UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
• The Risk: “Black box” bias where AI might unfairly price premiums, and the rise of AI-generated “deepfake” insurance fraud. • Regulator’s Response: The CBUAE now requires AI-driven decisions to be explainable. Under the 2025 Law, senior management is personally accountable for algorithmic errors, and companies must implement “Mandatory Anti-Fraud Mecha- nisms” specifically designed for digital security threats. Climate and Catastrophe (NatCat) Risks The record-breaking 2024 floods (AED4 billion in motor claims alone) permanently changed the UAE’s risk profile. • The Risk: Increased frequency of extreme weather events (hurricanes and flash floods) leading to pre- mium spikes and reduced reinsurance capacity. • Regulator’s Response: The UAE Climate Decree (Federal Decree-Law No. 11 of 2024) now man- dates that large entities – including insurers – measure and report their climate risk. The CBUAE also issued the Climate-related Financial Risk Man- agement Regulation, requiring insurers to perform stress tests for climate scenarios. 11.2 New Products or Alternative Solutions To address the risks discussed in 11.1 Emerging Risks Affecting the Insurance Market , the market has introduced several “intelligent” insurance models: Parametric Insurance This is the primary solution for climate risk. Instead of waiting months for a loss adjuster to visit a flood- ed site, a Parametric Policy pays out a fixed amount automatically if a pre-agreed “trigger” is met (eg, a specific wind speed or rainfall level measured by a third party). Telematics and Usage-Based Insurance A structural shift occurred in 2025 where premiums moved from “fixed” to “behavioural”. • “Pay-How-You-Drive”: Using 5G-connected sen- sors, insurers monitor real-time braking and speed. Careful drivers in the UAE can now receive dis- counts of up to 40%.
• eCall Integration: New GCC-standard cars now come with mandatory eCall modules that transmit data directly to insurers during accidents for near- instant claims processing. ART and Captives Large UAE conglomerates are increasingly bypassing traditional markets: • Captive Insurance: Many large groups are set- ting up their own “Captive” insurers in the DIFC or ADGM to self-insure their unique operational risks. • Insurance-Linked Securities (ILS): The ADGM is developing catastrophe bonds that allow UAE risks to be “sold” to global capital market investors, pro- viding a new source of funds for major disasters. 12. Developments in Insurance Law 12.1 Significant Legislative or Regulatory Developments In 2025, the UAE insurance landscape underwent its most significant transformation in decades. The key development is the enactment of the 2025 Law, which has completely overhauled the regulatory and super- visory framework for insurance onshore. The 2025 Law This landmark law consolidated the regulation of bank- ing and insurance under a single statutory umbrella, repealing both the 2018 Central Bank Law and the 2023 Insurance Law. Enhanced Consumer Protection and “Sanadak” The UAE has prioritised consumer rights through the full operationalisation of Sanadak, the first independ- ent financial ombudsman in the MENA region. All insurance complaints must now be funnelled through Sanadak before they can be escalated to judicial committees or courts. Additionally, the law imposes specific obligations on insurers to implement robust mechanisms for detecting and preventing digital fraud and social engineering. New Compulsory Insurance (January 2025) A major shift in universal health security took effect on 1 January 2025, extending mandatory health insur-
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