BAHRAIN Law and Practice Contributed by: Mohamed Shaban, Mohsin Al Alawi and Qassim Al Fardan, Hassan Radhi & Associates
the coverage position is investigated. The treatment of defence costs depends on whether they are payable in addition to the indemnity limit, form part of that limit, or require the insurer’s prior consent. Bahrain does not have a developed market in which external litigation funders routinely finance the defence of insured claims. In practice, defence funding is therefore principally provided by the insurers under the policy or directly by the insured where coverage is disputed. 5.2 Shifting Risk Landscape Technology and AI have not yet produced a material volume of reported Bahraini insurance litigation, but they are beginning to affect the nature of risk assess- ment and potential liability. Claims may increasingly concern data breaches, automated decisions, cyber- security failures, defective software, inaccurate digi- tal advice and dependence on external technology providers. These risks complicate the identification of the legal- ly responsible party. A single loss may involve the insured, a software developer, a data provider, a cloud operator and other contractors. Insurers may conse- quently become involved earlier in the investigation, appoint specialist technology experts and issue more detailed reservations of rights concerning causation, contractual liability, cyber exclusions and allocation between policies. Regulatory change also increases the possibility of investigations and associated defence costs even before a third-party civil claim is filed. Policy word- ing is therefore increasingly important in determin- ing whether regulatory investigation costs, mitigation expenses, notification costs and specialist advisory fees are covered. 5.3 Defence Costs and Litigation Complexity Defence costs increase significantly where the claim involves multiple insureds, contractors, consultants, insurers or jurisdictions. Construction, engineering, marine, professional liability and reinsurance disputes may require extensive technical evidence, foreign-law advice, document review and co-ordination among several defence teams.
In Bahraini proceedings, complex technical issues are frequently referred to parties-appointed experts. This can reduce the need for prolonged technical evi- dence but does not eliminate the cost of preparing submissions to the experts, challenging the expert’s assumptions and responding to the final reports. The legal complexity often lies in connecting the expert’s factual findings to the policy wording and applicable liability rules. Defence costs in Bahrain remain comparatively lower than in certain jurisdictions such as the United King- dom or United States. Nevertheless, they are increas- ing as insurance products become more specialised and as disputes involve cross-border evidence, novel risks and substantial document volumes. Parties should address defence-cost limits, allocation and consent requirements at an early stage. 5.4 Cost Risk Management and Funding Solutions The principal mechanism for transferring defence-cost risk is the defence-cost protection contained within liability, professional indemnity, D&O and similar poli- cies. The effectiveness of that protection depends on the applicable limit, whether defence costs erode the indemnity limit, the insurer’s right to control the defence and any requirement to obtain prior approval before appointing counsel or incurring expert costs. Standalone legal expenses insurance and after-the- event products are not widely used in Bahrain. Con- tractual indemnities, joint-defence arrangements and cost-sharing agreements may be used in multi-party commercial matters, but these arrangements depend on the parties’ contracts rather than a specialised litigation-cost market. Third-party litigation funding is also uncommon. There is no comprehensive dedicated Bahraini framework governing commercial litigation funding comparable to those in some larger disputes markets, and the relatively moderate level of court and defence costs reduces the commercial demand for such arrange- ments. Parties therefore generally fund their own pro- ceedings, rely on their insurer or seek recovery of the costs permitted by the court.
18 I NSURANCE L I T IGATI O N 2026
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