Are you covered? What UAE residents need to know about war-risk insurance
Standard insurance policies in the UAE typically exclude war-related risks; therefore, losses for local insurers have been “limited”.
“Standard insurance policies in the UAE typically exclude war-related risks, which are instead covered through add-on benefits. UAE insurers generally cede all this exposure to international reinsurers, and any increase in reinsurance costs is expected to be largely passed on to policyholders,” according to the latest research by AM Best on the UAE’s insurance market.
After the Middle East conflict broke out on February 28 involving the US, Israel and Iran, the UAE and Gulf countries were targeted by Iran with drones and missiles.
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The global credit ratings agency said prior to the start of the conflict, insurers in the UAE benefited from favourable market conditions, with 2025 demonstrating a return to strong technical results after the constrained performance of previous years.
“Material rate increases, as well as improved underwriting discipline, risk-based pricing enhancements, and increased business volumes, contributed to stronger financial performance across most lines of business,” it said.
According to Badri Management Consultancy, UAE-listed insurance firms’ net profit jumped 47 per cent to Dh3.7 billion ($1 billion) in 2025 compared to Dh2.5 billion in the previous year on the back of technical margins supported by risk-based pricing, portfolio rationalisation, and regulatory oversight from the Central Bank of the UAE.
Data showed that the top five insurers reported Dh2.7 billion, a 29 per cent increase year-on-year, while other players grew profits by 135 per cent, reaching Dh985 million.
The introduction of mandatory medical insurance in the Northern Emirates also benefited insurers.
“War-related losses have been limited to date. Where losses have arisen, the impact on domestic insurers is largely muted due to the high use of facultative reinsurance and minimal retention,” AM Best said, adding that capacity continues to be available to domestic insurers and any reduction in market capacity remains to be seen.
“It is anticipated that the reinsurance renewal conditions will continue to evolve, both in terms of policy terms and the rate environment, taking into account the ongoing events and the region’s exposure to volatile geopolitical conditions,” said AM Best analysts.
The credit rating agency said a potential rise in claims could expose primary insurers to counterparty credit risk through their reinsurance recoverables.
“However, UAE insurers typically maintain panels of financially strong reinsurance partners, which helps mitigate this risk,” it added.
Nonetheless, despite having significant exposures to real estate and equities, AM Best considers domestic insurers’ balance sheets sufficiently resilient to absorb movements in these asset values.
“While regional conflict creates macroeconomic uncertainty, its direct impact on core underwriting results to date remains limited. However, the situation remains fluid, and AM Best expects insurers to gain a clearer understanding of the implications as developments unfold,” it added.
