Reinsurance is often described as 'insurance for insurance companies' — and while that is a simplification, it captures the essential concept. Understanding reinsurance is important for UAE businesses and sophisticated insurance buyers because it directly affects the financial security of your insurer, the capacity available for large risks, and the pricing dynamics of the UAE insurance market.
What Is Reinsurance?
When an insurer accepts a large risk — a major property policy, a complex engineering project, or a liability programme for a multinational — it typically cannot retain the full risk on its own balance sheet. It transfers a portion of the risk to a reinsurer, in exchange for a portion of the premium. The reinsurer pays a proportionate share of any claims.
Reinsurance can be proportional — the reinsurer shares a fixed percentage of every risk; or non-proportional (excess of loss) — the reinsurer only pays when a loss exceeds a defined threshold. Catastrophe excess of loss reinsurance protects insurers against extreme events such as a major earthquake or a catastrophic flood affecting many policyholders simultaneously.
Why Reinsurance Matters for UAE Insurance Buyers
As a policyholder, you benefit from reinsurance in several ways. It increases the capacity of UAE insurers to write large risks — without reinsurance, no single UAE insurer could cover a billion-dirham project. It improves the financial stability of your insurer — reinsurers pay claims after major events, preventing insurer insolvency. And it allows global reinsurers' expertise and claims-paying ability to back UAE policies.
When purchasing insurance for a large risk — a major property, a significant liability programme, or a complex engineering project — ask your broker which reinsurers are supporting the programme. The security behind your policy is as important as the terms.
UAE Reinsurance Regulation
The UAE's Central Bank oversees reinsurance as well as primary insurance. UAE insurers must meet regulatory requirements for cession (the amount of risk passed to reinsurers) and must use reinsurers that meet the CBUAE's financial strength requirements. This regulation ensures that reinsurers backing UAE policies have adequate financial strength to pay claims.
The DIFC and ADGM also host licensed reinsurers and reinsurance brokers, making the UAE a significant reinsurance market in its own right — not just a consumer of reinsurance capacity from London, Europe, and Bermuda.
Lloyd's of London and the UAE Market
Lloyd's of London — the world's leading specialist insurance and reinsurance market — has a significant presence in the UAE market. Lloyd's syndicates provide capacity for many of the large and complex risks placed in UAE through specialist brokers. Gulf Oasis Insurance Brokers has direct access to Lloyd's syndicates for specialist risks that require London market capacity, including large property, aviation, marine, and liability programmes.
For UAE businesses with complex or large-scale risk, access to London market capacity through a specialist broker can be the difference between adequate and genuinely comprehensive coverage.