With the UAE’s two financial-free zones stepping up their game, more local and regional businesses may be looking closer to home to meet their captive insurance needs
On the rise
There are around 6,000 captive insurers in operation today, up from just 1,000 in 1980. More impressively, there has been 20 per cent growth in captives over the last decade, according to the insurer Allianz.
Meeting this demand are more than 70 domiciles with some form of captive legislation. The US is home to the majority of captives, with over 50 per cent of them domiciled there.
Three domiciles — Bermuda, Cayman Islands, and Vermont — account for about a third of all captives globally.
But new and emerging domiciles, such as the United Arab Emirates (UAE), recognise the importance of captive insurers in supporting economic growth and attracting foreign investment, suggested Marcin Antosik, senior vice president and captive operations leader for the Middle East at Marsh Captive Solutions, earlier this year.
As such, the UAE has two financial free zones — the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) — that have introduced captive insurance regimes.
Andrew Smith, managing partner at Cavendish, an expert insurance and reinsurance consultancy for strategic growth, risk management, and regulatory compliance based in the UAE, says the domicile is home to an increasing number of captives, with most coming from industries such as energy, healthcare, logistics, and aviation.
“These are sectors where managing risk is crucial, and captives are a smart way to handle that,” he explains.
Marsh is the largest captive manager in the Middle East, managing the majority of captives located in the region.
Businesses from the energy industry were the first to enter the captive insurance space, according to Antosik and Robert Geraghty, senior vice president and international sales and consulting leader at Marsh Captive Solutions.
Interest has since grown, as knowledge and understanding of the benefits have spread throughout the region. Today, businesses from the health, financial services, and manufacturing industries are also looking at captive insurance for their risk management needs.
Of the nine captives currently domiciled in the UAE, property is a major focus, although those under Marsh management also cover political violence and group accidents, among other lines. There is also interest in marine and employee benefits.
Four of the UAE’s captives are based in the ADGM, set up by “four significant entities in the UAE”, from the oil and gas, power, sovereign wealth fund, and manufacturing industries.
The ADGM does not restrict classes of insurance, allowing captives to reassess their strategy and add new lines as needed. Property, liability, business interruption, marine and transportation, cyber, political violence and terrorism, and group accidents are the most common types of insurance that captives write.
Many Middle Eastern companies have tended to set up captives abroad in established domiciles with long track records, including Bermuda, Guernsey and the Cayman Islands.
Smith says: “It is easy to see why they have been the go-to [domiciles] for a while. However, that is starting to shift. With the DIFC and ADGM really stepping up their game, more local and regional businesses are considering staying closer to home.
“The regulatory framework here in the UAE is getting stronger and more competitive, and businesses are starting to recognise the benefits of operating within a familiar environment. It’s also appealing to have everything nearby — your legal team, your operations, and the UAE’s growing financial infrastructure.”
Making waves
Indeed, the ADGM brought in a dedicated regime for captive insurance in 2017, with a rulebook and approach tailored to captives. "In doing so, we were able to acknowledge it is appropriate to take a different approach to captives and set out specific aspects," an ADGM spokesperson explains. These aspects include different classes of captives, capital requirements for those classes, and structures, as well as the role that a captive manager can play.
The ADGM spokesperson adds: “This laid the groundwork to help develop the sector, and we attracted several significant captives, including those looking to re-domicile to ADGM from other existing jurisdictions.
“There are many significant entities in the UAE and the wider region that could set up captives. Evolving market conditions and increased awareness of the benefits and solutions that captives can offer have led to growing interest. The new business pipeline is building, and we expect the sector to continue to grow.”
According to the spokesperson, this pipeline comprises more than just local businesses. They say: “We are seeing an increase in interest from entities across the Middle East and North Africa (MENA) and, more recently, Europe. We believe we have brought in a strong regime for captives that can compete with anyone in the world.
“Our risk-based, proportionate approach offers an attractive, flexible, responsive captive insurance framework that is business-focused. We have a dedicated application process that is quick, efficient, and competitive in terms of fees.”
Antosik elaborates that the regulators in the DIFC and ADGM launched captive insurance regimes in line with well-established domiciles, giving them a solid foundation on which to attract interest and instil confidence.
Smith further states: “The DIFC and ADGM have both become very attractive spots for captives, not just for Middle Eastern companies but internationally as well.
“The DIFC has been around longer and has a really solid legal system in place, which runs on common law principles — something a lot of international businesses are comfortable with. It is well-established and has a reputation for excellent governance, tax benefits, and flexibility.
“The ADGM is newer but has quickly built a name for itself because of its focus on innovation, especially with digital solutions and fintech.”
He adds: “Both centres are strategically located, giving businesses access to markets in Europe, Asia, and Africa, which is a significant advantage. Plus, the UAE’s tax efficiency and ease of doing business make them strong contenders against older captive hubs like Bermuda or Guernsey. The mix of flexibility, transparency, and a business-friendly approach is what makes these regimes stand out for businesses looking to establish captives.”
Levelling up
The regulators are also constantly seeking ways to improve the environment for captive insurers. Antosik says: “The regulator is willing to modify and adapt their processes based on individual cases. For example, the UAE is compliant with International Financial Reporting Standards (IFRS).
“Captives in the UAE can apply for modifications to the reporting regime, so the regulators in the DIFC and ADGM can respond to the specific needs of the captive and allow them to report under US Generally Accepted Accounting Principles (GAAP), for example. They actively promote the Middle East as a welcoming region for captives.
The regulatory approval processes in both the DIFC and ADGM are also attractive, with a three-month common timeline. Geraghty says: “For a fully fledged captive, it takes three months to receive approval in both Dubai and Abu Dhabi, which is in line with offshore domiciles. It is an efficient timeline.”
Smith comments: “UAE regulators, especially in the DIFC and ADGM, have proven to be very capable and responsive to what businesses need. They have done a great job of creating a regulatory framework that is strong and reliable but also flexible enough to adapt as industries evolve.
“What’s particularly impressive is their openness to change — whether that’s incorporating new technologies or adjusting regulations to fit emerging industries. They’re not rigid, which is refreshing in the insurance and financial world.
“Another key strength is how collaborative they are. They actively engage with industry experts and businesses to ensure that regulations are not only practical but forward-looking.
The introduction of digital platforms for reporting and licensing has also streamlined a lot of processes, which helps businesses get up and running faster. This willingness to innovate and stay flexible gives the UAE a real edge, especially when compared to more traditional regulatory environments elsewhere.”
What further measures should the UAE take to entice businesses from the region and abroad to establish captive operations there? Smith argues that speeding up and simplifying the regulatory approval process could enhance the appeal of the UAE. He says: “While the system is pretty efficient now, making it even quicker and less complex would make the UAE even more attractive.”
The UAE could also offer more incentives, such as tax breaks or fee reductions, to encourage businesses that are considering captive insurance.
For Smith, another area where there is potential is education. He says: “A lot of companies, especially smaller ones, are not fully aware of the benefits of setting up a captive locally. More outreach, particularly in industries like healthcare, construction, and logistics, would go a long way in sparking interest.
“On the international side, the UAE already has a lot going for it — like its strategic location and political stability — but it could boost its global profile by promoting its legal and financial frameworks more actively on the world stage. Continuing to integrate new technologies, particularly in fintech and insurtech, would also reinforce the UAE’s position as a forward-thinking and innovative jurisdiction.”
Antosik agrees that education is key. "Educating interested parties about what is possible and the structure of the rules would be the most beneficial at this point in time," he says. Europe dominates, but the Middle East and Asia Pacific are good alternatives for captives. We need to increase the visibility of these regions to help businesses interested in captive insurance understand what is possible, often within their immediate reach.
The ADGM spokesperson concludes: “ADGM is poised for growth in this sector. The regime is in place, global captive managers have set up here, significant local entities have taken the lead, and we are now seeing interest from international entities looking to ADGM as their jurisdiction of choice.
The appetite for captives is growing, and we expect this momentum to continue from both local entities and increasingly international entities too.”
