The UAE's insurance sector exhibits an intriguing pattern amidst the conflict in West Asia. While it appears resilient, stable, and strong, risk is quietly shifting beneath the surface.
According to global credit agency AM Best, standard insurance policies in the UAE generally exclude war-related risks. Due to this design, domestic insurers were shielded from direct financial shocks, even when regional tensions escalated among the US, Israel, and Iran in late February.
“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,” the agency noted. In simple terms, the immediate risk isn’t visible, but it is being transferred.
UAE-listed insurers saw their net profits surge by 47% to reach AED 3.7 billion in 2025, a feat made possible by disciplined underwriting and risk-based pricing. According to data from Badri Management Consultancy, smaller players booked sharper gains, highlighting a broad-based recovery.
However, this growth story comes with a caveat: a heavy reliance on reinsurance. This means that local companies transfer their high-risk exposure to global reinsurers.
So far, war-related claims have remained minimal. “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. However, if geopolitical instability persists, reinsurance costs could rise.
This additional cost will eventually be passed on to policyholders in the form of higher premiums. There is also a secondary risk: if claims surge significantly, insurers could face counterparty risk that reinsurers fail to fulfill their obligations.
The UAE insurance sector is not absorbing the shock itself, but rather redirecting it. For the time being, balance sheets remain stable, and profits appear strong. However, if tensions persist, the true impact will manifest not in insurers' losses but in rising systemic costs.
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