UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
• Ownership and Solvency: While historically a 51% UAE ownership rule was strictly applied, modern foreign direct investment laws and the 2025 Law allow for greater flexibility; however, the CBUAE retains discretionary approval over shareholding structures to ensure local financial stability. • Capital Requirements: The minimum capital stand- ards remain stringent, requiring AED100 million for insurance companies and AED250 million for reinsurance companies. • Expansion of Scope: Notably, the 2025 Law extends the regulatory perimeter to insurtech and technology service providers that facilitate insur- ance activities, requiring them to hold CBUAE authorisation regardless of the medium or platform used. Financial Free Zones (DIFC and ADGM) The DIFC and ADGM operate under independent common-law frameworks (regulated by the DFSA and FSRA, respectively). • Authorisation: Entities in these zones are primar- ily authorised to cover risks located within the free zone or provide reinsurance. • Non-Admitted Rule: They are generally prohib- ited from directly insuring mainland UAE risks (eg, local motor vehicles or property) without a sepa- rate mainland licence, a principle often enforced through “fronting” arrangements. Regulatory requirements vary significantly based on the classification of the insured, a distinction further reinforced by the 2025 Law. • Consumer Insurance (Retail): This remains the most heavily regulated sector. The CBUAE’s Consumer Protection Regulation and the 2025 Law mandate strict transparency, standardised policy terms and “key facts” disclosures to protect unsophisticated buyers. Critically, as of 2024/2025, all retail disputes must be referred to Sanadak, the independent ombudsman, before any court action can be initiated. • SME Insurance: Governed by the SME Market Conduct Regulation, this regime balances poli- cyholder protection with the operational needs of small businesses. It requires transparent com-
munication regarding commissions, fees and risk exclusions while allowing for more flexibility than pure retail products. • Corporate Insurance (“Professional Clients”): Large-scale corporate insurance is subject to significantly less regulatory intervention. Under the assumption that both parties possess equal bar- gaining power and sophisticated risk-management capabilities, insurers are permitted to use bespoke wordings, complex risk structures and international market clauses (such as those from the London Market). Reinsurance, Excess Layers and Fronting Specific rules apply to the wholesale insurance mar- ket, which is largely treated as a business-to-business activity. Reinsurance is generally exempt from the retail-focused mandates of the Consumer Protection Regulation. The 2025 Law provides the framework for reinsurance operations, treating them as sophisti- cated financial contracts. While primary insurance for local UAE risks must be issued by a CBUAE-licensed company, the 2025 Law continues to permit these companies to reinsure their risks with international or free-zone based reinsur- ers. This practice, known as “fronting”, is common for high-value risks where the local insurer “fronts” the policy but cedes the majority of the risk to the international market. The primary restriction remains the prohibition of “non- admitted” insurance. Unlicensed foreign insurers are strictly prohibited from directly insuring UAE-based assets or liabilities. Engaging in unlicensed activity now carries significantly higher administrative fines, up to AED500 million, and potential criminal penalties under the consolidated 2025 regime. 2.3 Taxation of Premium Value Added Tax (VAT) on Premiums Most insurance premiums in the UAE include a 5% VAT. This is a consumption tax that the insurance company collects from you and passes on to the gov- ernment. However, the law treats different types of insurance differently:
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