Premiums to be paid for insuring high-rise buildings in Dubai would rise next year, following a number of building fires in Dubai, including the Torch Tower in the Marina area, which caught fire in August for the second time in two years. But the increases are expected to be moderate.
Any potential rise in premiums will be partly driven by increased demand for insurance as awareness grows of how some of Dubai’s apartment blocks are at risk to fire outbreaks, according to insurance market experts.
Many tall buildings in the emirate still have inadequate fire safety standards, with some still clad with poor-quality material that allows blazes to spread quickly, reported Arab News citing the experts.
“Fire incidents have continued to occur, as the core problem of flammable cladding has unfortunately not been solved,” said Michael Kortbawi, partner at the Dubai-based law firm, BSA Ahmad Bin Hezeem & Associates.
“This has created awareness in building owners and owners’ associations about the need to carry proper levels of insurance coverage, and has thus led to an increase in demand for cover for high-rise cladded buildings.
“Underwriters have also taken note of the increased risk and have accounted for this in setting their rates. Therefore, rate increases can be expected.”
In 2013, the UAE revised its building safety code, which requires cladding on all new buildings over 15 metres to be fire-resistant. Older buildings are exempt from the ruling.
Mr Tim Davies, deputy CEO at insurance broker Marsh UAE, said that insurers are likely to be increasingly wary about insuring buildings. “In relation to tall towers, we are seeing stricter underwriting criteria and more scrutiny is being applied,” he said.
However, Mr Michael Rafter, CEO at the underwriter Arma Group, tempered expectations of significant price rises, saying premiums had already begun to rise last year.
“During 2016, the market experienced an increase in property insurance rates, particularly in respect of high-rise buildings, especially those with cladded exteriors,” he said, adding that this momentum subsided during the second quarter of this year.
“The current fire losses will certainly make more insurers hesitant about decreasing premiums, but we don’t see these current losses as events that push the insurance markets up significantly from the increases already achieved during 2016,” he said.
Instead, he sees insurers placing greater emphasis on their clients implementing risk management and loss-prevention measures.
While premiums for high-rise buildings could edge upwards, the wider insurance market in the UAE remains relatively soft owing to a competitive and overcrowded market.