Foreign Investment in UAE Healthcare and Insurance
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Foreign Investment in UAE Healthcare and Insurance

The United Arab Emirates has seen dramatic increases in population in recent years, averaging 7.7% growth since 2008. This population growth has come with a corresponding increase in the demand for medical services that the UAE’s previously existing medical infrastructure would be ill-equipped to deal with. For this reason national and local governments have focused on not only expanding their respective territories’ healthcare systems, but also attracting foreign companies that are willing to work within the UAE’s guidelines for foreign investors to establish themselves in the country and be part of one of the premiere destinations for healthcare in the Middle East.

In 2008 the UAE’s total FDI inflows came to US$13.7 billion. From 2005-2010 the UAE lead all Middle Eastern nations in greenfield foreign direct investment, meaning that a foreign parent company started a new venture in the UAE by constructing new operational facilities from the ground up. Obviously, foreign investment is generally welcome in the UAE, although healthcare is not as open as other industries.

Traditionally, healthcare in the United Arab Emirates has been government sanctioned and not open to private investment and partnerships. However, since 1985 local governments have been establishing free zones to attract foreign investment. The biggest of these zones as it relates to healthcare is the Dubai Healthcare City, which opened fully in 2008. Dubai Healthcare City is now home to over 80 clinics and over 1200 medical professionals. This growing medical community represents foreign interests from the United States, the United Kingdom and other European nations.

As UAE medical facilities continue to grow in prominence, the country has become more popular as a destination for medical tourists, bringing an even greater demand for medical professionals than what the UAE’s population alone would create. For this reason it is imperative that enough knowledgeable medical professionals be hired to support new facilities.

In the most recent Global Competitiveness Report for the UAE released by the World Economic Forum, the 3 most problematic factors for doing business in the country were 1) restrictive labor regulations, 2) inadequately educated workforce and 3) poor work ethic in national labor force. As the respondents that shaped these results were from the UAE, these results show that employers in-country may not have much faith in the quality of their local workforce, especially in a field that requires as much knowledge as healthcare. For this reason, many industries in the UAE have been focusing on increasing their attractiveness to the best and brightest potential employees from other parts of the world.

Cleveland Clinic Abu Dhabi will be opening in the 4th quarter of 2013. As a partner of Mubadala Healthcare in the UAE, the reputed Cleveland Clinic in the United States is not providing finances for the construction of the facilities, but rather providing expertise and human capital to ensure that the project is successful. The Cleveland Clinic has even gone as far as hiring over 700 nurses, 100 information technology people and more to work as expatriates at the Abu Dhabi location.

Cleveland Clinic President & CEO, Toby Cosgrove, M.D., said of the project, “Cleveland Clinic has a long-standing relationship with the people and government of Abu Dhabi and the UAE. We have had the privilege to treat Emirate patients and host medical professionals for continued medical education. Working with the government of Abu Dhabi, we identified a need in the region to provide compassionate, patient-centered care of the highest quality.”

Beyond this kind of human capital investment, other companies are making financial investments in the country. In August, South African company Mediclinic International Ltd. decided to buy all shares of Emirates Healthcare Holdings Ltd for US$223.6 million to take advantage of growth in the Middle East. Mediclinic Chairman, Edwin Hertzog, said last November that the company’s operations in Dubai are “showing our strongest growth.” Adding in August that, “Mediclinic management is optimistic about the outlook for Dubai and the UAE and believes that the transaction represents the next step in its growth strategy for the region.”

Mediclinic has also recognized a drawback of UAE law that has deterred doctors from working in the country. Last week Mediclinic openly lobbied the UAE government to change its laws concerning medical liability to reduce the risk of doctors facing criminal charges from patients dissatisfied with the service they have received.

In particular, Mediclinic has highlighted and case involving a South African doctor, Cyril Karabus, who has been arrested and is currently being detained over the accusations that he was responsible for the death of a child that he treated in Abu Dhabi in 2002. Although he is awaiting a retrial, Karabus has already been convicted and sentenced to three-and-a-half years in prison, along with additional “blood money” that is to be paid to the child’s family. For now, both Dr. Karabus’ case and amendments to current medical liability laws are pending.

Outside of road blocks that foreign companies investing in UAE medical facilities face, health insurance providers face greater restrictions in entering the nation. Foreign insurance providers in the UAE are generally prohibited from having a majority shareholding in any insurance company. A foreign shareholder could legally hold no more than a 25% stake in a UAE insurance company.

An exception to this rule is located at the Dubai International Financial Centre (DIFC) which is a federal financial free zone, operating outside of federal civil and commercial laws of the UAE, that allows for full foreign ownership. Here global insurance companies may establish insurers and offer direct insurance with regards to DIFC and non-UAE based risks and offer reinsurance with regards to UAE based risks.

Additionally, there is a provision that a foreign insurance company can open a branch office in the UAE provided that the UAE Insurance Authority gives approval to do so. This approval will be given only in the instance that the foreign insurance company provides an insurance product that is not provided by any existing UAE insurance provider or is needed by the UAE insurance market.

Currently, the Dubai Health Authority is undergoing its first-ever comprehensive survey of healthcare facilities in Dubai, which is scheduled to be completed on October 25th. From this, the Dubai government wishes to identify the gaps in Dubai’s healthcare market and develop a plan for future development of facilities and services in the coming decade.

In the DHA’s strategic goals, it has acknowledged that, “Public and private partnerships have been used in many countries to expand service availability and improve access and can play a similar role in Dubai if adapted to local needs and circumstances.” No doubt, this will continue to be a consideration when utilizing the survey and other emirates will be keeping a close eye on the results as well.


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