Hidden risks for SMEs and corporates: Why liability insurance matters more than ever

Small and medium-sized enterprises (SMEs) and mid-sized corporates in the UAE face similar risks as large corporations, despite having fewer resources to handle financial consequences. Aditya Kulkarni, Executive Vice President - Head of Distribution, Sukoon Insurance, highlights that many SMEs underestimate their liability exposures.

Every business interacts with various entities, making them vulnerable to accidents, negligence claims, damage to third parties, and decisions made by company directors. The costs associated with such incidents can surpass compensation payments, including legal defence expenses, settlements, investigation costs, and reputational damage.

Third-party liability insurance is crucial for protecting businesses against claims of bodily injury, property damage, or financial loss caused by their operations. While SMEs may assume such incidents are rare, the consequences can be severe and impact cash flow, profitability, and business continuity.

Directors & Officers (D&O) liability insurance is essential for privately-owned businesses, start-ups, family enterprises, and growing SMEs. Directors and senior executives are personally accountable for their decisions, and the financial implications of mismanagement or regulatory non-compliance can be substantial. Many directors are unaware that some claims may target them personally, putting their assets and reputation at risk.

The UAE's business environment has become more regulated, with higher scrutiny on accountability. As legal proceedings become more complex and expensive, liability insurance is no longer just a precaution but a necessity for business resilience. Education about liability exposures should be prioritized for SME owners and directors, who may face unique risks due to their hands-on involvement in decision-making.