Civil Law and UAE: Reinsurance and Large-Risk Dispute Handling

1. Introduction

Reinsurance and large-risk dispute handling is a specialised area of UAE civil and commercial law because a major insurance loss can involve several contractual layers:

Insured → Primary Insurer → Reinsurer → Retrocessionaire

A large-risk dispute may therefore involve:

interpretation of the original insurance policy;

interpretation of the reinsurance contract;

allocation of a very large loss;

claims notification;

disclosure and misrepresentation;

warranties and exclusions;

sanctions clauses;

“follow the settlements” provisions;

“follow the fortunes” arguments;

aggregation of losses;

legal and claims-handling costs;

governing law;

jurisdiction;

limitation;

arbitration;

enforcement.

The UAE's current regulatory framework includes Federal Decree-Law No. 48 of 2023 Regulating Insurance Activities, which defines a reinsurance company as a reinsurance company licensed to conduct reinsurance business in the UAE or abroad. (UAE Legislation)

The new Civil Transactions Law, Federal Decree-Law No. 25 of 2025, effective from 1 June 2026, also modernises insurance-related civil-law provisions while operating alongside specialised insurance regulation. (UAE Legislation)

A central proposition is:

A reinsurer's liability is determined by the reinsurance contract; the underlying insurance claim is relevant, but it does not automatically determine the reinsurer's liability unless the reinsurance contract makes it so.

2. Meaning of Reinsurance

Reinsurance is essentially an arrangement under which an insurer transfers or shares part of its insurance risk with a reinsurer.

The structure may look like:

Original Insured       ↓ Primary Insurer       ↓ Reinsurer       ↓ Retrocessionaire

The primary insurer remains the party directly responsible under the original insurance policy.

The reinsurer's obligation ordinarily arises under the separate reinsurance contract.

3. Why Large-Risk Disputes Are Different

Large-risk insurance can involve:

ships;

aircraft;

oil and gas installations;

major construction projects;

energy infrastructure;

banks;

industrial plants;

political and war risks;

large professional-liability exposures;

major property portfolios.

A single claim can therefore reach hundreds of millions of dirhams or more.

At that level, relatively small wording differences can have enormous financial consequences.

For example:

“The reinsurer shall follow settlements”

may produce a very different result from:

“The reinsurer shall independently determine coverage.”

Consequently, policy wording is often the centre of the dispute.

4. UAE Regulatory Framework

The UAE's Federal Decree-Law No. 48 of 2023 regulates insurance activities and identifies the Central Bank of the UAE as the relevant regulatory authority under the legislation. It also expressly recognises reinsurance companies. (UAE Legislation)

The private-law relationship may additionally be governed by:

the Civil Transactions Law;

commercial legislation;

applicable insurance regulation;

arbitration legislation;

evidence and procedural law;

DIFC or ADGM legislation where applicable;

foreign law where validly selected.

Thus:

Insurance regulation establishes the regulatory environment; the reinsurance contract establishes the parties' private-law obligations.

5. Nature of a Reinsurance Contract

A reinsurance contract is not simply a copy of the underlying insurance contract.

There are usually at least two contractual relationships:

First

Insured ↔ Insurer

Second

Insurer/Ceding Company ↔ Reinsurer

The insured generally does not become a direct contractual party to the reinsurance agreement merely because the underlying risk has been reinsured.

Therefore:

Underlying liability and reinsurance liability must be analysed separately.

6. Large-Risk Dispute Issues

A large-risk reinsurance dispute commonly raises:

1. What exactly was reinsured?

2. What percentage of the risk was assumed?

3. What was the attachment point?

4. What was the policy limit?

5. Was the reinsurance proportional or non-proportional?

6. Was the reinsurance facultative or treaty-based?

7. Was there a follow-the-settlements clause?

8. Was there a follow-the-fortunes clause?

9. Was notice given in time?

10. Was there material non-disclosure?

11. Did an exclusion apply?

12. Which law governs?

13. Which court or tribunal has jurisdiction?

14. Can the reinsurer rely on defences available under the original policy?

7. Case Law

The UAE's most developed reported reinsurance jurisprudence is presently found particularly in DIFC Courts decisions, which are especially valuable for large international insurance and reinsurance disputes.

8. Case 1 — Allianz Risk Transfer AG Dubai Branch v Al Ain Ahlia Insurance Company PJSC [2012] DIFC CFI 012

This is a foundational UAE reinsurance jurisdiction case.

The claimant was a DIFC branch of a foreign company licensed to conduct insurance/reinsurance business. The reinsurance policy had been concluded in the DIFC.

The claimant argued that:

the DIFC Courts had jurisdiction;

the policy was connected with the DIFC;

payment was to occur in the DIFC;

the DIFC legal framework should govern in the absence of an express governing-law clause.

The court considered the jurisdictional and governing-law issues in the context of the reinsurance relationship. (DIFC Courts)

Importance

The case establishes the importance of analysing:

place of contracting + place of performance + regulatory connection + governing law + jurisdiction.

Lesson

For large-risk reinsurance:

Do not assume that the location of the underlying insured risk alone determines jurisdiction.

9. Case 2 — AIG UK Ltd & Others v Qatar Insurance Co. [2024] DIFC CA 008

This is one of the most significant recent UAE reinsurance authorities.

The claimants were major international insurance/reinsurance companies, while the defendant was Qatar Insurance Company, which operated a Dubai branch and was licensed as an insurer in the UAE. (DIFC Courts)

The dispute involved substantial reinsurance arrangements connected to an underlying insurance claim.

Among the issues were:

whether reinsurance cover existed;

interpretation of the reinsurance contracts;

sanctions-related exclusions;

governing law;

liability of the reinsurers.

Importance

The case demonstrates that a large-risk dispute can require the court to analyse the reinsurance wording independently, rather than simply treating the original insurance judgment as conclusive.

It also demonstrates the importance of carefully drafting sanctions exclusions and defining the scope of reinsurance protection.

10. Case 3 — AIG UK Ltd & Others v Qatar Insurance Co. [2023] DIFC CFI 003/2022

The first-instance proceedings in the AIG litigation involved a preliminary dispute over the governing law of the reinsurance contracts.

The DIFC Court ordered determination of whether:

DIFC law, or

Federal UAE law

governed the reinsurance contracts. (DIFC Courts)

The court subsequently determined that the governing law of the reinsurance contracts was DIFC law. (DIFC Courts)

Importance

This case demonstrates:

Governing-law analysis can become a preliminary issue before the court ever determines the substantive reinsurance claim.

For large-risk contracts, governing-law provisions should therefore be drafted with exceptional precision.

11. Case 4 — Nessim v Nader [2024] DIFC CFI 013

This is another particularly important reinsurance authority.

The dispute involved an insurer and reinsurer and questions concerning:

DIFC jurisdiction;

governing law;

indemnification;

claims-handling costs;

underlying proceedings;

notification;

exclusions;

limitation.

The insurer argued that the reinsurer should indemnify certain costs incurred in dealing with underlying proceedings and relied, among other things, on the asserted operation of reinsurance clauses and UAE commercial practice. (DIFC Courts)

The case also demonstrates the complexity created where the reinsurance contract is not contained in a single document.

The insurer argued that the contract was evidenced by several documents and that oral evidence concerning negotiations would be necessary. (DIFC Courts)

Importance

For large-risk reinsurance, the contract file itself becomes crucial evidence.

This includes:

slips;

placement documents;

cover notes;

endorsements;

renewal confirmations;

emails;

broker communications;

policy schedules.

12. Case 5 — Al Buhaira National Insurance Company v Arab War Risks Insurance Syndicate [2024] DIFC CFI 013

This is one of the most directly relevant UAE reinsurance cases.

The dispute involved:

a UAE insurer;

a Bahrain-based reinsurer;

marine hull war-risk reinsurance;

a fleet of vessels;

multiple jurisdictions;

disputes concerning governing law;

“follow the settlements” wording;

contingent liability.

The underlying vessels and parties had substantial international connections. The court described the reinsurance as specialised Marine Hull War Risk reinsurance. (DIFC Courts)

Follow-the-settlements issue

The claimed clause provided that the facultative reinsurer would follow settlements agreed between the ceding company and insured.

The first-instance court initially rejected the argument that the relevant Placement Document formed part of the reinsurance contract. (DIFC Courts)

This demonstrates an extremely important principle:

A clause is enforceable only if it is actually incorporated into the reinsurance contract.

13. Case 6 — Al Buhaira National Insurance Company v Arab War Risks Insurance Syndicate [2026] DIFC CA 003

The Court of Appeal later substantially changed the position on the contractual incorporation issue.

The Court declared that the reinsurance contract did contain the “follow the settlements” provision.

It also declared that:

the insurer had not breached the relevant good-faith/fair-presentation obligations at placement;

the reinsurer was not entitled to avoid the reinsurance contract on the basis of alleged misrepresentation/non-disclosure;

the claim was not barred by late notification or limitation. (DIFC Courts)

Why this is important

This is a major lesson in large-risk dispute handling:

The documentary history of placement can determine whether a reinsurer is bound by a particular claims-handling provision.

The Court considered the parties' conduct, including repeated renewals and payment of premiums despite the absence of a signed/stamped Placement Note. (DIFC Courts)

14. Case 7 — Qatar General Insurance & Reinsurance Company QPSC v Emrgent Risk Solutions Ltd [2026] DIFC CFI 053/2024

This is an important very recent reinsurance/retrocession dispute.

The claimant was a Qatar-based insurance and reinsurance company and the defendant was a reinsurance and retrocession broker.

The dispute arose from a contract under which the defendant agreed to place retrocession coverage for reinsurance obtained by the claimant. (DIFC Courts)

The court found the defendant liable for breach of contract and awarded substantial damages, including QAR 6,089,712 for one head of loss and QAR 146,724.61 for another, with further amounts capable of accruing under the judgment. (DIFC Courts)

Importance

The case demonstrates that large-risk disputes can extend beyond:

insurer vs reinsurer

to:

reinsurer vs retrocession broker.

It therefore illustrates the entire risk-transfer chain.

15. Case 8 — Al Buhaira: Follow-the-Settlements Principle

The Al Buhaira litigation is also valuable because the judgment discusses the established common-law approach to a follow-the-settlements clause.

The court referred to the principle that such clauses can require a reinsurer to follow settlements where:

the claim falls within the scope of the reinsured risk; and

the insurer acted honestly and took proper/business-like steps in reaching the settlement. (DIFC Courts)

Important qualification

A follow-the-settlements clause does not necessarily mean:

“The reinsurer must pay anything the insurer chooses to pay.”

The contractual wording remains decisive.

16. What Is “Follow the Settlements”?

This clause generally concerns the relationship between:

Underlying claim

and

Reinsurance claim.

Where properly incorporated, it may restrict the reinsurer's ability to reopen the underlying settlement.

But important conditions may remain.

For example:

the settlement must fall within the reinsured risk;

the insurer must comply with contractual requirements;

the insurer must act honestly;

the settlement must be proper/business-like where the applicable law requires this;

the claim must satisfy the reinsurance wording.

The Al Buhaira litigation provides a particularly useful UAE illustration. (DIFC Courts)

17. Follow the Fortunes

A follow-the-fortunes clause is broader in concept.

It can potentially require the reinsurer to follow the insurer's good-faith determination of liability and quantum, subject to the contract.

However:

The precise wording matters.

Courts should not automatically insert a follow-the-fortunes obligation merely because the relationship is one of reinsurance.

This is why the contractual documents in Al Buhaira were so important.

18. Reinsurance Is Not Automatically Back-to-Back

A common misconception is:

“If the original insurer is liable, the reinsurer must automatically pay.”

That is incorrect.

The proper analysis is:

Step 1

Was the insurer liable under the original policy?

Step 2

Did the insurer's liability fall within the reinsured risk?

Step 3

Were the conditions of the reinsurance satisfied?

Step 4

Did any exclusion apply?

Step 5

Was notification timely?

Step 6

Did any aggregation or limit provision apply?

Step 7

Was there breach of a warranty or condition?

19. Large-Risk Allocation

Large-risk policies often divide exposure through:

proportional reinsurance;

quota share;

surplus arrangements;

excess-of-loss;

facultative reinsurance;

catastrophe layers;

retrocession.

For example:

Loss: AED 1 billion Primary insurer       ↓ Retention: AED 100m Reinsurance Layer 1       ↓ AED 100m – AED 300m Reinsurance Layer 2       ↓ AED 300m – AED 700m Reinsurance Layer 3       ↓ AED 700m – AED 1bn

The dispute may therefore concern which layer responds.

20. Attachment Point Disputes

The attachment point determines when the reinsurer becomes liable.

A dispute may arise over:

whether the loss exceeds the retention;

whether multiple losses can be aggregated;

whether a particular event triggers the layer;

whether the loss occurred during the coverage period.

In large-risk cases, the attachment point can determine millions of dirhams of liability.

21. Aggregation of Losses

Suppose an insurer suffers:

Loss A = AED 300 million

Loss B = AED 250 million

Loss C = AED 200 million

Can they be treated as:

one aggregated loss of AED 750 million?

That depends on the wording.

Important concepts may include:

event;

occurrence;

originating cause;

series of losses;

catastrophe;

hours clauses.

Therefore:

Loss aggregation is primarily a contractual interpretation problem.

22. Claims Notification

Reinsurance contracts commonly contain notification requirements.

The reinsurer may argue:

“The insurer notified us too late.”

The insurer may respond:

“The reinsurer suffered no prejudice.”

The outcome depends on:

wording of the clause;

applicable law;

contractual consequences;

limitation;

whether the clause operates as a condition;

whether the reinsurer waived the requirement.

The Al Buhaira Court of Appeal specifically dealt with the late-notification/time-bar issue and declared that the claim was not barred on that basis. (DIFC Courts)

23. Disclosure and Misrepresentation

Large-risk reinsurance involves significant underwriting information.

Potential disputes include:

prior losses;

claims history;

risk characteristics;

material changes;

security arrangements;

sanctions exposure;

geographical risk;

valuation.

A reinsurer may attempt to avoid the contract based on:

material non-disclosure or misrepresentation.

The Al Buhaira Court of Appeal held on the facts that the insurer had not breached the relevant good-faith/fair-presentation obligations and the reinsurer was not entitled to avoid the contract on that basis. (DIFC Courts)

24. Sanctions Clauses

International reinsurance may involve:

international banks;

vessels;

sanctioned jurisdictions;

foreign insureds;

international payment systems.

A sanctions exclusion may therefore become decisive.

The AIG/Qatar Insurance litigation demonstrates how sanctions-related arguments can become central to the interpretation and operation of reinsurance coverage. (DIFC Courts)

The court must distinguish between:

contractual exclusion;

regulatory prohibition;

applicable foreign sanctions law;

governing law;

public policy.

25. Governing Law

A large-risk reinsurance contract should clearly specify:

Which substantive law governs the reinsurance contract?

Possible choices may include:

UAE Federal law;

DIFC law;

English law;

another foreign law.

The AIG litigation demonstrates that governing law can itself become a major preliminary dispute. (DIFC Courts)

26. Jurisdiction

Governing law and jurisdiction are different.

For example:

“This contract is governed by English law.”

does not automatically answer:

“Which court hears the dispute?”

A contract could potentially have:

English governing law;

DIFC jurisdiction;

arbitration seated elsewhere.

The parties must therefore separately analyse:

governing law + jurisdiction + arbitration seat + enforcement location.

27. Reinsurance and Arbitration

Large international reinsurance contracts frequently use arbitration because the parties may prefer:

confidentiality;

specialist tribunals;

international neutrality;

procedural flexibility;

enforceability under the New York Convention.

The arbitration clause should clearly address:

seat;

number of arbitrators;

appointment;

governing law;

institutional rules;

language;

confidentiality;

emergency relief.

Ambiguity can generate preliminary jurisdictional litigation.

28. Evidence in Large-Risk Reinsurance

The evidence may include:

Contractual documents

policy;

slip;

cover note;

placement document;

endorsements;

schedules.

Communications

emails;

broker correspondence;

renewal messages;

claims correspondence.

Underwriting material

risk surveys;

actuarial analysis;

claims history;

underwriting reports.

Claims material

adjuster reports;

settlement agreements;

court judgments;

expert reports.

The Nessim and Al Buhaira litigation demonstrates the importance of reconstructing the actual contractual agreement from a large documentary record. (DIFC Courts)

29. Broker's Role

Reinsurance brokers can become central parties in disputes.

Their role may include:

placement;

communicating terms;

obtaining quotations;

confirming cover;

transmitting documents;

arranging renewals;

communicating claims.

The Qatar General Insurance & Reinsurance v Emrgent Risk Solutions dispute is a strong illustration because the defendant was a reinsurance/retrocession broker rather than simply the reinsurer itself. (DIFC Courts)

30. Retrocession

Retrocession is:

Reinsurance of reinsurance risk.

The structure becomes:

Original Insured      ↓ Insurer      ↓ Reinsurer      ↓ Retrocessionaire

A dispute at the retrocession level can therefore require examination of:

original insurance;

reinsurance;

retrocession;

claims handling;

allocation;

notification.

This creates a chain-liability problem.

31. Claims Handling Costs

A major dispute may concern whether the reinsurer must pay:

lawyers' fees;

surveyor fees;

adjuster fees;

defence costs;

investigation expenses;

settlement costs.

The answer depends on the reinsurance wording.

In Nessim v Nader, the insurer sought indemnification for costs connected with underlying proceedings and argued that contractual clauses and UAE commercial practice supported recovery. (DIFC Courts)

Therefore:

Claims-handling costs should be expressly addressed in large-risk reinsurance contracts.

32. Contingent Liability

An insurer may ask a court to declare:

“If I ultimately become liable to the insured, my reinsurer must indemnify me.”

But a court may be reluctant to decide hypothetical disputes.

This issue arose in Al Buhaira, where the court considered the insurer's attempt to obtain declaratory relief concerning potential liability in separate Sharjah proceedings. (DIFC Courts)

Principle

Courts generally prefer an actual and sufficiently concrete dispute rather than speculative future liability.

33. Limitation

Large-risk claims can remain unresolved for years.

Potential limitation disputes therefore become important.

Questions include:

When did the cause of action accrue?

When did the underlying loss occur?

When did the insurer's liability become established?

When did the reinsurer's payment obligation arise?

Does a notification provision operate as a contractual time bar?

The Al Buhaira Court of Appeal expressly addressed the argument that the claim was time-barred and concluded that the relevant claim was not barred on the facts. (DIFC Courts)

34. Large-Risk Settlement Strategy

A practical dispute-management approach should be:

Stage 1 — Preserve the documents

Collect:

slips;

placement documents;

policy wording;

endorsements;

emails;

broker communications.

Stage 2 — Establish the risk structure

Identify:

retention;

limits;

layers;

percentage participation;

attachment point.

Stage 3 — Establish the underlying liability

Determine:

insured's claim;

insurer's liability;

settlement/judgment;

quantum.

Stage 4 — Analyse reinsurance

Determine:

coverage;

exclusions;

conditions;

notification;

follow-the-settlements clause.

Stage 5 — Determine jurisdiction

Analyse:

court;

arbitration;

seat;

governing law.

Stage 6 — Quantify

Calculate:

gross loss;

recoverable loss;

retention;

reinsurance share;

expenses;

interest.

35. Large-Risk Dispute Matrix

36. Important Distinction: Original Policy vs Reinsurance

A useful examination formula is:

Original Policy Liability ≠ Automatically Reinsurance Liability

Instead:

Original Policy       ↓ Insurer's liability       ↓ Reinsurance Contract       ↓ Reinsurer's contractual obligation       ↓ Applicable exclusions/conditions       ↓ Recoverable reinsurance amount

This distinction is particularly important in sophisticated large-risk disputes.

37. Role of the 2025 Civil Transactions Law

The new UAE Civil Transactions Law entered into force on 1 June 2026 and includes updated insurance provisions, alongside provisions dealing with contractual obligations, unforeseen circumstances and guarantees. (UAE Legislation)

Its relevance to reinsurance disputes is primarily through the general private-law framework.

However, practitioners must also consider the specialised insurance regulatory legislation, especially Federal Decree-Law No. 48 of 2023.

Therefore:

The Civil Transactions Law should not be treated as the only source of UAE insurance law.

38. Relationship Between Regulation and Contract

A useful hierarchy for analysis is:

Mandatory UAE Insurance Regulation             ↓ Applicable Civil/Commercial Law             ↓ Reinsurance Contract             ↓ Underlying Insurance             ↓ Claims Settlement             ↓ Civil/Arbitral Remedy

The precise hierarchy depends on the legal issue and applicable legislation.

The fundamental point is that mandatory regulatory requirements cannot simply be contracted away.

39. Six Core UAE Reinsurance Authorities for Revision

The 2026 Al Buhaira appellate judgment is especially significant because it overturned the first-instance conclusion concerning incorporation of the follow-the-settlements provision and made specific declarations concerning good faith, avoidance, notification and limitation. (DIFC Courts)

40. Exam-Oriented Principles

Principle 1

Reinsurance is a separate contractual relationship from the original insurance.

Principle 2

The reinsurer's liability depends primarily upon the wording of the reinsurance contract.

Principle 3

Follow-the-settlements clauses can significantly restrict a reinsurer's ability to challenge an underlying settlement, subject to their wording and applicable law.

Principle 4

A purported reinsurance term must actually be incorporated into the contract.

Principle 5

Governing law and jurisdiction are separate questions.

Principle 6

Large-risk disputes require careful analysis of attachment points, limits and aggregation.

Principle 7

Late notification can become a substantial defence where the contract makes it legally effective.

Principle 8

Material non-disclosure and misrepresentation can affect reinsurance validity, but the applicable legal test must be established.

Principle 9

Reinsurance disputes may extend through retrocession and broker relationships.

Principle 10

The current UAE regulatory framework must be read together with the current Civil Transactions Law and applicable free-zone legislation.

41. One-Minute Revision

Remember:

RISK → WORDING → LIABILITY → SETTLEMENT → REINSURANCE → ENFORCEMENT

RISK

What exactly was reinsured?

WORDING

What do the reinsurance documents say?

LIABILITY

Is the insurer liable under the original policy?

SETTLEMENT

Was the claim settled honestly and within the reinsured risk?

REINSURANCE

Does the reinsurer have to indemnify under its own contract?

ENFORCEMENT

Which court or arbitral tribunal can determine and enforce the obligation?

The most important modern UAE authority to remember is Al Buhaira National Insurance Company v Arab War Risks Insurance Syndicate [2026] DIFC CA 003, which demonstrates how contract formation, incorporation of placement terms, follow-the-settlements clauses, good faith, notification and limitation can all become decisive in a large-risk reinsurance dispute. (DIFC Courts)

Core formula:

Large-Risk Reinsurance Liability = Contractual Coverage + Proper Incorporation + Underlying Risk + Compliance with Conditions + Applicable Law − Valid Exclusions/Defences.