The current war in Iran has enormous implications for the global and regional Middle East economy. The war also has important insurance implications, including with respect to D&O insurance in the Middle East region. In the following guest post, Shabnam Karim and Simon Lamb examine the ways that the current military, political, and diplomatic circumstances in the region are affecting both corporate risk exposure and the D&O insurance underwriting and claims environment. Shabnam is a partner and Simon is an associate at the Norton Rose Fulbright law firm’s Dubai office. We would like to thank Shabham and Simon for allowing us to publish their article on this site. Here is Shabnam and Simon’s article.
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The current period of heightened regional tension in the Middle East presents a distinct set of challenges for directors and officers liability insurers and claims professionals operating in the region. As businesses navigate supply chain disruptions and mounting economic pressures, Middle East D&O claims are likely to follow familiar patterns observed globally during previous crises, while also presenting challenges unique to the Middle East’s legal and commercial environment.
In this article, we examine the Middle East claims trends and coverage issues that D&O insurers and claims professionals should anticipate whilst the consequences of the present regional instability unfold.
Supply Chain Disruption and Mismanagement Claims
Regional conflict inevitably disrupts supply chains. Shipping routes through the Red Sea and Gulf of Aden face heightened risk, port operations may be compromised, and cross-border trade can slow or halt entirely. For companies dependent on the timely receipt of goods or raw materials, the consequences can be severe, including production delays, contract breaches, lost revenue, and reputational harm.
When these disruptions translate into financial losses, shareholders and creditors often look to company management for answers. The question that typically arises in subsequent litigation is whether the board took adequate steps to anticipate and mitigate foreseeable risks. Did the company have a robust supply chain contingency plan? Were alternative suppliers or routes identified? Did management disclose material supply chain vulnerabilities to investors?
The COVID-19 pandemic provides instructive precedent. In the United States, a wave of securities class actions followed the outbreak, with shareholders claiming that management had misrepresented companies’ exposures to supply chain delays and logistics failures.[i]
This precedent translates directly to the current tensions in the Middle East. Companies operating in or through the region that suffer conflict-related supply chain disruption may face claims alleging that directors failed to conduct adequate risk assessments, implement contingency measures, or disclose material exposures.
Looking specifically at onshore UAE, and Federal Decree-Law No. 32 of 2021 on Commercial Companies, there exists a legal framework that allows board members and senior executives to be held jointly liable to the company, shareholders, and third parties for acts of fraud, abuse of power, violations of law, and errors in management (Article 162). In practice, the concept of “errors in management” is broadly construed and may extend to serious failures of oversight, including inadequate risk management or contingency planning in the face of foreseeable disruptions.
In the DIFC and ADGM, which are freezones in the UAE that apply common law legal systems, directors owe duties derived from common law principles, including duties of care, skill, and diligence, and duties to act in good faith in the best interests of the company. The ADGM Courts directly import English law and jurisprudence and the DIFC Courts draw on both English and other common law jurisprudence. In practice, the test before these courts will be to scrutinise whether directors exercised reasonable care in overseeing risk management frameworks, including whether they took adequate steps to anticipate, mitigate, or disclose material supply chain risks.
It is also relevant to consider the express regulatory obligations that apply to companies in the region regarding business continuity. A number of regulatory frameworks across the Gulf (for example, regulations applicable to entities regulated by the Central Bank of the UAE, the DFSA, and the FSRA) impose explicit requirements on companies to maintain business continuity plans and operational resilience frameworks.[ii] Non-compliance with these requirements may strengthen the basis for claims that directors failed to safeguard operations against foreseeable disruptions, or may lead to regulatory exposure under such frameworks.
A particular issue of consideration is that litigation exposure for Middle East businesses may now be more international than it was in previous periods. Over the last five years in particular, companies in the Gulf region (in particular) have benefitted from significant international investments coming from international investors, private equity firms, or other stakeholders based outside the region, such as from the UK, Europe, the US and Canada. The globalized ownership and investment structures of Middle East companies present a scenario where disputes could arise from stakeholders outside the region, who have may have access to courts in other jurisdictions, including jurisdictions such as the US or Europe where there are more developed litigation and class action mechanisms and plaintiff-friendly litigation environments.
Share Price Decline and Securities Claims
Geopolitical instability and share price volatility are closely linked. When regional tensions escalate, companies may see their valuations decline. Where that decline is sudden or substantial, shareholder litigation often follows.
In Saudi Arabia, there is a securities class action regime under the Capital Market Law, which provides a mechanism for investors to bring a class action against directors for misleading disclosures or failures to disclose material risks. The Saudi Committee for the Resolution of Securities Disputes (CRSD) has jurisdiction over such claims and has demonstrated a willingness to hold directors accountable for disclosure failures in several recent cases.[iii] Notably, the Saudi regime is distinct from the class action regimes of the US and Europe in many ways, in that that the regulator can, through its website, invite affected parties (who did not hitherto file a claim) to join an approved class action lawsuit.
Elsewhere in the Gulf, in onshore UAE, a new securities regulatory framework came into force in 2026 following the passing of Federal Law No 32 and 33 of 2025. The UAE Capital Markets Authority (the regulator of listed companies in onshore UAE) now has expanded supervisory powers and enhanced criminal penalties can be imposed, including imprisonment. The relevant laws expressly affirm liability on board and management members for misleading disclosures. This new law paves the way for an increase in securities litigation before the onshore Dubai Courts.
Similar regimes exist or are developing in other Gulf jurisdictions.
D&O insurers should anticipate claims where companies are alleged to have downplayed their exposure to regional instability, failed to disclose material supply chain or operational risks, or made forward-looking statements that proved overly optimistic. The timing of disclosures will be critical: plaintiffs will scrutinise what management knew, when they knew it, and whether they disclosed it in a timely and accurate manner.
Adequacy of Insurance Procured
A less obvious but increasingly significant source of D&O claims in conflict scenarios arises where companies discover gaps in their insurance coverage. Property and business interruption policies frequently contain broad war exclusions, and where a company suffers losses that fall within those exclusions, it must absorb the cost from its own balance sheet. Further, particularly in the Gulf countries, there has historically been a lack of uptake of political violence, war, and terrorism insurance. These products were not routinely purchased by many companies in the region to date, meaning that many businesses may have had no relevant coverage for such risks.
Where uninsured losses are substantial, shareholders and liquidators may turn their attention to the board, alleging that directors breached their duty of care by failing to purchase insurance coverage or to procure adequate coverage for foreseeable risks. There may be arguments made that a prudent board should have ensured that appropriate coverage was in place or, at minimum, should have disclosed the existence of coverage gaps to investors.
While specific case law on director liability for insurance procurement failures remains fairly limited, the risk is recognised within the D&O insurance market. The existence of “failure to maintain insurance” exclusions in some D&O policies evidences an awareness that such claims could arise,[iv] and there have been cases in other jurisdictions where company directors have faced claims for an alleged failure to take out appropriate insurance.[v]
Economic Distress, Insolvency, and Fraud
The broader economic fallout of regional conflict extends beyond immediate supply chain disruption. Prolonged instability may affect consumer confidence, impact foreign investment, and create conditions in which businesses across multiple sectors face financial pressure. When companies face distress, D&O claims historically increase.
Common allegations include wrongful trading, where directors continued to incur debts when they knew or ought to have known that the company could not avoid insolvent liquidation; breaches of fiduciary duty, where directors allegedly prioritised their own interests or those of particular stakeholders over the company as a whole; and fraud, where financial distress reveals previously concealed misconduct.
While insolvency regimes vary across the region, the financial free zones in the UAE (the DIFC and the ADGM) have developed sophisticated frameworks that permit liquidators and creditors to pursue claims against directors, and onshore jurisdictions are also increasingly active in this space.
A further dimension relates to bad debt and loan defaults. Under UAE law, courts have in certain cases held directors personally liable for the repayment of company debts, particularly where there are allegations of mismanagement.[vi] D&O insurers should be alert to the potential for claims arising from such scenarios.
Notably, many D&O policies contain insolvency exclusions that bar coverage for claims arising from a company’s insolvency, bankruptcy, or financial distress although buy-backs are available at extra cost. Insurers and policyholders should consider the scope of any potential exclusions carefully, and the availability of insolvency buyback endorsements.
Cyber Risk in a Conflict Environment
Regional conflicts are frequently accompanied by heightened cyber activity. State-sponsored actors, hacktivists, and opportunistic criminals exploit periods of instability to launch attacks on critical infrastructure, financial institutions, and commercial enterprises. The Middle East has been a particular target in recent years, with significant incidents affecting entities across the Gulf.
According to reports from various authorities in the GCC, the recent scale of attempted intrusions is significant. For example, as of 18 February 2026, UAE authorities were intercepting between 90,000 and 200,000 cyberattacks per day, with more than 70% linked to state-sponsored threat actors.[vii]
Where a company suffers a cyber incident and is found to have lacked adequate cyber resilience or pre-incident compliance, directors risk facing claims and scrutiny. In the aftermath of a significant breach, shareholders may contend that the resulting financial and reputational damage, which may include the cost of responding to regulators and paying fines and penalties, was attributable to mismanagement.
D&O insurers should remain attentive to the broader potential management exposures arising from cyber risks in the current environment.
Regulatory Investigations and Enforcement
The Middle East has seen a rise in both internal and external investigations in recent years, fueled by companies’ heightened compliance obligations and an increasingly rigorous and proactive regulatory enforcement appetite.
Regulators across the region, such as the Securities and Commodities Authority in the UAE, the Capital Market Authority in Saudi Arabia, and the financial services regulators in the DIFC and ADGM, have become more active in scrutinising corporate conduct, particularly in areas such as financial reporting, disclosure obligations, anti-money laundering compliance, and market conduct. Recent analysis by AJMS Global notes that between July 2024 and July 2025, UAE regulators imposed approximately AED 658 million in monetary penalties (with the Central Bank of the UAE alone imposing 22 fines and sanctions totalling around AED 512 million during this period), alongside a strategic shift towards holding senior management personally liable for compliance failures.[viii]
When companies enter distress (a common impact of operating in a turbulent economic time), both internal stakeholders and external regulatory bodies often increase their scrutiny. Insurers and businesses should be aware of the increased risk at this time and that adverse regulatory findings can also serve as the precursor to civil litigation, as shareholders and creditors may use adverse regulatory findings as a basis for a civil claim against directors.
Coverage Considerations for Insurers
The foregoing analysis raises a number of coverage issues that policyholders and D&O insurers should monitor closely:
1. Potential exclusions
Many D&O policies contain exclusions for losses arising from war or hostile acts. Insurers should review the scope (and precise wording) of such exclusions and consider if and how they might be argued to apply in these unusual circumstances and in particular how they apply to claims arising from the indirect consequences of regional conflict, such as supply chain disruption or economic distress.
As noted above, insolvency exclusions also warrant careful attention. If economic pressure builds and corporate failures increase, the scope of insolvency exclusions and the availability of buyback coverage will become increasingly relevant.
The enforceability of policy exclusions is a critical issue. In many Middle East jurisdictions, including under onshore UAE law, policy exclusions are upheld only where they are drafted clearly, prominently displayed or highlighted in the policy (often in a contrasting colour/font), and specifically approved/initialled by the insured. Failure to meet these formal requirements may undermine an insurer’s ability to rely on such exclusions.
2. Overlapping Coverage and Allocation Issues
Where losses could fall within the scope of more than one policy, questions of overlapping coverage and allocation between policies may arise. For example, a company may hold separate standalone political violence, war, and terrorism insurance, alongside its D&O coverage. Each may respond to different aspects of the same underlying event.
Similar allocation complexities may arise in respect of cyber-related losses. For example, state-linked cyberattacks may trigger both a standalone cyber policy and a D&O policy where shareholders allege inadequate cybersecurity governance. A D&O policy may contain broad conduct-based exclusions or specific cyber or war exclusions, while the cyber policy may include hostile-act carve-outs invoked where an attack is attributed to a state actor.
The interplay of “other insurance” clauses across policies further complicates matters, as each may seek to render itself excess over other available coverage.
Policyholders and insurers should carefully consider all potentially responsive policies to understand how coverage may interact and to identify gaps and overlaps.
3. Notification Issues
Policyholders should be mindful of time limits for notifying claims under their D&O policies. Most D&O wordings impose strict reporting timelines, typically requiring notification of any claim or circumstance “as soon as practicable.” Policyholders should ensure they notify potential claims promptly and in accordance with policy requirements and the requirements of the applicable governing law.
The consequences of late notification may vary depending on the policy’s governing law across the Middle East. For example, under UAE law, although insurers have a remedy for late notification, an insurer may not be entitled to decline a claim solely on that basis where the insured demonstrates a reasonable excuse for the delay. This “reasonable excuse” defence can therefore provide a degree of protection to policyholders who have failed to comply strictly with notification timelines, although the scope and application of this defence will depend on the facts of each case and should not be treated as a substitute for timely notification.
A related issue arises in the reinsurance context. In the Middle East market, reinsurance capacity commonly changes from year to year even though the direct insurer remains the same. Where a direct insurer fails to notify reinsurers promptly, it may lose the benefit of its reinsurance cover if the relevant reinsurance contract’s conditions on notification are not met even though the insurer may in fact be liable to the policyholder due to being on cover continuously across multiple policy years.
4. Governing Law and Jurisdiction
Finally, governing law and jurisdiction issues warrant careful attention in the Middle East D&O market.
D&O policies placed in the region may be governed by different laws or subject to different courts or tribunals, depending on where the policy was issued, the insured’s domicile, and the specific terms negotiated at placement.
This can materially affect coverage outcomes. The same wording may be interpreted differently under onshore UAE law, DIFC law, ADGM law, English law, or the law of another jurisdiction. Substantive issues such as the enforceability of exclusion clauses, the duty of utmost good faith, and the availability of late notification defences may all be resolved differently across different legal systems.
Policyholders and insurers should give early consideration to governing law and jurisdiction provisions and their strategic implications, as these may shape coverage dispute outcomes as much as the substantive policy terms themselves.
Conclusion
The current regional tension in the Middle East presents a complex and evolving risk landscape for D&O insurers and claims professionals. While the precise trajectory of events remains uncertain, the patterns observed in other jurisdictions and in previous crises provide a useful guide to the claims trends that are likely to emerge.
In particular, supply chain disruption, share price decline, inadequate insurance, economic distress, and regulatory investigations all present potential catalysts for increased D&O claims. Insurers who understand these dynamics and engage proactively with their policyholders will be better positioned to manage their exposures and respond effectively when claims arise.
For policyholders, robust risk management, transparent disclosure, and comprehensive insurance coverage are the best defences against the claims that follow periods of instability. Directors who can demonstrate that they took reasonable steps to anticipate and mitigate foreseeable risks will be in a far stronger position than those who cannot. In an uncertain environment, preparation remains the most reliable form of protection.
[i] See, e.g., Ryan v. FIGS, Inc. et al., No. 2:22-cv-07939-ODW (AGRx) (C.D. Cal. filed Nov. 1, 2022).
[ii] DFSA GEN 5.3.23 Guidance | Rulebook; ADGM GEN 3.3.33 Guidance | Rulebook.
[iii] https://www.saudiexchange.sa/wps/portal/saudiexchange/newsandreports/issuer-news/news-detail-wcm/?newsId=9112&locale=en#:~:text=2025%2020:34-,CMA:%20Obligating%20Some%20Members%20of%20the%20Board%20of%20Directors%20and,on%2022/04/2025.
[iv] Failure to Maintain Insurance Exclusion Precludes Coverage for Defense Costs Incurred in a Lapsed Life Insurance Dispute | The D&O Diary
[v] Campbell v Peter Gordon Joiners Ltd (in liquidation) and another (2016) UKSC 38.
[vi] See, e.g., Dubai Court of First Instance Case No. 14 of 2019 dated October 10, 2021, in which the Court held the directors of a public company personally and jointly liable for the company’s outstanding debts, totalling close to AED 450 million.
[vii] Emirates News Agency: 71.4% of cyber threats targeting UAE state-sponsored: Cybersecurity Council
[viii] AJMS Global – Business Management Consultancy Services – UAE Regulatory Enforcement: A New Era of Compliance