UAE Law and Practice Contributed by: Farida Safwat, Elham Mobini and Ramy George, NHB Legal
insurers can use AI in handling claims by categoris- ing them according to level of risk and complexity, as follows: • human-in-the-loop – where a human makes deci- sions; • human-on-the-loop – where AI is performing rou- tine operations with oversight from humans; and • human-out-of-the-loop – which refers to limited to low-risk, non-material processes with the right controls. AI adoption, especially for the many low and medium- risk claims, and the further obligation provided under the CBUAE law to provide written reasons for rejec- tions of a claim, are considered positive developments and effective solutions to expedite assessment and decision-making, which reduce delays and claims escalations into coverage disputes. In parallel, the law further restricted the asymmetric appeal structure of the IDSRC, whereby decisions up to AED100,000 cannot be appealed, providing an additional incentive for prompt and fair first-instance decisions where a grievance is filed. Accordingly, early engagement, transparent communication of cover- age positions, and prompt payment of undisputed amounts remain important. 4.7 ESG and Climate-Related Coverage ESG considerations have become an influential fac- tor on coverage disputes, as the Climate Change Law obliged all UAE entities to comply with the new requirements of monitoring, reporting and reduction of greenhouse gas emissions. In the case of non- compliance, regulatory sanctions will be imposed on insureds, which raises questions about the insurabil- ity of those losses under existing policies, giving rise to disputes on whether such losses are covered or excluded, and what constitutes a covered occurrence when considering climate-related events. In addition, ESG disclosures by listed companies have increasing importance, especially in the D&O and financial lines context, as if sustainability reporting is found to be materially misleading, this may expose directors’ personal liability for governance failures related to climate-risk oversight. In D&O coverage,
such claims are a developing area of contention, as insurers may argue that this is dishonest conduct excluded from coverage, while directors argue that these are good-faith compliance efforts. Therefore, insurers are increasingly seeking to clar- ify the treatment of ESG-related liabilities through express coverage provisions, exclusions and policy conditions, reducing ambiguity and potential cover- age disputes. They have also developed products to insure against specific environmental risks where the exposure can be properly evaluated and priced. 4.8 Delegated Authority and Claims Responsibility The insurance market structure in the UAE depends on delegating authority for underwriting, policy admin- istration, and claims-handling functions from the insurance companies to managing general agents (MGAs) and third-party administrators (TPAs). Accord- ingly, coverage disputes arising from such delegated authority raise distinct legal issues of attribution, rati- fication and liability allocation. In all cases, insurers remain liable to policyholders for all their obligations within the policy, regardless of whether functions are delegated internally or to third parties. Where an MGA issues a policy on terms beyond its authority or a TPA wrongly denies a claim, the insured will then act against the insurer, not the delegate. The insurer may then act against the del- egate under the binding authority agreement, but this is a different contract in which the policyholder is not a party. Frequent areas of dispute include where a TPA rejects a claim that is subsequently overturned by the IDSRC and the policyholder seeks consequential losses for the period of wrongful denial, and where an MGA binds an insurer to a risk outside the scope of the delegated authority, or where a broker is acting in a dual capacity. 4.9 Financial Lines Coverage Trends In D&O coverage, it is obvious that more claims are brought against directors, due to shareholder activ- ism, regulatory investigations and disputes between senior executives and their employers.
275 I NSURANCE L I T IGATI O N 2026
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