UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
Reinsurance (Wholesale) Reinsurance and large-scale corporate insurance are generally classified as “Professional” business. These contracts are largely exempt from the retail- focused conduct rules. The focus is on contractual construction and market practice. The principle of “utmost good faith” remains central, but the parties are expected to be capable of negotiating their own terms without the intervention of the specialised con- sumer protection frameworks applied to retail clients. While consumers in the ADGM may have access to simplified dispute mechanisms, reinsurance disputes in these zones are almost exclusively resolved through the DIFC/ADGM Courts or through international arbi- tration, reflecting the parties’ equal bargaining power. 7. Alternative Risk Transfer (ART) 7.1 ART Transactions Onshore UAE (Civil Law) In the mainland UAE, ART transactions, including ILWs and parametric solutions, are increasingly discussed but remain primarily within the domain of sophisticat- ed, large-scale commercial reinsurance. While the 2025 Law does not explicitly define “ART” as a separate category, it provides the CBUAE with a broad and flexible mandate to regulate “innovative financial activities” and “emerging technologies”. If structured as reinsurance, these contracts are recog- nised and enforceable, provided they meet the core requirements of risk transfer and insurable interest. The main challenge onshore remains the strict “Ara- bic-prevails” requirement for contract interpretation and the formal requirements for arbitration clauses and exclusion clauses (bold/coloured text), which can be difficult to align with standardised international ART wordings. DIFC (Common Law) The DIFC has a mature framework for ART, position- ing itself as a regional hub for capital-markets risk transfer.
• The DFSA explicitly recognises the Insurance Special Purpose Vehicle (ISPV) concept. These are typically used for fully funded reinsurance risk- transfer structures, such as catastrophe bonds or insurance-linked securities (ILS). • Since 2019, ISPVs often utilise the Prescribed Company regime, which offers a cost-effective and flexible corporate structure for “Qualifying Pur- poses” such as structured finance and risk transfer. This allows for the ring-fencing of assets and liabili- ties, ensuring that capital market investors have no recourse to the ceding insurer’s other assets. ADGM (Common Law) As of late 2025, the ADGM is positioning itself as a frontrunner in ART innovation through its 2025/2026 Insurance Reform Programme. • The FSRA issued a landmark discussion paper in December 2025 proposing a comprehensive framework to support the growth of a domestic ILS market. • A key innovation being introduced is the “Synthetic Sidecar”. Unlike traditional sidecars that require a separate legal entity, the ADGM is exploring structures that allow risk transfer to happen within a regulated insurance entity through ring-fenced, fully funded asset pools. • Regulators are currently focusing on “basis risk” (the gap between actual loss and the ART payout trigger) and ensuring that collateral management meets international solvency standards (IAIS Prin- ciples). 7.2 Foreign ART Transactions Onshore UAE (Civil Law) In the mainland UAE, the treatment of ART trans- actions written in foreign jurisdictions depends on whether they are classified as reinsurance or financial derivatives. • Treatment as Reinsurance: Under the 2025 Law, a UAE-licensed insurer is explicitly permitted to rein- sure its risks with a reinsurer located outside of the state, provided that the foreign reinsurer is regu- lated in its home jurisdiction and meets specific credit-rating requirements. If an ART transaction (such as a foreign-issued Industry Loss Warranty)
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