UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
insurance intermediaries and reinsurers, operating primarily on a wholesale or international basis. Entities licensed in the DIFC or ADGM are generally restricted to operating within the relevant free zone or cross-border and may not distribute insurance to onshore UAE customers without separate CBUAE authorisation. Regulatory Requirements Applicable to Distributors Across all regimes, distributors are subject to require- ments relating to: • licensing and ongoing regulatory supervision; • minimum capital and professional indemnity insur- ance; • fit-and-proper standards for owners and senior management; • conduct-of-business, disclosure and conflict-of- interest rules; and • client money handling and record-keeping. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer What Information Must the Insured Disclose? (Onshore UAE) Under UAE law, an insured is expected to act honestly and accurately when applying for insurance. This does not mean that the insured must volunteer every pos- sible detail about the risk. In practice: • The insured must answer the insurer’s questions truthfully and completely. • Information is considered “material” if it would reasonably affect an insurer’s decision to provide cover or the terms of that cover. Where an insured intentionally conceals or misrep- resents information, the insurer may be entitled to cancel the policy and retain the premium. However, where non-disclosure is unintentional, or results from unclear or incomplete questions, insurers are gener-
ally not permitted to avoid cover, particularly in con- sumer cases. The Insurer’s Duty to Ask Cear Questions Insurers are expected to play an active role in assess- ing risk. In particular: • Insurers must ask clear, specific and understand- able questions during the application process. • If an insurer fails to ask about a particular risk fac- tor, it will usually not be allowed to rely on non- disclosure of that factor later. • Insurers are treated as professional risk assessors, not passive recipients of information. As a result, consumers are not expected to guess what information an insurer might find relevant beyond the questions asked. Consumer Insurance vs. Commercial Insurance The treatment of disclosure differs depending on the type of policy. Consumer and SME insurance • The insured is generally only required to answer the insurer’s questions honestly. • Ambiguous wording is interpreted in favour of the insured. • Disputes must usually be referred first to Sanadak, the UAE insurance dispute resolution body. • Exclusions and conditions limiting cover must be clearly highlighted in the policy. Commercial (corporate) insurance • Insureds are expected to take a more proactive role in disclosing material information. • Policies are interpreted in light of the commercial sophistication of the parties. • Disputes are typically resolved through courts or arbitration. DIFC and ADGM (Financial Free Zones) Different rules apply in the financial free zones. For the DIFC, insurance contracts continue to follow the traditional principle of utmost good faith, meaning
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