i The nature of the UAE insurance and reinsurance market
The United Arab Emirates (UAE) insurance market is the largest in the Gulf Cooperation Council and one of the best performing insurance markets in the region.2 While the UAE Insurance Authority was established in 2007 and is still relatively new, the insurance market is becoming increasingly regulated. There is generally low insurance penetration, although motor insurance and health insurance in certain emirates are compulsory.
Only licensed insurers can write business 'onshore' in the UAE, and there is currently a moratorium on the issuing of new onshore licences. Therefore, significant additional capacity is provided by way of reinsurance. There are effectively two separate insurance jurisdictions: the onshore UAE market; and the Dubai International Financial Centre (DIFC). There is also, separately, the Abu Dhabi Global Market (ADGM), which is largely made up of wholesale 'offshore' reinsurance centres. The onshore insurance market is largely dependent on reinsurers and significant capacity is now available in the DIFC, since Lloyd's opened there in 2015. The DIFC has its own legal framework and court system based on common law.3
There are no express legal provisions restricting insurance fronting transactions in the UAE. Therefore, as long as the insurer is in compliance with applicable prudential limitations in local regulations, there is no provision preventing it from ceding 100 per cent of a given written risk (i.e., fronting the risk), either to a local reinsurer or a foreign reinsurer. In practice, however, reinsurers may impose stricter terms and conditions.
ii The legal landscape for insurance and reinsurance disputes
The Insurance Authority will generally require insurance policies issued in the UAE to be governed by UAE law. In the case of reinsurance policies, the parties are free to choose the law applicable to the contract. The parties can also choose arbitration as the method of dispute resolution.4
The UAE legal system is a civil law system, and the primary source of law is a statutory code. This means there is no system of binding precedent although the doctrine of jurisprudence constante does apply, meaning that decisions of higher courts can be persuasive on lower courts.
In insurance disputes, the court will typically appoint an expert to investigate the facts and the technicalities of the case, meet with the parties, gather evidence and prepare a report, and the findings and recommendations in the report are usually followed by the court.
There is no pre-action protocol or procedure. Although, for civil, commercial and labour claims in Abu Dhabi, it is mandatory that the claim is first filed with the Abu Dhabi Settlement and Reconciliation Committee. Similarly, in Dubai, all claims must first be filed with the Centre for Amicable Settlement of Disputes (save for a few categories of claims that are exempt).5 The purpose of the Committee and the Centre is to allow the parties an opportunity to reach an amicable settlement.
The doctrines of reservation of rights and without prejudice correspondence are not expressly recognised under UAE law. There is also no general doctrine of privilege (whether legal advice privilege or litigation privilege), although the impact of this is minimised by the absence of any obligation of mandatory disclosure. However, the laws governing lawyers' conduct in the UAE prohibit lawyers from disclosing confidential information provided by their client without the client's consent or other limited circumstances.
i The insurance regulator
The onshore UAE insurance market is regulated by the Insurance Authority, which oversees all insurance business in the country (i.e., insurers, brokers and other insurance service providers). In addition to the Insurance Authority, there are separate regulators for the health insurance sector in some of the individual emirates; at present, these are the Dubai Health Authority, the Health Authority Abu Dhabi and the Sharjah Health Authority.
ii Position of non-admitted insurers
UAE law prohibits non-admitted insurance and any insurer conducting insurance business in the UAE must be licensed by the Insurance Authority. This prohibition applies to all types of insurance business and is contained in the UAE Insurance Law (Federal Law No. 6 of 2007).6
iii Position of brokers
Brokers operating in the UAE are also required to be licensed by the Insurance Authority.
iv Requirements for authorisation
In order to undertake insurance activities from or within the UAE, an insurer must be licensed by the Insurance Authority and must be established as either: (1) a locally incorporated public joint-stock company, listed on a UAE stock exchange and with UAE nationals owning at least a 51 per cent stake in the company; or (2) a branch of a foreign insurance company. Insurers are required to hold regulatory capital pursuant to the Insurance Authority's regulations.
v Regulation of individuals employed by insurers
Certain activities are controlled functions in that the Insurance Authority must approve any individual working in that role. Broadly, these roles include directors, chief executive officers, compliance officers, finance officers and money laundering reporting officers of an insurer or broker.
In addition, an insurance company regulated by the Insurance Authority must circulate the Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies Operating in the UAE7 to its employees, as well as develop internal professional codes of conduct for the company and its employees.8
vi Distribution of products
Insurance products should only be distributed in the UAE by insurers licensed by the Insurance Authority (i.e., direct sales), insurance brokers and consultants licensed by the Insurance Authority, or banks licensed in the UAE via bancassurance arrangements between a locally licensed insurer and the bank.9
vii Compulsory insurance
In the UAE, third-party liability insurance in respect of motor vehicles is compulsory. Health insurance is also compulsory in the emirates of Dubai and Abu Dhabi.
viii Compensation and dispute resolution regimes
The Insurance Authority mandates that each insurance company must maintain a register of complaints from its clients, and should investigate each complaint within 15 days of the date of its submission. Any decision should be stated in the Complaint Register.10 The Insurance Authority inspectors have access to the Complaint Register to verify the information recorded therein. Each complainant (whether it is the insured or the beneficiary) may appeal decisions to the Insurance Authority if their complaint is rejected by the insurance company.
ix Taxation of premiums
On 1 January 2018, the federal government of the UAE introduced value added tax (VAT) at the rate of 5 per cent.11 All insurance and reinsurance premiums are subject to VAT with the exception of life insurance.
Each of the individual emirates has issued corporate tax decrees that theoretically apply to all businesses established in the UAE. However, in practice, these laws have not been applied to date.
An annual fee is also payable to the Insurance Authority12 that is calculated as a percentage of the total subscribed annual premiums underwritten minus locally applicable reinsurance premiums underwritten by an insurance company as follows:
- life and capital insurance: 0.2 per cent of annual premium;
- health insurance: 0.4 per cent of annual premium; and
- property and liability insurance: 0.5 per cent of annual premium.
x Proposed changes to the regulatory system
There are a number of regulatory reforms being considered by the federal authorities at present, most notably in relation to life insurance and dispute resolution. These potential reforms are considered in more detail in Section V, below.
xi Other notable regulated aspects of the industry
The Financial Regulations for Insurance Companies determine the limits of distribution and allocation of invested assets permitted for insurance companies by setting a ceiling limit for overall exposure in certain asset classes.13 For example, for real estate assets and UAE equity instruments, the ceiling is 30 per cent; for non-UAE equity instruments, the ceiling is 20 per cent. The ceilings for government debt securities are significantly higher, at 100 per cent for UAE emirate debt securities and 80 per cent for debt securities for A-credit rated foreign countries.
It is notable that the Insurance Authority's solvency margin requirement is based on the assumption that the company will continue to operate as a going concern.14 The Insurance Authority, when considering the licensing of an insurance entity, places great emphasis on this aspect. Solvency capital requirements are applied to each company to ensure that potential risks are provided for and must cover underwriting, market, liquidity, credit and operational risks.15 The purpose behind these requirements is to ensure that companies maintain funds in excess of their minimum capital requirement, solvency capital requirement and minimum guarantee fund.16 Companies are required to inform the Insurance Authority should capital fall below these set minimum amounts.
III INSURANCE AND REINSURANCE LAW
i Sources of law
In the UAE, insurance is regarded as a commercial activity and, in theory, is governed by the UAE Commercial Code.17 Under the UAE Commercial Code, the hierarchy of laws is as follows:
- the Commercial Code;
- the agreement of the parties (i.e., the policy);
- rules of commercial customs and practices (with specific or local customs and practices superseding general); and
- the Civil Code,18 insofar as it does not contradict the general principles of the commercial activity.
However, the substantive provisions of insurance law are contained in the Civil Code19 and therefore, in practice, the insurance provisions of the Civil Code20 are applied by the UAE courts, despite the hierarchy of laws in the Commercial Code.
Marine insurance law in the UAE is set out within the Maritime Code.21 It can be helpful to consider these provisions in the context of non-marine insurance in the event that the Civil Code and the other insurance laws do not address a particular issue.
Many policies written in the UAE are still written on or using London market wordings. In the event that UAE law is completely silent on a point, it can be instructive to consider the relevant English law on the basis that it may represent commercial custom, although the extent to which a UAE court will be guided by English law is limited.
Further, the principles of Islamic shariah can also be relevant when considering insurance law. Although there is a presumption that where there is a codified provision of UAE law dealing with an issue, that provision is considered to be compliant with Islamic shariah, courts may nevertheless look to shariah principles for guidance in interpreting and applying the law.
Takaful insurance is an alternative system of cooperative Islamic insurance that is also found within the region. Takaful insurance is primarily subject to the same UAE laws as non-takaful insurance, although there are some differences, for example relating to policy content, as set out in the Insurance Authority Board Resolution No. 4 of 2010.22
ii Making the contract
Essential ingredients of an insurance contract
Under UAE law, insurance is a contract whereby the insured and insurer cooperate in addressing an insured risk or event. The insured pays to the insurer a specified sum or periodical instalments (i.e., the premium) and, in return, if the specified risk materialises, the insurer is bound to make payment.23 The general provisions in relation to formation of contracts under the Civil Code will apply to insurance contracts, insofar as they do not contradict those specific provisions in the insurance sections of the Civil Code.24
Transfer of risk when the uncertain event occurs
The policy will typically specify that there will be a transfer of risk when the uncertain event occurs. However, as a basic principle, in first-party insurance, the transfer of risk will occur when the risk or the event set out in the contract 'materialises'.25
In the case of liability insurance, the obligations of the insurer only arise when the injured third party makes a claim against the insured.26 This can include a legal judgment awarded against the insured but it has been held in certain cases that this is not strictly required.27
Although not explicitly stated, there must be a fortuity (i.e., there must be an element of risk or uncertainty).
Requirement of insurable interest
There is no express concept of insurable interest within UAE law. However, the Maritime Code contains a prohibition on anyone benefiting from a policy of insurance unless they have a 'lawful interest' in the peril not occurring.28 It is likely that this provision would apply equally to non-marine insurance.
It is also worth noting that taking out a contract of insurance without an 'insurable interest', albeit undefined, would be akin to gambling, which is prohibited under shariah law.
Utmost good faith
Parties to an insurance policy are obliged to perform their obligations in a manner consistent with the requirements of good faith.29 There is also an express obligation on an insurance company to carry out its business on the basis of absolute good faith.30
In cases of non-marine insurance, if the insured misrepresents or fails to disclose matters, or fails to carry out an obligation under the policy, and the insurer can prove that the insured did so in bad faith, the insurer is entitled to retain the premium in addition to requiring that the policy be cancelled.31
In cases of marine insurance, the position is the same as in non-marine if the insurer can prove bad faith of the insured. However, even if bad faith cannot be proved (but misrepresentation, for example, can be proved) in relation to a marine insurance policy, an insurer is still entitled to retain half of the premium, as well as requiring that the policy be cancelled.32
To give a degree of protection to insureds, there is an obligation on the insurer to include all of the necessary queries relating to material facts, required by the insurer to assess the risk, within the proposal form. The proposal form must also set out the consequences on coverage of giving incorrect or inaccurate information.33
Recording the contract
A contract of insurance is recorded by way of a written policy. As a result of the enactment of the Electronic Transactions and E-Commerce Law,34 contracts between parties can be executed electronically; for example, contracting by 'click-to-accept' means where an insurer indicates their consent to the insurance contract by ticking a box online. The Electronic Transactions and E-Commerce Law permits such electronic documentation as evidence.
The content of insurance policies is governed by the Insurance Authority Board Resolution No. 3 of 2010, which sets out a number of requirements, including that the policy must clearly describe the subject matter, the insured sum, the extent of cover and the claim procedure. In addition, the policy must include all terms and conditions governing the contract, be bound in such a way that does not permit removal of pages and must set out page numbering in the policy and any attachments.35 The Maritime Code also contains certain specific requirements for the content and recording of marine insurance policies, including that the insurer or a representative must sign the policy.36
Insurance policies in the UAE are required to be in Arabic although may be accompanied by a translation. In the event of a discrepancy between the translations, the Arabic version will prevail.37 Failure to issue a policy in Arabic can result in a fine38 as well as uncertainty as to how the terms will be interpreted.
iii Interpreting the contract
General rules of interpretation
The starting point for interpreting a policy is that clear words will be given their direct meaning with no scope for any other interpretation.39 If the words are clear, they cannot be departed from.40
However, where there is ambiguity or scope for interpretation, enquiries can be made into the intentions of the parties.41 Any doubt arising in cases of ambiguity will be resolved in favour of the obliging party.42 This is caveated in the case of contracts of adhesion (e.g., standard form insurance policies) and it is not permitted to construe ambiguity against the 'adhering party' (i.e., the insured).43
Finally, there is a presumption of contractual interpretation in UAE law that a specific or special condition, or term, will override or supplement a standard or general clause.
Incorporation of terms
As a general rule, an insurance policy must contain all of the terms and conditions that pertain to it.44 However, there are a number of notable terms that have additional requirements.
For example, exclusion clauses (or any clause that relates to a circumstance leading to the avoidance of the contract or the lapse of the rights of the insured) must be shown 'conspicuously'.45 This has been further defined as printing the clause in another font or in another colour.46 Arguably, any such clause should also be countersigned by the insured.47
An arbitration agreement is void unless it is contained within a special agreement, separate from the general printed conditions of the policy.48
The following provisions in an insurance policy are void:
- any provision excluding cover for a breach of the law, other than a felony or deliberate misdemeanour;
- a late notification provision in the event that there is a reasonable excuse for the delay; and
- any arbitrary provision, breach of which was not causative of the occurrence of the incident insured against.49
Finally, a party's obligations under the contract (i.e., the policy) can extend beyond what is expressly contained within the contract to include an obligation to also do that which is related to the contract via law, custom, or the nature of the transaction.50
Types of terms in insurance and reinsurance contracts
UAE law does not specifically distinguish between types of terms in the same way as may be found under English law (e.g., conditions, terms, innominate terms), nor are conditions precedent or warranties expressly recognised, although as a matter of practice, both UAE practitioners and courts are familiar with these terms.
The applicability and enforceability of a term under UAE law will depend upon its effect. Any term that purports to permit an insurer to avoid cover (e.g., a condition precedent) will be subject to the formalities for exclusion clauses as referred to above and may be void if it does not comply.
Likewise any arbitrary term, breach of which would have had no effect on the cause of the incident insured against, will also be void. In that regard, breach of a warranty in a policy will not automatically allow an insurer to avoid cover, the breach of the warranty must have been causative of the loss.
iv Intermediaries and the role of the broker
There is no legal requirement under UAE law to conduct insurance or reinsurance business through an insurance broker. Where an insurance broker is involved, insurance brokers in the UAE must be authorised by the Insurance Authority, which prohibits insurance companies from dealing with brokers in respect of UAE insurance business not licensed by them.51 With regard to intermediaries acting in the life insurance business, there are plans to introduce legislation requiring such intermediaries to be licensed by the Insurance Authority.52
Under UAE law, a broker is an independent intermediary who mediates insurance or reinsurance contracts between the insured and reinsured, and the insurer and reinsurer, and is paid a commission from the insurer and reinsurer. UAE law does not distinguish between placing brokers and producing brokers. UAE insurance law distinguishes between a broker and an agent. The first acts independently as an intermediary; the latter acts directly and exclusively as intermediary for one insurer or reinsurer. Both categories are separate and a broker cannot act as agent and vice versa.53
How brokers operate in practice
Brokers that are established and authorised in the UAE must comply with the UAE Insurance Authority's Brokers Regulations. A broker in the UAE is not permitted to act as both insurance broker and reinsurance broker for the same customer and the same transaction.54 Reinsurance brokers are not directly regulated under UAE law, provided they do not carry on business activities in the UAE (i.e., their business activities are conducted outside the UAE). Therefore, generally, a reinsurance broker's functions and duties will be determined by the contractual arrangements between it and the reinsured, a producing broker or the reinsurer, as the case may be.
The procedure for providing notice of a claim will usually be set out in the insurance policy itself. The Insurance Authority Directive provides that the procedures the insured has to follow upon the occurrence of the risk have to be clearly indicated on the policy.55
Under UAE law, there are no specific consequences for late notification in insurance contracts; rather, the general position as regards breach of contract will apply (see below). In the event of a breach of contract, the insurer may seek damages or refuse to pay a claim under the policy (depending on the insurance policy itself).
However, if the insured has a 'reasonable excuse' for the delay, a term in the insurance policy that provides that late notification means an insured's rights shall 'lapse' under an insurance policy, will be void under UAE law.56 Further, 'arbitrary' clauses are void (i.e., where a breach not connected to the occurrence of the insured risk is potentially invalid); this could include breach of a notification provision.57
If an insured fails to provide all information requested by insurers following notification, this can amount to a reason to deny the claim in circumstances where such information is required to ascertain the incident or the extent of the loss58 and where the insured has no reasonable excuse for the delay.59
The limitation period for claims under insurance contracts is three years from the occurrence of the incident, or from the date of the insured having knowledge of that occurrence.60 The limitation period in respect of marine insurance is generally two years from the date of the incident or where a third party makes a claim against the insured.61 Further, limitation is suspended under marine insurance by 'registered letter or delivery of other documents relating to the claim',62 or a 'legal excuse'.63
Good faith and claims
Parties to contracts (including insurance contracts) governed by UAE law are subject to the obligation to perform the contract in 'good faith'; this includes an obligation on the insurer to exercise good faith in paying claims.64 It follows that it may, theoretically, be possible for the insured to claim damages for breach of this duty of good faith when adjusting and settling claims (i.e., this would be similar to the punitive 'bad faith' claims), to claim damages for consequential losses flowing from the insurer's breach, or both.
IV DISPUTE RESOLUTION
i Jurisdiction, choice of law and arbitration clauses
The courts have jurisdiction over any dispute arising out of an insurance policy where the domicile of the insured is within the jurisdiction.65 The courts also have jurisdiction over claims brought against UAE nationals (i.e., a UAE legal entity) or a foreign legal entity with a domicile or place of residence in the UAE.66 Any agreement to the contrary is void under UAE law.67
In theory, UAE law recognises choice of law clauses. However, the courts will not apply laws that are contrary to shariah or public policy (a concept that is broadly construed). Moreover, there are specific matters where a court will not uphold a foreign choice of law clause, for example: real property,68 contracts entered into or performed in the UAE69 and employment matters. In practice, however, foreign choice of law provisions will likely be ignored by a UAE court.
Arbitration clauses are recognised and enforced in the UAE. However, there are certain formalities that need to be observed for an arbitration clause to be valid under UAE law. An arbitration agreement must be evidenced in writing and must be signed by someone who has the specific authority to settle disputes.70
Litigation stages, including appeals
Litigation in the UAE is divided into three stages:
- Court of First Instance;
- Court of Appeal; and
- the Federal Supreme Court (colloquially referred to as the Court of Cassation in the emirates, which have their own judicial system).
In the event a claimant seeks to file a claim in the courts of Abu Dhabi or Dubai, it must first file the claim with the Abu Dhabi Settlement and Reconciliation Committee (in respect of civil, commercial and labour claims) or the Centre for Amicable Settlement of Disputes (for the majority of claims in Dubai save for a few exempt categories)71 respectively.
Substantive proceedings are then commenced in the UAE court by the filing of: a statement of claim along with; a power of attorney (POA) issued in favour of a local advocate; and the appropriate court fee. Once these are filed, the court will schedule a hearing date and the defendant will be served with the claim.
Separate hearings for the defendant to submit its POA and its defence, and for any further submissions, will be scheduled and held until the court considers that it has enough information either to appoint a court expert or pass judgment.
Either party has an automatic right to appeal judgments of the court of first instance to the court of appeal.72 Appeals to the Court of Cassation from the court of appeal can only be made on points of law (in accordance with the specific grounds set out in the Civil Procedure Code).73
The judgment creditor should apply to the Execution Court in order to enforce the judgment against the defendant.
A party is required to present evidence that it relies on in support of its claims or defence and there is no obligation to disclose documents that are relevant or helpful to the other party. The court may be asked to order the specific disclosure of a document.74 Oral witness testimony is possible on application to the court, but is uncommon.
Where causes of action are based on documentary evidence and there is a dispute about the validity of a document, the original documents must be produced.75
All submissions to the court, including documentary evidence, must be filed in Arabic. Any evidence in any other language will need to be translated and certified by a legal translation company registered and certified with the Ministry of Justice.
Experts are appointed by the court from a panel of experts according to their particular specialisation. The parties may also agree to use a particular expert from the panel. If appointed, the expert will set a meeting with the parties and allow the parties to submit further documents in addition to those already submitted to the court (including the parties' own expert evidence). Once the expert has filed his or her report, the parties are given the opportunity to comment on it.
While the opinion of the expert is not binding on the court,76 the court will usually follow the recommendations in the expert's report. Significantly, the factual findings of an official document (which are those in which a public official or person employed in public service certifies what has taken place before him or her or what he or she has been informed of by the parties concerned within the limit of his or her authority and jurisdiction, such as a police report) are binding upon a UAE court.77
In the UAE, only nominal legal costs are recoverable by a successful party (often in the region of 5,000 dirhams) at each stage of proceedings. Court filing fees and expert fees are, however, recoverable as part of the final (successful) judgment awarded by the court.
Format of insurance arbitrations
The applicable UAE insurance law recognises arbitration agreements. As above, in respect of insurance contracts, the arbitration clause must be set out in a separate agreement signed by both parties.78 Ad hoc arbitration is also recognised in the UAE.
Arbitration proceedings in the UAE (i.e., onshore) are governed at the federal level by Articles 203–218 of the Civil Procedure Code,79 whereas different arbitration laws will govern offshore arbitrations.80 A domestic arbitral award must be ratified by the UAE courts before it can be enforced.81
The arbitration provisions of the Civil Procedure Code are not based on the UNCITRAL Model Law and these federal law provisions are largely underdeveloped, as compared to the DIFC and the ADGM arbitration laws, which are modelled on the UNCITRAL Model Law and in accordance with international standards of best practice. A new federal arbitration law based on the UNCITRAL Model Law, which would replace Articles 203–218 of the Civil Procedure Law, has been in the pipeline for many years but has yet to be enacted.
Procedure and evidence
There are a number of arbitration centres and institutions, both onshore and offshore. Onshore centres and institutions include the Dubai International Arbitration Centre, the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai. There are also other domestic arbitration centres, such as in Sharjah and Ras Al Khaimah. Examples of offshore institutions include the DIFC-LCIA Arbitration Centre and the ADGM. Each institution will have its own procedural rules that will apply insofar as they do not contradict the mandatory rules of the Civil Procedure Code or the offshore law as applicable.
The UAE has been party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) since 2006. While there has been uncertainty around the enforcement of arbitral awards in the UAE under the Convention, recently, UAE courts have more readily recognised enforcement of foreign arbitral awards.82 UAE arbitral awards should also be enforceable in other Convention signatory states.
Arbitrators can award costs at their discretion. A party may apply to the courts to vary the tribunal's assessment of costs; however, the usual position is that the unsuccessful party pays the winner's costs.
iv Alternative dispute resolution
In relation to insurance claims, UAE onshore legal proceedings will be subject to the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai, as explained in subsection iii, above. In respect of other emirates, there are no other insurance-specific alternative dispute resolution centres.
Parties can mediate disputes at the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai.
V YEAR IN REVIEW
In 2017, new circulars were issued by the Insurance Authority relating to, among other things, motor insurance83 and capital requirements for foreign branches that are based onshore.84 There was also a push towards liberalising the insurance sector. Cabinet Resolution No. (16) of 2017 reduced the mandatory local shareholding requirement for insurers incorporated in the UAE from 75 per cent to 51 per cent.85
In the health insurance sector, the Dubai Health Authority passed Executive Council Resolution No. 6 of 2017, which set out mandatory health insurance obligations on employers and sponsors. Employers and sponsors who fail to adhere to this Resolution will be subject to fines.
ii Life Insurance
The UAE has one of the most developed life insurance markets in the region, and it is continuing to grow.
In April 2017, the Insurance Authority introduced draft Circular No. 12 of 2017 regarding Life Insurance and Family Takaful Business in the UAE,86 with the aim of raising the bar of regulation of life insurance and family takaful products in the UAE. The regulations contained in the Circular are intended to secure market conduct with the various entities that provide and facilitate the provision of life insurance products in the UAE, and place significant focus on regulating the commission structure, disclosure obligations owed to the client and protecting policyholder values.
The draft regulations are currently at the consultation stage, with the final form of the regulations expected in 2018.
iii Dispute resolution
A new law has been passed by the Federal National Council, which has the potential to radically change the way insurance disputes are resolved in the UAE. An amendment to Law No. 6 of 2007 on the Establishment of the Insurance Authority and Regulation of Insurance Operations was passed on 5 December 2017, with the objective of promoting efficiency and reducing the number of cases before the UAE courts.
The new rules empower the Insurance Authority to set up a specialised committee for the resolution of insurance-related disputes. This new committee would be the first port of call for all insurance disputes, and no claim will be accepted by the courts unless it has first been referred to the committee. The decision of the committee will be binding, but the parties have a right to appeal to the Court of First Instance within 30 days of the decision. If no appeal is filed, the decision of the committee will be binding.
In addition to the above, the Insurance Authority would have the following powers:
- the power to impose fines on insurance companies;
- the power to establish funds in order to protect and compensate those who have suffered a loss as a result of insurance activities; and
- the power to introduce licensing requirements for onshore reinsurers, to include capital requirements.
While the new rules have been passed by the members of the Federal National Council, they have yet to be signed into law.
Federal Decree Law No. 7 of 2016 recently amended Article 257 of the UAE Penal Code to impose criminal liability on arbitrators and experts (among others) who knowingly issue a decision or assert an opinion that is contrary to the duties of objectivity and integrity. Such offences will be punishable by temporary imprisonment and lead to a prohibition on undertaking the assignments commissioned to the relevant offender.
We understand that the ambit of this provision is currently under review.
VI OUTLOOK AND CONCLUSIONS
The Insurance Authority is taking a more proactive approach to the regulation of the insurance and reinsurance market. Significant focus has been on managing market conduct to ensure client protection and promoting transparency and fairness for all parties. This can be clearly seen in the new restrictions imposed on insurance intermediaries in draft Circular No. 12 of 2017. This approach is likely to continue for the foreseeable future.
The implementation of VAT will undoubtedly have a considerable effect on the industry, both in terms of cost and efficiency. As the new VAT regime is in its infancy, there is considerable uncertainty among insurance practitioners as to the scope of VAT liability and how it will be collected. Life insurance and reinsurance have been expressly exempted under the new VAT regime, but no such exemption currently exists for other reinsurers.
Additionally, a draft law is currently under consideration to review the Maritime Code. At the time of writing, no such revisions or updates have been published but this is an area to watch to see whether there is an overhaul of marine insurance law in the UAE.
The proposed, and highly anticipated Federal Law on Arbitration is likely to be a unifying (i.e., standardising) law and it is anticipated that it will increase the UAE's profile as a destination for arbitration.
1 Sam Wakerley and John Barlow are partners, and Shane Gibbons is an associate, at HFW.
2 UAE Insurance Authority Annual Report on the UAE Insurance Sector 2015.
3 An analysis of DIFC law as well as other offshore jurisdictions (such as the ADGM) are beyond the scope of this chapter.
4 However, in relation to insurance contracts, strictly speaking, the arbitration clause must be set out in a separate agreement agreed to by both parties as per Article 1028(1)(d) of the Civil Code.
5 For example: labour disputes; temporary and summary actions or orders; proceedings where the government is named as a party; and proceedings that are outside the Civil Court's jurisdiction.
6 Article 26 of the Insurance Law provides that: 'It is not permissible to carry out insurance with an insurance company outside the state on property in the state, or on the liabilities arising from the same. It is not permissible either to broker for insuring such property or liabilities except with a company registered in accordance with the provisions hereof.' In practice, the Insurance Authority prohibits any insurance products from being provided by foreign insurers irrespective of the type of risk being insured.
7 The Insurance Authority's Board Resolution No. 3 of 2010.
8 Article 3(12) of the Insurance Authority's Board Resolution No. 3 of 2010.
9 While bancassurance arrangements are permitted in the UAE, the Insurance Authority's board of directors' decision of 2016 concerning the instructions on marketing insurance policies through banks is still in draft form and is yet to be enacted.
10 Article 10 of the Insurance Authority's Board Resolution No. 3 of 2010.
11 Federal Decree-Law No. (8) of 2017 on Value Added Tax.
12 According to Article 2 Cabinet Decision No. 23 of 2009 concerning Charges, Supervision, Control and Transactions of Insurance.
13 Section 1, Article 3 of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies (Financial Regulations).
14 Section 2, Article 4(1)(a) of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies.
16 Section 2, Article 8(1) of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies.
17 Federal Law No 18 of 1993.
18 Federal Law No 5 of 1985.
19 Articles 1026–1055 of the Civil Code.
20 Along with the Insurance Law and the Insurance Authority Board Resolution No. 3 of 2010.
21 Articles 399–420 of the Maritime Commercial Code (Federal Law No. 26 of 1981).
22 An analysis of takaful insurance is beyond the scope of this chapter.
23 Article 1026(1) of the Civil Code.
24 Articles 125–148 of the Civil Code.
25 Article 1026(1) of the Civil Code.
26 Article 1035 of the Civil Code.
27 Court of Cassation judgment No. 281 of 1993.
28 Article 368 of the Maritime Code.
29 Article 246(1) of the Civil Code.
30 Article 3 of the Insurance Authority's Board Resolution No. 3 of 2010.
31 Article 1033 of the Civil Code.
32 Article 388 of the Maritime Code.
33 Article 6 of the Insurance Authority's Board Resolution No. 3 of 2010.
34 Federal Law No. 1 of 2006.
35 Article 7 of the Insurance Authority's Board Resolution No. 3 of 2010.
36 Article 373 of the Maritime Code.
37 Article 28 of the Insurance Law.
38 Article 104 of the Insurance Law.
39 Articles 258(2) and 259 of the Civil Code. There is often confusion in this area as the Civil Code also provides that the criterion in construing contracts is intentions and meanings and not words and form (as per Article 258(1) of the Civil Code).
40 Article 265(1) of the Civil Code.
41 Article 265(2) of the Civil Code.
42 Article 266(1) of the Civil Code.
43 Article 266(2) of the Civil Code. See, for example: Dubai Court of Cassation Case No. 125/2009 which held that a Construction All Risk insurance policy was a contract of adhesion under Article 266 of the Civil Code and therefore any ambiguity should be resolved against the insurer; Dubai Court of Cassation Case No. 247/2003 also held, in a life insurance case, that any ambiguity should always be resolved in favour of the insured.
44 Article 7 of the Insurance Authority's Board Resolution No. 3 of 2010.
45 Article 1028(c) of the Civil Code.
46 Article 7(2)(a) of the Insurance Authority's Board Resolution No. 3 of 2010; Article 28 of the UAE Insurance Law.
47 Article 28 of the Insurance Law.
48 Article 1028(d) of the Civil Code; Article 7(2) of the Insurance Authority's Board Resolution No. 3 of 2010.
49 Article 1028 of the Civil Code.
50 Article 246(2) of the Civil Code.
51 Article 26(4) of the Resolution of the Board of Directors of the Insurance Authority No. 15 of 2013 concerning insurance brokers regulation (the Insurance Authority's Brokers Regulations).
52 Article 9(1) of draft Circular No (12) of 2017 regarding Life Insurance and Family Takaful Business in the UAE.
53 Article 3(3) of the Insurance Authority's Brokers Regulations.
54 Article 3(4) of the Insurance Authority's Brokers Regulations.
55 Article 7(5) of the Insurance Authority's Board Resolution No. 3 of 2010.
56 Article 1028(b) of the Civil Code.
57 Article 1028(e) of the Civil Code.
58 Article 9(6) of the Insurance Authority's Board Resolution No. 3 of 2010.
59 Article 1028(b) of the Civil Code.
60 Article 1036 of the Civil Code.
61 Article 399(1) of the Commercial Maritime Code.
62 Article 399(3) of the Commercial Maritime Code.
63 Article 399(1) and (2) of the Commercial Maritime Code.
64 Articles 246 and 1034 of the Civil Code, Article 3 (2) of the Insurance Authority Directive (Code of Conduct for Insurance Companies issued by the Insurance Authority (Insurance Authority Resolution No. 3 of 2010)).
65 Article 37 of the Civil Procedure Code (Federal Law 11 of 1992), which requires that insurance policy claims should be filed with the Court having jurisdiction over the place in which the beneficiaries are domiciled.
66 Article 20 of the Civil Procedure Code.
67 Article 24 of the Civil Procedure Code.
68 Article 21(2) of the Civil Procedure Code.
69 Article 21(3) of the Civil Procedure Code.
70 Article 203 of the Civil Procedure Code. In respect of insurance contracts for example and as identified above, an arbitration clause must be in a special agreement and separate from the general printed conditions of the policy (Article 1028(1)(d) of the Civil Code).
71 For example: labour disputes; temporary and summary actions or orders; proceedings where the government is named as a party and proceedings which are outside the Court's jurisdiction.
72 Article 158 of the Civil Procedure Code.
73 Article 173 of the Civil Procedure Code.
74 Article 18(1) of the Law of Evidence in Civil and Commercial Transactions (Federal No. 10 of 1992).
75 Article 45 of the Civil Procedure Code.
76 Article 90(1) of the Law of Evidence.
77 Articles 7 and 8 of the Law of Evidence.
78 As per Article 1028(1)(d) of the Civil Code.
79 As above, Article 203 states that an arbitration agreement must be evidenced in writing and signed by someone who has the specific authority to settle disputes.
80 For example, the DIFC Arbitration Law 2008 apply in the DIFC and the ADGM Arbitration Regulations 2015 apply in Abu Dhabi.
81 Article 215 of the Civil Procedure Code.
82 For example, see Case No. 693 of 2015 where the Court of Cassation recognised for enforcement a London-based arbitration award.
83 See Circular No (5) of 2017 concerning compliance to the limits of the basic and ancillary deductible on motor vehicle insurance policies against loss and damage, whereby insurers were instructed not to impose charges on the insured that differ from those specified in Ministerial Resolution No. (54) of 1987 regarding Motor Vehicle insurance policies against loss or damage and under the legal liability.
84 See Circular No. (7) of 2017 Regarding Enforcement of Solvency Requirements for Foreign Branches in Section 2 of the Financial Regulation whereby the Insurance Authority introduced new draft regulations to clarify the solvency requirements for foreign branches.
85 See Article 1.
86 This was a follow up to Circular No (33) of 2016, which referred to a previous draft