The insurers on the hook for war in Iran

May 21st 2026|4 min read

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The insurance industry exists to contemplate worst-case scenarios, but the events of the past three months have nevertheless been hard to take in. The Iran war has unleashed havoc in the Middle East. It has also presented two classes of specialty insurer—those offering protection against political violence and marine war, which covers ships in conflict zones—with their biggest shock in decades.

The impact on those who insure against political violence has been most dramatic. Such policies protect businesses from terrorist attacks, sabotage, civil unrest, war and other nasty events. Since Iran started firing missiles at its neighbours, local firms in the Gulf have scrambled to find coverage for exposed infrastructure and property. Their clamour, and the higher risks they now face, has transformed the market. Insuring some assets now costs 40 times the pre-war rate.

Some of this is because previous prices were too low, says Fergus Critchley, head of terrorism and political violence at WTW, an insurance broker. A run of strong performance in the sector had brought in competition, pushing down underwriters’ premiums. They had room to fall, in turn, because few foresaw a conflict on anything like the present scale.

Claims are thought to run into the billions of dollars, with many stemming from attacks on energy infrastructure. For a niche industry that generates about $1.2bn of annual income from premiums, the resulting losses may erase years’ worth of revenue. Many insurance contracts also promise reimbursement for indirect losses, such as interruption of business. The Gulf is packed with offices belonging to multinationals, so such payouts will be steep. The market will tighten as a result. Contracts now being signed are dearer than in peacetime and offer narrower coverage.

What if peace is declared? Mr Critchley says that premiums would probably stay at their current, expensive levels for at least three to six months. In part this is because any news of a peace deal would meet significant scepticism. Even if a lasting one is struck, insurance would not be as cheap as before the war. Oleksii Omelianchuk of FortuneGuard, a firm that assesses conflict risks, points out that insurers who did not price in the risk of the present war are unlikely to make the same mistake twice.

Whether war or peace prevails, political-violence insurers may soon scale back. They typically negotiate their contracts with reinsurers—to whom they offload some of their risk—each year on January 1st. When this date rolls around in 2027, reinsurers may well reduce the coverage they offer and raise prices, just as insurers are doing already. Oliver Martin, head of political violence at Atrium, an underwriting syndicate, says that could deter insurers from signing bumper policies today, since they may not be able to reinsure them after next year’s renegotiation.

Prices have also risen sharply for insurance against marine war. For ships attempting to traverse the Strait of Hormuz, premiums for such protection are now often between 10 and 20 times the pre-war rate, according to WTW. So far the losses sustained by marine-war insurers are nowhere near as steep as in the political-violence market. Stale Hansen, boss of Skuld, one such insurer, says that even the total loss of a ship would not be a “game changer” for the market. Oil tankers are not hugely expensive, often fetching between $80m and $120m apiece. For comparison, marine insurers collect premiums totalling around $40bn per year. And few skippers, after all, have yet risked destruction by attempting to cross the strait.

As a result, marine insurers may do well from the war. But the longer it lasts, the more uncertain their prospects become. Many policies have provisions for “blocking and trapping”. These trigger payouts after a vessel has been stranded for a set period—usually six or 12 months—after which it is deemed lost. Should Hormuz stay shut for long enough, such provisions might apply to 2,000 or so ships stuck behind it. After Russia invaded Ukraine, blocking-and-trapping clauses eventually led to hundreds of millions of dollars in insurance losses. And far more boats are now in the Gulf than ever were in the Black Sea, threatening much bigger payouts.

Insurers are therefore eager for a programme to help vessels safely escape. Some of those stranded in the Black Sea by war in Ukraine were eventually able to leave under a UN-brokered scheme. Government support for a similar scheme in Hormuz would help. However, the most recent attempt by President Donald Trump—his short-lived Project Freedom—provoked Iran to launch more missiles and was then promptly called off. Progress in peace talks, meanwhile, seems about as dependable as a fair wind. It may be a long time before skippers and their insurers have room to relax.  ■

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