Assessing insurers’ vulnerability to an adverse scenario in which the Strait of Hormuz remains effectively closed until June 2026, Fitch Ratings warned that inflation or supply chain disruptions could drive up claims costs, putting particular pressure on underwriting profitability for Gulf Cooperation Council (GCC) insurers.
Fitch observed that GCC insurers are primarily non-life or general insurers, with portfolios concentrated in motor and medical lines, with limited near-term direct war-related insurance exposure.
“Property and casualty risks typically represent a small proportion of overall risk, excluding war risks, and are typically heavily reinsuranced,” the ratings agency added.
However, Fitch noted that in a downside scenario, GCC insurers with limited rating headroom could face greater negative rating pressure from current macroeconomic conditions.
“Surges in inflation or supply chain disruptions could impact claims costs, putting pressure on underwriting profitability. Asset mixes are generally conservative, with a large proportion of cash in the portfolio. However, some asset mixes have significant exposure to local equities and real estate, so more protracted and severe conflicts could erode valuations and impact investment returns,” the ratings agency said.
Fitch said that outside the GCC, direct losses from conflict are likely to remain concentrated in certain specialized sectors, including maritime, aviation, political violence, energy and trade credit.
If the conflict continues or triggers a broader systemic shock to the global economy and financial markets, the potential for related losses could increase earnings volatility and put pressure on capital positions.
Nonetheless, non-life insurers and reinsurers are expected to retain sufficient headroom to absorb indirect pressure from potential increases in claims costs.
The ratings agency concluded: “Weak growth will mainly affect consumer-related insurance businesses, and if inflation rises sharply and rapidly, insurers may not be able to fully appreciate pricing trends, leading to tighter earnings.
“We expect the direct impact on the global life insurance market to be limited. Inflationary pressures on the industry are modest and the biggest impact is likely to come from interest rate changes or foreign exchange fluctuations.
“Fitch believes the global insurance industry’s capital levels are generally quite strong and can withstand a period of underwriting losses without requiring a rating downgrade or outlook revision.”
