The conflict with Iran is triggering a surge in demand for war insurance in the Middle East, while sparking fights over rising premiums and what’s covered by existing policies.
Standard commercial policies, such as property, cyber and business-interruption insurance, typically don’t include war-related damage.
Companies are rushing to take out new war coverage, with most insurers seeing well over 300 new submissions in the last few weeks, according to Fergus Critchley, global head of terrorism and political violence at broker WTW.
War-risk cover for real estate in the Persian Gulf now typically costs 6% to 8% of a property’s value, compared with well under 1% in peacetime, according to Sachin Sahni, an insurance analyst at S&P Global Ratings.
The scramble comes after many businesses in the Gulf dropped war-risk cover in recent years to reduce their premiums, brokers said, trusting the region’s reputation as a haven from political turmoil.
Claims are starting to trickle in, but brokers and analysts say it is too early to gauge overall losses stemming from the conflict.
Rising rates have been a flashpoint, with some insurers recently withdrawing from a group providing cover for Emirates’ fleet of aircraft after the airline balked at a much higher premium because of the war.
Aviation insurers can typically reprice policies after a war breaks out.
Marine insurance is a hot spot for likely conflicts, with the effective closure of the Strait of Hormuz leaving around 1,000 ships stranded.
Ships can get insured to go through the strait—at steep prices—but most are choosing not to because of security concerns.
Sanctions add another layer of complication, with some vessels that are traversing the Strait of Hormuz being part of the so-called shadow fleet of vessels flouting sanctions on oil.
Repercussions from the conflict are spreading beyond the Gulf, with a rise in demand for terrorism insurance from big multinationals.
