Latest comments from several Howden Re executives suggest that the effective closure of the Strait of Hormuz following an escalation in the Middle East conflict could become a stress test for the reinsurance industry, but that widespread withdrawals are not expected as the reinsurance market is well capitalized and highly engaged; instead, the response is likely to be characterized by targeted repricing, tighter terms and an increased focus on aggregation and structuring, particularly during mid-year renewals.
The conflict in the Middle East began to escalate significantly on February 28, 2026, when the United States and Israel launched coordinated air strikes against Iranian military and leadership targets.
Iran responded with missile and drone attacks on Israeli and U.S. military bases in the region.
Disruptions caused by the ongoing conflict disrupted maritime traffic, led to sharp increases in war insurance premiums, and led to the rapid withdrawal and repricing of insurance capacity across multiple lines of insurance.
Notably, the Strait of Hormuz is a critical global chokepoint, through which approximately 20% of the world’s oil supply and a significant portion of liquefied natural gas pass daily.
According to analysis by Howden Re, the impact of closing the strait extends far beyond the risk of maritime war and extends to energy, political violence, aviation, trade credit and the broader macroeconomic environment.
Howden Re added that this was not just a single line loss event, but a scenario with the potential to impact the wider industry, unfolding in real time and testing the resilience of the global risk transfer market.
David Flandro, head of industry analysis and strategic consulting at Howden Re, continued: “The most immediate impacts are clearly in political violence/war, maritime and energy risks, but the larger issues facing the industry may ultimately be addressed through what we call macro transmission channels.
“Ongoing disruptions to energy supplies will increase the risk of renewed inflationary pressures, higher interest rates and the potential for broader sector capital impairment. This combination is likely to have a greater impact on insurability than insured losses from individual vessel or infrastructure claims.”
Andrew Foot, managing director at Howden Re, added: “While most of the headlines currently focus on shipping and related losses, the impact on the energy sector is far more complex.
“Infrastructure strikes, precautionary shutdowns and prolonged power outages create significant business disruption risks, much of which may not be covered by traditional war risk coverage. This is a highly correlated risk environment that was previously considered a tail risk.”
A sharp rise in demand for coverage of political violence and terrorism, particularly for Western assets operating in the Gulf, has driven up pricing multiples and prompted more selective underwriting, according to Howden Re’s analysis.
Aviation, cyber and trade-related routes are also said to face heightened risk assessments as conflicts spread across borders and disrupt supply chains.
“Political violence underwriting capacity remains, but underwriting discipline has tightened significantly. Insurers are looking closely at aggregation, war-terrorism boundaries and the interplay between local policies and global reinsurance treaties. The key question is no longer whether underwriting capacity exists, but how it is deployed and structured,” explains Richard Miller, managing director at Howden Re.
Meanwhile, insured losses on trade credit and political risk lines remain limited for now, but Howden Re warned that prolonged disruptions in shipping routes and energy markets could significantly increase default and non-payment risks.
Phil Bonner, global head of special treaties at Howden Re, said: “Credit and political risk markets have remained resilient amid recent geopolitical shocks, but the situation in the Strait of Hormuz has significant potential implications.
“As insurers and reinsurers reassess counterparty risk, supply chain disruption and sovereign risk, previously stable, reliable product lines are now firmly becoming strategic priorities. As the market adapts to a more complex risk environment, we expect to see more selective deployment of capacity, with an increased focus on aggregation and event definition.”
Sean Riordan, managing director of credit and financial risk at Howden Re, added: “Keeping the Strait of Hormuz safe and open for shipping is vital to the stability of global trade flows and the wider credit system.
“Ongoing disruptions are expected to manifest initially as credit and liquidity stress, affecting payment performance, letters of credit and contractual obligations. For insurers and reinsurers, the key variables are duration and security: how long the disruption lasts and how effectively routes are protected.
“These factors will ultimately determine whether credit stress remains contained or, over time, translates into claims on trade credit, sovereign credit and political risk portfolios.”
Despite the current challenging situation, Howden Re’s analysis shows that the reinsurance market is well capitalized and active and widespread divestments are not expected.
As noted at the beginning of this article, market reaction is expected to take the form of targeted repricing, tighter terms and an increased focus on aggregation and program structure, particularly at mid-year renewals.
Flandreau concluded: “Regardless, this is a reminder that geopolitical risks propagate in insurance markets much faster than traditional loss development models assume. In this environment, technical discipline, transparency and proactive monitoring are crucial.”
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