UAE Law and Practice Contributed by: Farida Safwat, Elham Mobini and Ramy George, NHB Legal
7.2 Sanctions and Payment Challenges Sanctions compliance has become a live underwriting and claims-handling issue rather than a background legal formality. The UAE’s core targeted financial sanctions instru- ment, Cabinet Decision No 74 of 2020, read together with Federal Decree-Law No 10 of 2025, requires reporting entities, including insurance companies, to comply with UAE AML/CFT obligations, including cus- tomer due diligence, sanctions screening, reporting obligations and targeted financial sanctions require- ments. Reporting entities must implement appropriate meas- ures to identify matches against applicable UAE and UN sanctions lists and, where a confirmed match exists, take the required freezing and reporting meas- ures without delay. Non-compliance may result in criminal liability and administrative penalties, includ- ing fines of up to AED5 million for certain violations. Cross-border claims payments and reinsurance set- tlements are further complicated by tightening corre- spondent banking and beneficiary-verification require- ments, reinforced by the UAE’s efforts to meet the revised Financial Action Task Force (FATF) Recom- mendation 16 (“R.16”) on payment transparency in light of a 2026 mutual evaluation on-site visit. In prac- tice, this is translating into longer payment timelines, more granular beneficiary due diligence, and – in a small number of cases – disputes between insureds and insurers over the delay in releasing claim pro- ceeds pending sanctions clearance. 7.3 War, Political Risk and Exclusions Recent regional conflicts have placed war, warlike operations and political violence exclusions under sustained pressure across multiple insurance lines. In marine and aviation, standard war-risk wording typically operates through notice-of-cancellation mechanisms, enabling insurers to cancel and, where appropriate, reinstate cover on revised terms and at an additional premium as risk escalates, rather than automatically withdrawing cover. This has contributed to rising war-risk premiums and restrictions for the highest-risk areas during periods of
Insureds (and their insurers) used to rely on the cost of proceedings as a natural deterrent to marginal claims, or under-resourced claimants. However, with increased accessibility to third-party funding (espe- cially in the DIFC), insureds have fundamentally altered their defence strategies to be well prepared for all stages of a dispute, along with incurring more costs to take whatever precautionary actions will sup- port their position (including preparing external expert reports, appointing different law firms, and pursuing procedures in different jurisdictions). They also con- sider the funder’s commercial interests, which are likely to lead to settlement negotiations. 7. Geopolitical Factors 7.1 Geopolitical Drivers of Insurance Disputes Recent geopolitical developments have caused a marked increase in insurance and reinsurance dis- putes in the UAE. The dominant driver is the conflict between the United States, Israel and Iran, which began on 28 February 2026 and has directly affected the Gulf region through missile and drone activity, attacks on commercial vessels, and repeated Iranian- declared closures of the Strait of Hormuz. While not a combatant, the UAE’s proximity to the Strait, its role as a regional shipping, aviation and logistics hub, and its extensive marine, energy, prop- erty and aviation exposures have made it a focal point for coverage disputes. In terms of nature, disputes are increasingly concen- trated on war-risk exclusions, held-covered clauses, and the scope of “hostile act” definitions in marine and cargo policies, alongside business-interruption claims tied to shipping and supply disruption, and aviation claims linked to airspace closures and rerouting. Vol- ume has risen accordingly, with war-risk premiums for Hormuz transits spiking sharply and generating down- stream coverage and reinsurance disputes. Beyond the conflict, insurers and reinsurers with UAE- exposed books are also monitoring sanctions regimes affecting Gulf counterparties, and shifting trade and tariff policy affecting supply chains, as secondary but persistent drivers of dispute activity.
279 I NSURANCE L I T IGATI O N 2026
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