Middle East Insurance & Subrogation Overview - November 2010

INTRODUCTION

The prevailing laws in the Middle East are generally based on and utilize elements of Shari'ah, The Koran and the Hadith together with what is termed as Latin law, influenced by Egyptian Napoleonic Code style law. The concept of insurance is not contradictory to Islam, for example, the payment of blood money by an individual to a deceased's family has been common through the ages. Further, the concept of risk mitigation, by using what can be termed as the law of large numbers, is and has been common practice in Islam. One of the explanations often cited for the low uptake for conventional insurance or what is termed as Islamic insurance, Takaful, in the Middle East is that insurance is viewed by many to be considered impermissible. It inherently contains elements of gharar (uncertainty) or, to put it into context, trading in risk, which is addressed in Shari'ah law.

Takaful is a Shari'ah compliant insurance scheme operated on the basis of shared responsibility and mutual obligations to safeguard its participants against a defined risk. As such, a Takaful policy differs from a conventional insurance policy— any surplus of funds at the end of the underwriting year is (in principle) divided between policyholders and the Takaful company in pre-determined proportions, similar in many ways to a mutual. The real issues facing a Takaful provider are how to construct a policy, a claims procedure, or an investment strategy that is Shari'ah compliant.

THE UNITED ARAB EMIRATES (INCLUDING DUBAI, ABU DHABI)

The law relating to insurance in the UAE was codified following the enactment of Federal Law No. #6 of 2007 (the "2007 Law") which created the UAE Insurance Authority ("IA"). The precise application of the 2007 Law is ongoing and is adopted from Jordanian insurance law. Currently the 2007 Law is very grey in its application and far from an all-encompassing regulatory system for conducting insurance or insurance mediation activities in the UAE.

As to laws governing insurance contracts, the UAE Civil Code has 29 articles in its insurance section relating to, inter alia, misrepresentation and non-disclosure, together with a specific subrogation clause at Article 1030 which sets out that:

"It shall be permissible for the insurer to take the place of the assured in respect of any indemnity paid to him for loss, in bringing the claims of the assured against the person who caused the loss out of which the liability of the insurer arose ..."There...