War Risks and Insurance: Can UAE Businesses Recover Losses Caused by Conflict and Geopolitical Disruptions?

Businesses in the UAE are increasingly looking at insurance as a financial safeguard against unexpected losses amid rising geopolitical tensions. Yet legal experts warn that many companies may be overestimating the protection offered by standard insurance policies, particularly when losses arise from war or conflict-related disruptions.

A common misconception among policyholders is that insurance contracts automatically provide broad protection against all forms of risk. In practice, however, most policies include war-exclusion clauses that can significantly restrict an insured party’s ability to recover losses linked to armed conflict, hostilities or similar geopolitical events.

The issue has gained renewed attention as global conflicts and regional tensions continue to affect supply chains, trade routes and commercial operations across several sectors.

Legal Framework Governing Insurance Contracts

Insurance contracts in the UAE are primarily regulated by the UAE Civil Transactions Law (Federal Law No. 5 of 1985). A key provision affecting policyholders is Article 1028, which requires that any exclusion clause — particularly those relating to war risks — must be clearly stated, explicit and properly disclosed within the policy.

Legal specialists say the provision is intended to ensure transparency in insurance agreements. If an exclusion clause is ambiguous or not clearly presented to the insured, UAE courts and regulators may interpret the terms in favour of the policyholder.

Oversight of the sector is carried out by the Central Bank of the UAE (CBUAE), which requires insurers to comply with strict governance and disclosure standards aimed at protecting consumers.

Business Interruption and Marine Risks

War-related exclusions often become most relevant in areas such as business interruption and marine insurance, where companies depend heavily on coverage to protect commercial operations.

Business interruption insurance is commonly used by companies to offset losses resulting from operational disruptions or supply-chain breakdowns. However, such policies frequently exclude interruptions linked to armed conflict unless an additional endorsement specifically covering war risks has been obtained.

For companies involved in international trade, marine insurance presents similar challenges. Losses arising from maritime blockades, attacks on vessels or other conflict-related incidents are typically excluded under standard policies. Businesses engaged in shipping or cross-border trade therefore often require separate and specialised war-risk coverage.

Policyholder Rights During Claims

The UAE insurance system places strong emphasis on consumer protection. Policyholders are entitled to receive clear information before entering into a contract and fair treatment throughout the life of the policy.

When a claim is submitted, insurers are legally required to act in good faith, process claims within a reasonable timeframe and provide transparent reasons if a claim is rejected or only partially settled.

At the same time, policyholders must meet their own obligations, including promptly notifying insurers of losses and submitting the required documentation to support their claims.

Sanadak Offers Alternative Dispute Resolution

In cases where disputes arise between insurers and policyholders, litigation is no longer the only avenue available.

The establishment of Sanadak – UAE Insurance Ombudsman has introduced an independent mechanism for resolving complaints against insurance companies and brokers regulated by the CBUAE.

The platform allows policyholders to challenge insurer decisions without immediately resorting to court proceedings. Disputes are assessed based on the applicable legal framework and the specific contractual terms involved.

The process is also designed to be faster and more accessible than traditional litigation, providing a cost-effective route for resolving insurance disputes.

Growing Relevance Amid Global Tensions

With geopolitical instability increasingly affecting global commerce, war-related risks are becoming a more prominent concern for businesses operating in sectors such as logistics, shipping, energy and international trade.

Experts say companies should carefully review the scope of exclusions in their insurance policies and consider specialised war-risk coverage where necessary. They also advise businesses to familiarise themselves with the legal protections available under UAE law and the dispute resolution mechanisms provided by bodies such as Sanadak.

As conflicts and geopolitical tensions continue to influence global trade and supply chains, a clearer understanding of insurance coverage — and its limitations — may prove crucial for businesses seeking to protect themselves from the financial fallout of war-related disruptions.

 

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