The UAE's construction sector is one of the most active in the world — with mega-projects, residential developments, and commercial fit-outs happening across every emirate. Every construction project, regardless of size, carries significant risk: structural collapse, damage to works in progress, theft of materials, and injury to workers or passers-by. Contractor All Risk (CAR) insurance is the comprehensive solution that protects all parties on a UAE construction project.
What Does CAR Insurance Cover?
Contractor All Risk insurance has two primary sections. Section I — Material Damage — covers physical loss or damage to the contract works (the structure being built), construction plant and equipment, and temporary structures. This covers perils including fire, flood, storm, theft, accidental damage, and collapse during construction. Section II — Third-Party Liability — covers legal liability for bodily injury or property damage caused to third parties as a result of construction operations.
Additional covers available under CAR include: existing structures being modified or extended; construction plant and machinery on an 'all risks' basis; cross-liability between principal and contractor; delay in start-up (for projects with revenue implications); and maintenance period cover after project completion.
Who Should Buy CAR Insurance and Who Is Covered?
CAR insurance can be arranged by the project owner (principal), the main contractor, or jointly under a 'project policy' that covers all parties. A project policy covers: the project owner; the main contractor; sub-contractors; and sometimes architects, engineers, and consultants working on the project. A joint policy eliminates coverage gaps and avoids disputes between parties about whose insurance responds to a particular loss.
Project owners who employ contractors on a design-and-build basis should ensure the CAR policy covers the design liability — or require the contractor to maintain a separate professional indemnity policy for design errors.
UAE Construction Projects: Specific Risk Considerations
UAE construction projects face several specific environmental risks: extreme heat causing material fatigue and worker health incidents; sandstorms damaging exposed finishes and equipment; flash flood risk (highlighted by the 2024 UAE floods) for basement and ground-level works; and ground condition risks in coastal reclamation areas. Ensure your CAR policy does not exclude these UAE-specific perils.
Dubai Municipality, Abu Dhabi Municipality, and other UAE regulatory authorities often require proof of CAR insurance — including the third-party liability section — before a construction permit is issued. Ensure your policy is arranged and certificates issued before work commences.
How to Set the Correct Sum Insured
The contract works sum insured should equal the full contract value — including materials, labour, contractor's profit, and design fees. This is the cost to rebuild the entire project from scratch if it were totally destroyed. Insuring at less than the full contract value creates an 'average' situation where partial claims are paid proportionately, leaving you exposed.
Gulf Oasis Insurance Brokers has extensive experience in structuring CAR insurance for UAE construction projects ranging from small fit-outs to major infrastructure. We work with Lloyd's syndicates and specialist construction insurers to deliver the most competitive and comprehensive coverage.