Construction Insurance in the UAE: What Contractors and Developers Need to Have

The policies a project actually runs on

Four policies carry most construction risk here, and each answers a different question.

Contractors All Risks. The foundation policy on almost every building project. CAR covers physical loss or damage to the permanent and temporary works during construction — fire, flood, storm, collision, theft, vandalism, accidental damage — along with materials on site and, by extension, materials in transit or in off-site storage. Cover typically runs from mobilisation through practical completion and continues into the maintenance or defects liability period, commonly twelve or twenty-four months. Section two of a CAR policy generally carries third-party liability arising from the works.

Third-Party Liability. Cover for injury to people and damage to property beyond the site boundary. Urban construction in Dubai places sites directly against occupied buildings, live roads and adjacent plots, so a crane movement, a falling object or an escape of water reaches a neighbour quickly. Limits should reflect the exposure of the specific site rather than a standard figure carried forward from the last project.

Workers' compensation and employer's liability. Statutory cover for injury to the workforce, which arises under labour legislation and carries its own section below.

Professional indemnity. Cover for liability arising from professional negligence in design. Consultants carry it as a matter of course, and contractors carrying design responsibility need it equally. Under a design-build arrangement the contractor absorbs design liability, which turns PI cover into a condition of appointment — a point running through our guidance on single-point design responsibility.

Two further covers appear on particular project types: plant and equipment cover for owned and hired machinery, and delay in start-up or advance loss of profits cover, which responds to revenue lost when an insured physical event pushes back the date a building begins earning.

Ten-year liability under the new Civil Transactions Law

Decennial liability distinguishes UAE construction from most other markets, and the parties it binds frequently misunderstand it.

Federal Decree-Law No. 25 of 2025, promulgating the new Civil Transactions Law, came into force on 1 June 2026 and repealed Federal Law No. 5 of 1985 in full. The decennial regime survived the change intact and moved to new article numbers, as Charles Russell Speechlys sets out in its analysis of the renumbered provisions and their treatment of subcontractors.

The operative provisions now read as follows. Article 821 holds the contractor and the supervising engineer jointly liable to the employer for ten years for total or partial collapse, extending expressly to defects threatening the structural integrity and safety of the works, with the period running from handover. Article 822 narrows the position of an engineer who prepares designs without supervising their execution, limiting that liability to defects in the design. Article 823 renders void any agreement purporting to exempt or limit decennial liability. Article 824 gives a three-year window to bring a claim, running from the collapse or from discovery of the defect.

Four characteristics make the regime demanding. Liability is strict, so an employer demonstrates the conditions rather than proving fault. Exclusion and limitation clauses carry no effect, which means a contractual cap drafted against the regime achieves nothing. The reference to structural integrity and safety reaches further than a literal collapse test. And the ten-year clock starts at handover, so a contractor's exposure on a project completed years ago continues running today.

One change deserves particular attention from main contractors. The new law expressly removes the decennial rules from the relationship between a main contractor and its subcontractors, confining them to the relationship between the employer on one side and the contractor and engineer on the other, while adding provisions governing recourse against subcontractors. A defect originating in a subcontractor's scope therefore remains the main contractor's problem as against the employer, with recovery down the chain following a separate route. The implications for package procurement appear in our guide to what to verify before awarding a trade package.

The gap between that liability and the usual policies

Here is the point most parties discover late: neither policy a contractor commonly holds reliably answers decennial liability.

A CAR policy generally expires at the end of the defects liability period, commonly twelve or twenty-four months after handover, while a decennial claim can arrive in year seven. Professional indemnity responds to negligence, and decennial liability attaches without fault, so a PI policy may fail to trigger at all — and most PI wordings exclude decennial liability expressly.

The market handles the mismatch through endorsement more often than through standalone products, with cover for decennial exposure typically arranged by extending a CAR, erection all risks or PI policy rather than through a dedicated decennial policy. Mandatory decennial liability insurance has been the subject of regulatory proposals in the UAE over several years, as Simmons & Simmons recorded in its note on plans for a compulsory regime, and the cover appears as a contractual requirement on major developments whatever the regulatory position stands at in a given year.

Quantum matters here as much as trigger. Compensation under the regime covers actual loss suffered and may extend to loss of profit and loss of use, which places potential exposure well beyond the cost of repairing the defect itself.

For a developer, the consequence is direct. A certificate confirming CAR and PI cover says nothing about decennial exposure, so the questions to ask are whether decennial cover exists, whether it sits as an endorsement or a standalone policy, what the limit is, and how long it runs. For a contractor, the same question belongs on the balance sheet: an obligation resisting exclusion, resisting capping, and running for a decade deserves cover proportionate to the buildings being handed over.

Structural defects also tend to originate in a handful of recurring places, and below-ground water ingress ranks high among them, as our treatment of tanking failures that surface years later describes.

Statutory workforce cover and the clocks attached to it

Workforce liability in the UAE arises under labour legislation rather than under the construction contract, and the obligation reaches every private sector employer.

Federal Decree-Law No. 33 of 2021 on the regulation of employment relationships, together with Cabinet Resolution No. 33 of 2022 on work injuries and occupational diseases, requires an employer to bear the cost of treatment and to compensate a worker for work-related injury or occupational illness. The federal portal's summary of work injury compensation obligations sets out the timing: a work-related injury or occupational illness goes to the Ministry of Human Resources and Emiratisation within 48 hours of the incident, and compensation falls due within 10 days of receiving the medical report confirming the injury or disability.

A worker prevented from working by the injury receives full wage during an initial period of incapacity, reducing thereafter on the scale the law sets, with compensation for a fatal injury calculated against the worker's wage within statutory limits. The legislation itself also sets out the circumstances removing entitlement, including self-inflicted injury, injury sustained under the influence of alcohol or narcotics, and injury resulting from a deliberate violation of declared safety precautions.

Two practical consequences follow for a contractor. The law creates a direct statutory liability on the employer rather than mandating a named insurance product, so workmen's compensation cover functions as the mechanism for meeting that liability instead of as the liability itself. And the obligation travels down the chain in practice, since an uninsured subcontractor's injured worker becomes a problem reaching the main contractor. Verifying cover at each appointment belongs in prequalification, alongside the disciplines in our guidance on holding a supply chain to its stated obligations.

The 48-hour reporting clock also deserves naming in site procedures rather than in a policy file, since the people who learn of an incident first are rarely the people holding the insurance documents.

Who insures what, and how the contract should say so

Insurance arrangements go wrong more often through ambiguity about responsibility than through absence of cover.

Under most FIDIC-based contracts used in the region, the contractor arranges CAR and third-party liability in the joint names of employer and contractor, workers' compensation for its own workforce, and plant cover for its own equipment. The employer arranges cover for existing structures where works proceed within an occupied or existing building, any delay in start-up cover protecting its own revenue, and confirmation that its consultants carry professional indemnity.

Five contract points deserve explicit treatment:

1. Joint naming and subrogation. Policies written in joint names prevent an insurer paying a claim and then pursuing the other contracting party to recover it. Subrogation waivers extending to subcontractors are worth securing, since a claim recovered from a subcontractor finds its way back to the project.
2. The moment risk passes. Risk in the works transfers from contractor to employer at taking over, and cover on both sides should meet at that date with no gap between the contractor's policy lapsing and the employer's property policy incepting.
3. Deductibles and who bears them. A policy with a low premium and a high deductible transfers cost rather than removing it, and the contract should state which party carries the excess.
4. Subcontractor cover. Whether subcontractors sit under the principal CAR policy or hold their own, verified at each appointment rather than assumed from a tender submission.
5. Notification obligations. Insurers impose notice requirements, and late notification defeats otherwise valid claims. Site teams need to know what triggers a notification and who makes it before an incident occurs.

Cover and contractual risk allocation move together, which argues for settling both in the same conversation rather than in sequence, as our guidance on putting a risk register to work describes.

The exclusions that decide UAE claims

Every policy carries a schedule of exclusions, and the ones determining outcomes here are reasonably predictable.

Defective workmanship and defective materials appear in narrow form on standard wordings, with broader cover available on extended terms, and the distinction between the defective element itself and resulting damage to surrounding work decides a great many claims. Design defect exclusions vary in width, which matters enormously on design-build contracts. Wear, tear, gradual deterioration and corrosion fall outside physical damage cover. Consequential and financial loss sits outside CAR, which explains why delay in start-up cover exists as a separate product. Contractual liabilities assumed beyond common law fall outside standard wordings, so an unusually onerous indemnity accepted in a contract may well be uninsured. Cyber exclusions now appear routinely. Testing and commissioning frequently carries its own sub-limits and conditions.

Site-specific conditions attach as well, and Dubai projects commonly see them around hot works, dewatering, piling adjacent to existing structures, and crane operations over public areas. Each condition imposes a procedure site teams follow for cover to respond, which places those procedures in method statements rather than in a folder in the commercial office.

Certification carries a parallel trap on fire-rated and facade elements, since substituting one component of a tested assembly voids the certification covering the whole, and an uncertified assembly complicates both the regulatory position and any subsequent claim. Our treatment of certified facade assemblies covers how the testing regime works.

Verification worth doing before signature

Certificates get accepted at face value far more often than they deserve. A more rigorous verification takes an afternoon.

Request the policy schedule rather than the certificate, since a certificate confirms existence while a schedule shows limits, deductibles, named insureds, territorial scope, period and exclusions. Confirm the insurer holds a licence from the Central Bank of the UAE, which regulates insurance activity and publishes a register of licensed insurers, brokers and agents. Confirm the policy period covers the full construction programme plus the defects liability period, with a mechanism for extension if the programme slips. Confirm the sum insured matches contract value plus materials, professional fees and debris removal. Confirm the third-party limit reflects the site's surroundings. Confirm named insureds include the employer, the contractor and subcontractors of every tier.

Then ask three questions certificates never answer: whether decennial cover exists and on what terms, what the claims history on comparable projects looks like, and who inside the contractor's organisation manages insurance and handles notifications.

Renewals deserve a diary entry of their own. Annual policies renewing mid-project lapse quietly, and a gap of days in CAR cover on a live site represents an exposure nobody intended to take. Verification of this kind belongs alongside the broader diligence set out in our guide to testing a contractor's financial standing.

Claims, and the records that decide them

Claims succeed or fail on documentation assembled before anyone knew a claim was coming.

Prompt notification comes first, within the period the policy specifies. Preserving the scene follows, with photographs taken before clearance begins and damaged materials retained for inspection. Contemporaneous records then carry the weight: daily site diaries, labour and plant returns, delivery notes, inspection records and instructions. Loss adjusters assess what the records show rather than what the parties recall, and a project with disciplined record-keeping recovers materially more than one without.

Mitigation matters equally, since insurers expect reasonable steps to limit further loss, and unreasonable inaction affects settlement. Coding the cost of that mitigation separately from the outset keeps it recoverable rather than absorbed into the general account.

A useful discipline treats the insurance file as a project deliverable maintained through construction, holding policies, schedules, endorsements, subcontractor certificates, renewal confirmations and a log of notifiable incidents. The same logic governs the close-out documentation described in our guide to the records a handover pack should contain, which acquires particular value against a liability running for ten years.

Questions worth putting to the other party before signature

Which policies are in force, and may we see the schedules rather than the certificates? Is the insurer licensed by the Central Bank? Does decennial cover exist, in what form, to what limit, and for how long? Does the policy period cover the programme plus the defects liability period, and what happens if the programme extends? Are the policies written in joint names, and do subrogation waivers extend to subcontractors? Which deductibles apply, and who bears them? How are subcontractors covered, and who verifies that at each appointment? What triggers a notification, and who makes it? And which indemnities in the draft contract fall outside the cover being offered?

A party answering those readily has managed insurance on real projects. A party treating them as paperwork has described how a claim gets declined.

Tell us where your project stands

Capital Associated carries contractor's all-risk, professional indemnity and third-party liability cover across the projects we deliver, operates under documented HSE protocols, and maintains the inspection and commissioning records supporting both quality assurance and any claim that arises. Our completed work includes villa construction at Dubai Hills Estate alongside commercial delivery across the city.

Complete the project form with your project type, location, approximate built-up area, budget range and intended start date, attaching your draft contract or insurance schedules if you hold them. A senior member of our team will respond with an initial assessment, and we will supply our own insurance schedules, licence and classification alongside it so you can verify rather than take our word for it.

Developers structuring a project and weighing how risk and cover should sit between the parties get the most value from that conversation before the contract is drafted, which is what our pre-contract planning work covers, alongside managed delivery for developers on projects run under a construction management arrangement.

Construction insurance and decennial liability carry consequences specific to each project and each contract, and the governing legislation changed materially in 2026. The guidance above sets out general principles for orientation, and parties should take advice from a UAE-qualified construction lawyer and a Central Bank-licensed insurance broker before settling cover or signing terms.