Construction insurance market trends: The Middle East (UAE)

Construction All Risk

Construction All Risk

In general, premium rates on construction business within the region are extremely competitive.

LOCAL MARKET

The local Standard and Poor's A rated insurers (DNIC, Oman Insurance Company, Orient and Emirates Insurance Company) offer competitive terms with coverage on the basis of the standard Munich Re wording (plus endorsements). While they do not usually underwrite risk on a subscription basis they have a combined capacity of USD500M (probable maximum loss).

Local insurers are unlikely to offer any differentiation on the basis of coverage enhancements or innovation.

REINSURANCE MARKET

The capacity of the construction reinsurance market in the UAE is approximately USD1B (probable maximum loss) and continues to increase.

Construction Liability

Construction Liability

Within the region, clients tend to purchase coverage in line with their contractual requirements only. As a result the exposure tends to be covered as an extension to construction all risk (CAR) policies.

Limits are generally low for projects, typically USD2 million, and the claims activity is relatively benign.

Professional Indemnity

Professional Indemnity

An extended reporting period of 10 years is becoming a common contractual requirement for large projects increasing the awareness and importance of this coverage for those providing professional advice within the construction industry.

There are a number of large, international markets offering sizeable lead lines in a very competitive environment. Add this to significant local market capacity there is a total of USD500 million capacity available within the region.

Auto Liability

Auto Liability

The UAE has a unified wording for motor insurance which is based on named perils, although it is possible to buy back some exclusions. As a result, premium rating is principally driven by the claims experience of clients. High loss ratios across the portfolio have seen international insurers increase their rates for motor policies.

Plant and Equipment is generally incorporated within CAR policies though coverage being placed for large cranes is currently being achieved at a rate of 0.4% per annum.

Marine

Marine

New capacity is regularly added to an already oversubscribed market place as new insurers continue to enter the market. As a result premium rates continue to set new lows.

In addition, there have been no significant marine losses in the region to affect the insurers rating or indicate any increase is likely.

D&O Liability

D&O Liability

While new company law enacted in 2015 had the effect of placing greater emphasis on corporate governance in private joint stock companies, the market remains soft in the region.

As the law reform becomes embedded we expect to see an increase in the uptake of this coverage though there is current a surplus of capacity from both local markets and international reinsurers.