was established, under a proportional reinsurance contract; and (b) from the date that the reinsurer's liability was triggered by exhaustion of the aggregate deductible under an excess of loss contract with an aggregate deductible.

In the QFC, there is no specific law relating to reinsurance contracts, and we expect that the default position that applies to insurance contracts is likely to govern the position - please see responses to question 1.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

There are exceptions to the commencement of the limitation period where:

(a) information relating to the insured risk is concealed or inaccurate information is provided, in which case the period does not begin to run until the insurer becomes aware of the truth; and (b) the insured's claim against the insurer arises from a third party claim against the insured, in which case the limitation period starts from the day on which the third party first made its claim, or from the day on which the third party receives compensation from the insured (it is not clear from the legislation how these provisions interface with each other).

Article 413 of the Qatar Civil Code applies generally to prescription periods, and provides that a period of prescription will cease by judicial claim, even where the action is brought before an incompetent court. The period will also cease when a writ of execution is served.

With regard to contracts of marine insurance, according to Article 267 of the Qatar Maritime Law, the prescription period provided in Articles 265 and 266 shall be interrupted by the delivery of a registered letter or documents relating to the claim, in addition to "other reasons prescribed by law".

We are not aware of a specific provision in the regulations that would suspend or protect the limitation period in relation to a contract of reinsurance, but expect that service of proceedings would serve to interrupt the limitation period.

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

According to Article 418 of the Qatar Civil Code, the prescription period may not be waived until such period has passed. Clear language or conduct demonstrating an unequivocal intention not to rely on the limitation defence would be necessary.

Under QFC law, although there is no direct reference to the forfeiture of a right to rely on a limitation period in the QFC Contract Regulations, the provisions set out in relation to avoiding a contract under Article 38 may be analogous. Article 38 provides that where a party is entitled to avoid the contract for mistake but the other party declares itself willing to perform and performs the contract as it was understood by the first party, the contract is considered to have been concluded as the first party understood it.

The second party is required to make such a declaration and render such performance promptly after having been informed of the manner in which the first party had understood the contract would be performed and before the first party has acted in reliance on a notice of avoidance.

After such a declaration or performance the right to avoidance is lost and any earlier notice of avoidance is ineffective. By analogy, if an obligor altered the legal relationship by indicating that he would not assert a limitation defence and the obligee accepted this position by refraining from protecting the limitation period, the obligor might be held to have lost the right to assert the limitation defence.

(1) When does the limitation period start to run for insurance contract?

Although insurance contracts are dealt with under a separate chapter of the Oman Civil Code, this chapter does not deal with limitation periods. Therefore the general rule for prescription applies, stipulated under Article 340 of the Oman Civil Code:

"A claim for obligation shall be not heard if denied after the lapse of 15 years without lawful excuse, subject to any special provisions relating thereto."

Regarding the time from which the 'prescription' period begins to run, Article 344 of the Oman Civil Code provides:

"The period laid down for the prescription of claims shall commence as from the day upon which the right falls due for exercise and from the time a condition is satisfied if the right is dependent upon a condition, and from the time the entitlement is proved in claims under a guarantee of an entitlement."

Maritime insurance agreements are treated separately under the Oman Maritime Law where the limitation period runs for 2 years.

(2) When does the limitation period start to run for reinsurance contracts?

Oman law does not address reinsurance contracts separately. It is our view that the same regulation that applies to insurance contracts would be applicable here - please see response to question 1.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

Article 346 of the Oman Civil Code allows for a suspension of the limitation period in the event of the occurrence of a 'lawful excuse', as follows:

"The lapse of time for prescription shall be suspended if there is a lawful excuse whereby the claim for the right could not be made. The period of legal excuse shall not be taken into account in the prescription period."

The Oman Civil Code does not clarify the definition of a lawful excuse. Our view is that the courts would examine the defence of a lawful excuse, if put forward, on a case-by-case basis, to determine the validity of the excuse.

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

The provisions on limitation period do not allow for any alteration. Most provisions contained within the Oman Civil Code are akin to principles of 'public order', which are applied strictly by the courts and without variation.

(1) When does the limitation period start to run for insurance contract?

The UAE Civil Code and the UAE Maritime Law apply uniformly throughout the UAE (save for some of the free zones such as the Dubai International Financial Centre – DIFC which are subject to their own laws and regulations).

There is no local law which specifically governs contracts of reinsurance. Under Article 1036 of the UAE Civil Code, claims arising out of contracts of general insurance shall not be heard after the expiration of 3 years from the date of occurrence of the incidence out of which the claim arose or the date of the insured's knowledge thereof.

The preferred view of local practitioners is that reinsurance contracts probably fall under the insurance provisions in the UAE Civil Code. In the event that the Article 1036 time bar does not also apply to reinsurance contracts, the UAE Civil Code provides a long stop procedural time bar of 15 years under Article 473, but this is noted to be subject to (unspecified) exceptions.

Contracts of marine insurance are dealt with separately under the Maritime Law.

Under Article 399 of the UAE Maritime Law, all claims arising out of a contract of marine insurance are time barred after a period of 2 years, although the date on which the limitation period begins to run depends on the nature of the claim.

Under Article 478 of the UAE Civil Code, the time runs from the day upon which the right falls due for exercise, or from the day a condition precedent is satisfied or, in claims under a "guarantee of an entitlement", from the day the entitlement is proved.

Under Article 399(1) of the UAE Maritime Law, time begins to run:

(a) from the date upon which the insurance premium fell due in matters connected with a demand; (b) from the date of the occurrence of the accident out of which the claim arose in matters connected with a claim for compensation for loss sustained by the vessel; (c) from the date on which the vessel arrived or the date on which it should have arrived in connection with a claim for compensation for loss sustained by the goods, but if the accident occurs later than the two said dates the period shall begin to run as from the date the accident occurred; (d) from the date of the occurrence of the accident in connection with a claim for settlement of damages by means of abandonment and in the event that a period of grace is specified in the contract for the making of a claim for abandonment the period shall begin to run from the date on which that period of grace expired; (e) from the date upon which the insured has made payment in connection with a claim for contribution in general average or any claim for remuneration due in respect of assistance and salvage; or (f) from the date on which a third party makes a claim against the insured or from the date on which the insured makes payment in connection with his claim as against the insurer by way of recourse against the third party. In the DIFC Article 38 of the DIFC Court Law sets out the general rule that proceedings must not be commenced more than 6 years after the date of the event(s) that first give rise to the cause of action. The DIFC Contract Law and the DIFC Law of Damages and Remedies, each stipulate that an action for any breach of contract must be commenced within 6 years after the cause of action has accrued. The DIFC Contract Law specifies that in the case of fraud, the action must be commenced within 6 years of the date when the aggrieved party becomes aware of the fraud. Notwithstanding, Article 38 of the DIFC Contract Law, Article 9(1) of the DIFC Law of Obligations provides that in cases where a cause of action arises as a result of fraud by the defendant, no time limit shall apply. It is not clear how these two apparently conflicting provisions will be interpreted by the DIFC Courts. Article 9(2) of the DIFC Obligations Law provides that in respect of non-contractual obligations (e.g. negligence, misrepresentation, economic torts and vicarious liability) that a cause of action arises on the earliest date on which the claimant knows or ought reasonably to know about the loss that gives rise to the cause of action, provided that any action is brought within fifteen years of the date that the cause of action in fact arose.

Part 4 (Articles 60-64) of the DIFC Obligations Law concerning "Obligations Relating to Insurance". Again, although not express, it is considered likely that these provisions would also be applied to reinsurance. The question of time bar in insurance-related claims is not expressly dealt with in these Articles. However, Article 60(3) allows the Board of Directors of the DIFC Authority to make Regulations in relation to various matters including to "limit, restrict or provide Guidance as to circumstances under which a third party may be entitled to claim under a contract of insurance", which could feasibly include limitation issues.

(2) When does the limitation period start to run for reinsurance contracts?

There is little, if any, UAE jurisprudence in respect of reinsurance law. However, it would certainly be arguable that limitation in respect of a claim under a reinsurance contract would begin to run on:

(a) the date that the liability of the reinsured was established, under a proportional reinsurance contract; and (b) from the date that the reinsurer's liability was triggered by exhaustion of the aggregate deductible under an excess of loss contract with an aggregate deductible.

There is, unfortunately, no provision in legislation or other guidance with regard to the possible interrelation of one or more of the above periods which could conceivably arise depending on the facts of a particular case.

In the DIFC, although not express, it is considered likely that the provisions of Part 4 (Articles 60-64) of the DIFC Obligations Law concerning "Obligations Relating to Insurance". Again, although not express, it is considered likely that these provisions would also be applied to reinsurance – please responses to question 1.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

Under Article 481 of the UAE Civil Code and Article 399 of the UAE Maritime Law, the running of time is suspended if there is a "lawful excuse" for not bringing the claim. The period during which that excuse subsists is not taken into account in calculating the prescription period. There is no definition of "lawful excuse", which leaves the issue to be determined at the Court's discretion on the facts in each case.

The running of time is interrupted if the defendant expressly or impliedly admits to the claimant's rights to a claim (Article 483 of the UAE Civil Code), or if the claimant brings judicial proceedings (Article 484 of the UAE Civil Code). If time is interrupted a new period of prescription equivalent to the first period commences (Article 485 of the UAE Civil Code).

Under Article 399(3) of the UAE Maritime Law, the running of time is suspended by means of registered letter or delivery of documents relating to the claim.

Under DIFC Law, Article 22 of the DIFC Damages Law and Article 123 of the DIFC Contract Law provide that "by the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it". There is no express provision allowing the parties to extend the applicable limitation period by agreement, but equally there is nothing expressly preventing the parties from agreeing to an extension of time. Accordingly, under DIFC law it will be possible to agree a standstill agreement which will suspend the running of time.

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

Code a time bar defence cannot be waived until the time limit has expired. That Article provides that the defences can be waived expressly or impliedly once established, but never to the detriment of the beneficiary of the right. There is no authority for exactly what this Article means.

There is presently no precedent under DIFC Law as to how a party may forfeit the right to rely on a limitation period. However, one would expect that the affirmation and waiver provisions that apply under the Contract Law in relation to, for example, agency contracts, would mean that a party could either waive its right to relay on a limitation period by taking an action which is inconsistent with that limitation period having come to an end.

(1) When does the limitation period start to run for insurance contract?

There is no specific statutory limitation period for making a claim under insurance contract in South Africa. Claims under an insurance contract are subject to extinctive prescription in terms of the Prescription Act, 68 of 1969, being three years from the date the debt becomes due. For property insurance, this will be the date of the loss event. For liability insurance, this will be the date when the insured's liability is ascertained on the date of judgment, award or binding settlement

Insurance policies typically include a time-bar period to institute a claim.

(2) When does the limitation period start to run for reinsurance contracts?

The same principles stated above apply to reinsurance contracts.

(3) Can the limitation period be suspended and/or interrupted, and if so, how?

In terms of the Prescription Act, 68 of 1969, the basic limitation period can be interrupted by an express or implied acknowledgment of liability or by the service on the insurer of summons to begin a process by which the insured claims payment of the debt.

(4) Can the express terms of the insurance policy and/or reinsurance contract have the effect of altering the start date for the limitation period?

Yes, an insurance policy may contain a contractual limitation clause either barring a claim after the deadline or excluding liability for loss unless the insured has begun proceedings before the deadline. South African Courts have held that such clauses are enforceable provided they are fair and reasonable. To ensure that the limitation period is reasonable the limitation period under a (re)insurance contract should at least be 180 days after a claim has been rejected.