Reinsurance Disputes UAE: Settlements, Cooperation & Allocation

Reinsurance disputes often begin after the direct insurance claim has already become complex. A cedant may have investigated a loss, negotiated with the insured, paid a settlement and then presented the reinsurer with a recovery request. The reinsurer may respond that the original claim was not covered, the settlement was unreasonable, notice was late, claims-control rights were ignored, the loss was allocated to the wrong treaty year, or the cedant has exhausted the wrong limit.

In the United Arab Emirates, those disputes must be analysed at two different levels. The first is the UAE regulatory framework governing insurance and reinsurance businesses. The second is the reinsurance contract itself, including its governing law, dispute-resolution clause and detailed wording on settlements, cooperation, aggregation, allocation and claims expenses.

This distinction is critical. Phrases such as follow the settlements, follow the fortunes and claims cooperation are widely used in international reinsurance markets, but their precise effect should not be assumed from the label alone. The wording of the clause and the law governing the contract can materially change the result.

The current UAE regulatory framework

As of 2026, the principal federal legislation governing insurance and reinsurance activities is Federal Decree-Law No. 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business. It became effective on 16 September 2025 and repealed Federal Decree-Law No. 48 of 2023.

The 2025 decree-law treats insurance and reinsurance as licensed financial activities supervised by the Central Bank of the UAE. Article 82 expressly allows an insurance company to reinsure with another reinsurance company inside or outside the UAE or in a Financial Free Zone, while Article 94 provides that an insurance company may not reinsure with another insurance company unless that company is licensed for the relevant type of insurance in accordance with the applicable Central Bank rules.

The Central Bank Rulebook also continues to list Insurance Authority Board of Directors Decision No. 23 of 2019 Concerning Instructions Organizing Reinsurance Operations as in force. Those instructions regulate ceded and accepted reinsurance, reinsurer eligibility and rating, treaty and facultative business, retrocession and regulatory monitoring of reinsurance arrangements.

Regulation does not answer every reinsurance coverage question

The UAE regulatory framework establishes who may conduct reinsurance business and imposes prudential, licensing, solvency and supervisory requirements. It does not create a universal statutory formula answering every dispute between a cedant and reinsurer.

For example, the UAE legislation does not establish one automatic rule stating that every reinsurer must follow every settlement reached by a cedant. Nor does it prescribe one universal method for allocating a long-tail loss between multiple treaty years.

Those questions normally require analysis of:

the reinsurance slip, treaty or facultative certificate;
the underlying direct policy;
incorporated wording and endorsements;
follow-the-settlements or follow-the-fortunes language;
claims notification, cooperation or control clauses;
aggregation and occurrence definitions;
limits, retentions and sub-limits;
claims-expense and defence-cost provisions;
governing law;
arbitration or jurisdiction provisions; and
the factual history of adjustment and settlement.

Follow-the-settlements: what question is the clause trying to answer?

A follow-the-settlements clause is generally intended to address the extent to which a reinsurer is bound by a settlement made by the cedant with the original insured. Its commercial purpose is to avoid requiring the direct claim to be litigated twice from the beginning every time the cedant seeks a reinsurance recovery.

That does not mean that every settlement automatically becomes recoverable from the reinsurer. The precise effect depends on the actual wording and governing law.

A reinsurance dispute may still raise questions such as:

whether the loss fell within the risks reinsured;
whether the direct settlement was made within the terms of the original policy;
whether the settlement also fell within the scope of the reinsurance;
whether the cedant acted honestly and in a businesslike manner;
whether the cedant complied with mandatory notice or claims-control requirements;
whether excluded or uninsured amounts were included in the settlement; and
whether the cedant allocated the settlement to the correct policy, treaty year or layer.

A follow-the-settlements clause should not be treated as a substitute for reading the underlying policy and the reinsurance contract together. The reinsurer's obligation remains defined by the bargain actually made.

Follow-the-settlements and follow-the-fortunes are not necessarily identical

The expressions are sometimes used loosely as though they are interchangeable. In practice, their legal effect depends on wording, context and governing law. Some contracts use one expression, some use the other, and some contain detailed language defining exactly which settlements, compromises, judgments, claims expenses or ex gratia payments are recoverable.

For a UAE-linked dispute, the safest approach is therefore not to ask whether an abstract international doctrine applies automatically. The better questions are:

What does the actual clause say?
What law governs the reinsurance contract?
Does the clause bind the reinsurer only to the amount of a settlement, or also to the cedant's coverage determination?
Are there express exceptions for fraud, bad faith, ex gratia payments or matters outside the reinsured risk?
Did the cedant satisfy any conditions connected with notice, cooperation or control?

Claims-cooperation clauses

Reinsurers frequently require the cedant to provide information about significant underlying claims. A claims-cooperation clause may require prompt notice, regular updates, loss-adjuster reports, pleadings, expert evidence, settlement proposals, reserve information or an opportunity for the reinsurer to participate in strategy.

The commercial rationale is straightforward: the reinsurer bears financial exposure but usually does not have a direct contractual relationship with the original insured. It therefore depends on the cedant for access to the claim file.

A dispute may arise where the cedant settles first and informs the reinsurer later, provides incomplete information or proceeds in a way that allegedly deprives the reinsurer of a meaningful opportunity to participate.

Claims cooperation is different from claims control

A claims-cooperation clause usually requires information and participation. A claims-control clause may go further and give the reinsurer contractual rights concerning appointment of lawyers or adjusters, defence strategy, admissions, settlement negotiations or approval of settlements.

The distinction matters. A cedant that retains control under a cooperation clause may have greater freedom to resolve the underlying claim than a cedant that has agreed not to settle without the reinsurer's consent.

Whether breach of a particular clause completely defeats a reinsurance recovery, gives rise to damages, requires proof of prejudice or has another consequence depends on the clause and governing law. It should not be assumed merely from the heading “claims cooperation”.

Late notification disputes

Notice provisions are a frequent source of disagreement, particularly in casualty, professional indemnity, financial lines, construction, property-catastrophe and long-tail liability business.

Typical questions include:

What event triggered the obligation to notify the reinsurer?
Was notice required when the direct claim was first made, when the reserve crossed a threshold, or when the cedant reasonably expected a reinsurance recovery?
Was the notice clause a condition precedent or a contractual obligation with a different remedy?
What information had to accompany notice?
Did delay actually prejudice the reinsurer's ability to investigate or influence settlement?

These questions are particularly sensitive where a large underlying claim develops gradually. A small notification may later become a substantial treaty loss after new evidence, deterioration of injuries, multiple claimants or aggregation of related events.

Coverage allocation: which policy year bears the loss?

Allocation becomes difficult when a loss spans time, multiple insured locations, multiple defendants, several policies or more than one reinsurance year.

Examples include:

construction defects developing over several years;
environmental or contamination claims;
professional liability claims arising from a continuing course of conduct;
multiple property losses arising from one catastrophe;
product-liability claims affecting several policy periods; and
settlements covering covered and non-covered heads of loss.

The cedant may contend that a large proportion of the settlement belongs to a particular year or layer. The reinsurer may argue for a different trigger, allocation method or distribution between covered and excluded losses.

Horizontal and vertical allocation

International reinsurance disputes sometimes use terms such as horizontal allocation and vertical allocation. These are analytical descriptions rather than universal UAE statutory rules.

A horizontal approach may spread a loss across multiple policy periods or layers where the governing coverage theory requires that result. A vertical approach may permit recovery through the tower applicable to a particular triggered period. Which approach is appropriate depends on the direct insurance wording, reinsurance wording and governing law.

Parties should therefore resist importing an allocation method from another jurisdiction simply because it is familiar from foreign case law.

Aggregation: one loss or many?

Aggregation can be financially decisive. If 100 individual claims are treated as one occurrence, the cedant may access an excess-of-loss treaty after applying one retention. If they are treated as 100 separate losses, the retention may apply repeatedly and the reinsurance recovery may be dramatically reduced or eliminated.

Typical aggregation wording may refer to:

one event;
one occurrence;
one originating cause;
one catastrophe;
a series of losses arising from a common cause; or
losses occurring within a specified hours clause.

Small drafting differences can produce very different results. The dispute normally requires detailed analysis of the causal relationship between individual claims, the structure of the direct settlement and the aggregation language in the treaty.

Allocation between covered and uncovered settlement amounts

A cedant may settle a direct claim globally without assigning a precise amount to every allegation. Reinsurance problems arise when some allegations are arguably covered by the reinsured policy and others are not.

The parties may disagree over:

how much of the settlement represents covered damages;
whether defence costs sit inside or outside the reinsurance limit;
whether interest is recoverable;
whether regulatory fines, penalties or punitive elements are excluded;
whether ex gratia components are recoverable;
whether salvage or subrogation proceeds must reduce the loss; and
how deductibles, retentions and sub-limits should be applied.

A well-documented settlement allocation can reduce later disputes. Where the cedant knows that a substantial reinsurance recovery will be sought, it should consider the reinsurance consequences while negotiating and documenting the underlying settlement.

Defence costs and claims expenses

Claims expenses can become as contentious as the indemnity itself. Large liability, marine, energy and professional-indemnity disputes may generate substantial lawyer, adjuster, surveyor and expert costs.

The reinsurance wording should be checked for:

whether expenses are covered at all;
whether they are included within or payable in addition to the limit;
whether the reinsurer must consent before costs are incurred;
whether costs are allocated proportionally with indemnity;
whether costs incurred in coverage disputes with the original insured are recoverable; and
whether costs incurred pursuing subrogation or recovery actions are addressed.

A 2025 DIFC Court decision concerning a marine hull war reinsurance dispute considered whether the cedant's own costs connected with underlying proceedings were recoverable and, on the facts and governing English law, recognised an implied contractual basis for certain costs. That decision is useful as an illustration of the importance of governing law and wording; it should not be treated as creating a universal UAE rule for every reinsurance contract.

The regulatory importance of reinsurance recoverability

Reinsurance disputes are not only private contractual matters. The UAE's regulatory framework recognises that inability to collect reinsurance can affect an insurer's financial position.

Article 33 of the 2019 Reinsurance Operations Instructions requires management of an insurance company to alert its board and the regulator where a problem in reinsurance arrangements may affect the company's ability to meet its obligations. The listed circumstances include information indicating that a reinsurer may be unable to meet its obligations, failure by the reinsurer to pay after claims have been submitted, uncovered liabilities exceeding retention and exhaustion of reinsurance capacity.

The same instructions also impose controls concerning the quality and rating of reinsurers and contain financial-provision requirements addressing the risk that a reinsurer fails to pay amounts due.

This means a material reinsurance dispute may raise governance, reserving, solvency and regulatory-reporting issues in addition to the litigation itself.

The cedant should not treat reinsurance as a substitute for its direct obligations

The direct insurance policy and the reinsurance contract are separate contractual relationships. In general, the insured claims under its direct policy against the insurer, while the insurer seeks recovery from its reinsurer under the separate reinsurance contract.

A cedant therefore needs to manage the underlying claim based on its direct legal and contractual obligations rather than assuming that payment can always wait until a reinsurer confirms reimbursement.

This separation is expressly visible in UAE marine insurance law. Article 279 of Federal Decree-Law No. 43 of 2023 Concerning the Maritime Law states that the insurer may reinsure insured property, but the original insured does not have the right to rely on the reinsurance contract unless otherwise agreed in the reinsurance policy. The marine provisions also state that the relevant marine-insurance rules apply to reinsurance unless otherwise agreed.

For non-marine reinsurance, the exact contractual and statutory position should be examined under the applicable legal regime rather than assuming that the marine provision applies universally.

Reinsurance brokerage and settlement flows

Reinsurance brokers often play a central role in placing cover, transmitting notices, preparing bordereaux, negotiating wordings and processing premiums and recoveries.

The current CBUAE Insurance Brokerage Regulation distinguishes primary insurance from reinsurance business. It provides that premiums generated from reinsurance operations, and claim settlements and premium refunds arising from reinsurance, are subject to the relevant reinsurance brokerage agreement.

Where a dispute arises, the parties should therefore examine not only the treaty but also the broker's contractual authority and responsibilities. Questions may arise over whether notice through the broker constituted notice to the reinsurer, whether a settlement agreement was binding, whether funds were transmitted correctly and whether the broker had authority to agree wording changes.

Governing law can change the answer

UAE-linked reinsurance is often international. A UAE cedant may purchase cover from reinsurers in London, Europe, Bermuda, Asia, the DIFC, ADGM or other markets. The contract may therefore select a governing law different from onshore UAE law.

This is particularly important for clauses such as follow-the-settlements, claims cooperation and aggregation because foreign legal systems may have extensive case law interpreting standard market wording.

A dispute team should identify at the outset:

the law governing the reinsurance contract;
the law governing the arbitration agreement, if separately specified;
the seat of arbitration;
the court with supervisory jurisdiction over the arbitration;
the place where interim measures may be required; and
the jurisdictions in which an award or judgment may need to be enforced.

Onshore UAE, DIFC and ADGM should not be treated as one legal forum

The UAE contains distinct legal environments. Onshore UAE is governed by federal and emirate-level law. The Dubai International Financial Centre and Abu Dhabi Global Market are financial free zones with their own court and commercial-law frameworks.

A clause stating only “UAE law” or “Dubai jurisdiction” can create avoidable uncertainty if the parties intended a particular onshore or financial-free-zone framework.

Current UAE insurance-dispute commentary also highlights the importance of carefully drafting arbitration agreements, including the seat and the law governing the arbitration clause. In complex reinsurance contracts, specificity at placement can prevent an expensive jurisdiction dispute before the tribunal ever reaches the coverage issues.

Arbitration is common, but the clause must be checked carefully

International reinsurance contracts frequently provide for arbitration because parties may prefer a confidential forum with specialist insurance expertise. However, the validity, scope and enforcement of an arbitration clause should not be assumed.

The parties should examine:

whether the arbitration agreement was validly incorporated;
whether the signatories had the required authority;
whether the clause covers disputes concerning formation, avoidance and non-disclosure as well as claims;
whether there are consolidation or joinder mechanisms for multi-layer disputes;
the applicable institutional or ad hoc rules;
the tribunal's power over interim relief and costs; and
how awards will be recognised and enforced against the relevant assets.

These issues become especially important where several reinsurers subscribe different percentages of one placement but are not necessarily bound by identical dispute-resolution provisions.

Multi-reinsurer disputes

A treaty or facultative placement may involve a lead reinsurer and several following markets. A cedant may assume that an agreement with the lead will bind all subscribing reinsurers. That assumption should be tested against the slip and any express follow-the-leader, claims-agreement or several-liability wording.

Key questions include:

Does the lead have authority to bind followers on claims?
Is the authority limited to administrative matters?
Can followers raise their own coverage defences?
Are subscribers severally liable only for their own shares?
Are there different endorsements or signed lines?
Can disputes be consolidated before one tribunal?

The answers can materially affect both litigation strategy and settlement negotiations.

Practical claim-file discipline for cedants

A cedant expecting a substantial reinsurance recovery should build the reinsurance record while adjusting the direct loss. A robust file should ordinarily include:

the complete underlying policy and endorsements;
the complete reinsurance contract, slip and endorsements;
placement correspondence and agreed wording changes;
notice to reinsurers and proof of transmission;
claims-cooperation correspondence;
loss adjuster, expert and legal reports;
reserve history;
coverage analysis for the direct claim;
settlement authority and internal approvals;
settlement agreements and releases;
allocation calculations;
defence-cost invoices;
salvage and subrogation recoveries; and
broker statements and reinsurance-account records.

Documenting why a settlement was commercially and legally reasonable can be as important as documenting the amount paid.

A practical framework for analysing a reinsurance recovery dispute

Issue	Key question
Underlying coverage	Was the original insured's claim within the direct policy, and how was that issue resolved?
Reinsured risk	Does the reinsurance actually cover the same risk, period, territory and interest?
Follow-the-settlements	What precisely does the clause require the reinsurer to follow, and what exceptions apply?
Notice	Was notice given when and how the reinsurance contract required?
Claims cooperation	Did the reinsurer receive the information and participation rights promised by the contract?
Claims control	Was reinsurer consent required before settlement or appointment of professionals?
Aggregation	Is the loss one occurrence, multiple occurrences or a series arising from a common cause?
Allocation	Which policy year, treaty, layer, location or head of damage bears the loss?
Limits and retentions	How do attachment points, deductibles, reinstatements and sub-limits apply?
Expenses	Are defence, adjustment, expert and coverage costs within or outside the limit?
Recoveries	How should salvage, contribution and subrogation proceeds be credited?
Governing law	Which legal system interprets the clause?
Forum	Which court or tribunal decides the dispute, and where will the result be enforced?

Drafting lessons for future placements

Many reinsurance disputes can be reduced through clearer drafting at placement. Parties should consider defining:

what settlements the reinsurer must follow;
the standard applicable to the cedant's settlement decision;
notification triggers and time periods;
information to be supplied;
whether the reinsurer has cooperation or control rights;
consent requirements for settlement;
aggregation language and hours clauses;
allocation methodology where losses span periods;
treatment of defence and coverage costs;
application of limits, retentions and reinstatements;
treatment of salvage and subrogation;
lead/follower authority;
governing law;
arbitration seat and rules; and
consolidation or joinder for multi-party placements.

Key takeaway

Reinsurance disputes in the UAE cannot be resolved by relying on market labels alone. Follow-the-settlements language, claims-cooperation obligations and coverage-allocation mechanisms derive their practical effect from the actual wording of the contract and the law selected to govern it.

The UAE regulatory framework remains highly relevant. The Central Bank supervises reinsurance as a licensed financial activity, the current rules regulate ceded and accepted reinsurance, and material problems with reinsurance recoverability can create governance and prudential consequences for the cedant.

But when a particular loss is disputed, the decisive work usually involves reconstructing the contractual chain from the direct policy through the reinsurance placement: what was insured, what was settled, what was reinsured, what information was provided, how the loss was allocated and which legal forum has authority to decide the dispute.

HZ Legal can assist insurers, reinsurers, brokers and corporate stakeholders with UAE-linked reinsurance disputes, treaty and facultative wording reviews, claims-cooperation issues, allocation and aggregation analysis, arbitration clauses and reinsurance-recovery strategy.

Official and authoritative sources

This article provides general information only and does not constitute legal advice. Reinsurance disputes are highly dependent on contractual wording, governing law, forum, underlying coverage, claims history and the applicable regulatory status of the parties. Follow-the-settlements, claims-cooperation and allocation principles should be assessed under the specific reinsurance contract rather than treated as automatic UAE statutory rules.