UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
disclose conflicts of interest, keep proper records, and act only within the scope of their licensed activi- ties. If an intermediary fails to meet these duties, it may face regulatory action by the CBUAE (including supervisory measures and penalties), and it may also face civil liability to affected parties depending on the circumstances. UAE Financial Free Zones (DIFC and ADGM) In the DIFC and ADGM, an intermediary’s “side” is determined by the contract and the regulatory sta- tus of the intermediary, and the intermediary must clearly tell the client whether it is acting for an insurer or acting independently for the client. The DFSA and FSRA conduct rules require insurance intermediaries to communicate information clearly, treat clients fairly and manage conflicts of interest. In ADGM, for exam- ple, the conduct rules also expect an intermediary to request correction if it believes a client’s disclosure is not true, fair or complete, and to consider whether it can continue acting if proper disclosure is not pro- vided. Breaches can lead to regulatory enforcement and potential civil liability. 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract Onshore UAE (Civil Law) In the UAE, an insurance contract is a formal agree- ment where the insured pays a premium – either as a lump sum or in instalments – and, in return, the insurer agrees to compensate the insured if a covered, uncertain event occurs (such as an accident, illness or damage). For the contract to be legally valid, certain conditions must be met: • The insured must have an insurable interest, mean- ing it would suffer a real financial loss if the event happens. • The risk must be lawful and not contrary to public policy or Islamic principles. • The contract must be in Arabic to be recognised by UAE mainland courts; while English translations are common, the Arabic text prevails in the event of any interpretative discrepancy (except for specific international lines such as Marine or Aviation). • Any clauses that exclude or limit the insurer’s liabil- ity must be written in bold, in a different colour, and
be specifically endorsed (signed/initialled) by the insured to be enforceable. From a practical perspective, a valid and workable policy should clearly state: • who is insured; • what is insured (the subject matter and risks cov- ered); • the policy period; • the premium; • the limits/sum insured; • deductibles; • main exclusions; and • the key claims and notification requirements. These items matter because they help avoid misun- derstandings and disputes later, particularly for con- sumers who rely on the policy wording as the main record of what was agreed. DIFC and ADGM (Common-Law Jurisdictions) In the UAE’s financial free zones, insurance contracts are governed by modern, English-style common-law systems. While each has its own laws, they rely heav- ily on familiar legal principles found in English law. Key features of insurance contracts in these zones include: • Agreements must involve genuine risk transfer and insurable interest. • Policies are usually written in English, with no requirement for Arabic. • The principle of utmost good faith applies, mean- ing both insurer and insured must share all relevant facts during negotiations. Insurers licensed in the DIFC or ADGM must comply with their respective regulators (DFSA and FSRA), and they are typically not allowed to insure onshore UAE risks directly – their operations are generally limited to within the free zones or for reinsurance. These frame- works provide international insurers with a familiar, transparent and flexible environment within which to operate in the region, which is especially appealing for those adjusting to regulatory changes post-Brexit.
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