What are the insurance implications associated with property in the UAE?

The Royal Institution of Chartered Surveyors (RICS) has stated that reinstatement cost assessments (RCAs) must be conducted every three years. Ideally, this should be done every year, so that the “figures are updated and the correct levels of insurance are met,” Walker said.

Explaining that RCAs have been made “mandatory” for jointly-owned properties by Dubai Real Estate Regulatory Agency (RERA), Walker adds that privately-owned buildings, which are not bound or covered by such mandate, are likely to follow an incorrect approach to conducting RCAs.

“Building managers or owners of these properties are arriving at their own assessments. This can be based on a number of factors such as the original construction cost or on the basis of a previous RCA. That could be risky if they don’t have the specialist industry knowledge to assess the changes and construction cost movement in the market.”

Another concerning issue, Walker pointed out is that building owners or property managers rely solely on the market value, which can be very different and can lead to “discrepancy in figures”.

“There is no correlation between the market value and value of reconstruction,” he concluded.

Walker also addressed the risks that buildings in the region are most vulnerable to.

“In terms of vulnerabilities for buildings in the UAE, the biggest talking point would be the fire risk, given the significant high-profile fires here in the region. And, that really stems from the use of aluminium composite panel cladding (ACP), which increases the risk of a building.”

He continued: “Dubai has sky-rocketed and grown exponentially. About 20-30 years ago when the focus was largely on low-rises was not prolific, but over the last 20 years, whilst the landscape has grown in area, it has grown in height as well with the implementation of high-rises largely clad in ACP, and with that comes a different risk profile for buildings in the UAE.”

Walker advised that building owners and managers carry out the first risk assessment of their property as a starting point.

“It is important to understand whether the cladding is high, low, or medium risk and how that can be mitigated. A number of factors play into the risk profile of the cladding and building overall,” he concluded.

This article was originally published on Construction Week