International insurance law firm Kennedys has warned that the evolving conflict involving the United States, Israel and Iran could bring a rare multi-front event to global insurance and reinsurance markets.
Kennedy’s assessment is that continued military operations, disruptions to energy flows and prolonged regional instability could simultaneously test political violence, maritime, aviation, trade credit and political risk safeguards.
According to the Kennedys, the escalation began when U.S. and Israeli forces conducted air strikes on Iranian targets, reportedly killing senior members of the Iranian regime, including Ali Husseini Khamenei.
However, the company noted that the removal of senior leadership figures did not make the trajectory of the conflict clear. Instead, Iran has responded with missile and drone strikes across the Gulf and targeting Israel, widening the geographic scope of the risk.
In addition to Israel and Cyprus, retaliatory attacks have targeted the United Arab Emirates, Qatar, Bahrain, Kuwait and Saudi Arabia, among others, Kennedys observed. While the missile defense system intercepted many of the projectiles, some hit their targets.
The company cited reports of damage to civil and commercial assets, including retail complexes, hotels, ports, airports, energy infrastructure and liquefied natural gas facilities. Kennedy believes that insured properties may still be at risk if the strategic goal is to disrupt the economy.
In the market for political violence, Kennedy anticipates claims for physical loss and damage to private assets may accumulate. Many major policies in the Gulf are written locally but reinsured in London, meaning losses can flow into international reinsurance markets. The company said aggregation issues could become central, particularly if multiple strikes are seen as part of a coordinated operation.
Kennedy said marine insurance companies already face greater risks. Under many Hull War policies, parts of the Red Sea, Gulf of Aden, and Persian Gulf are designated as excluded areas, subject to negotiated cover terms. The maritime liability market, including fixed premium P&I and charterers liability insurers, has reportedly issued cancellation notices for certain territorial risks, reinstated under revised conditions.
Kennedy highlighted reports of ships being attacked in the Strait of Hormuz and near Oman, causing casualties and structural damage. The company noted that a successful attack on a fully loaded tanker could result in significant pollution liabilities. Beyond direct attacks, the possibility of Iran’s Islamic Revolutionary Guard Corps reportedly announcing a closure of the Strait of Hormuz has raised concerns about delays, detentions and supply chain disruptions, even if no physical damage is caused.
The company noted that Iranian authorities had previously seized ships and expected further politically motivated seizures. If the ship is stuck in the Persian Gulf, a claim may be made under a loss of hire policy, or if the detention is longer, a claim may be made under the constructive total loss clause, which is usually triggered after 12 months.
Mr Kennedys said disputes were likely to arise between shipowners and charterers, particularly over the legality of voyage orders into affected areas, off-hire clauses and disputes over contractual frustration.
Other navigation risks were also identified. Kennedy noted that ships may disable AIS for safety reasons, increasing the risk of collisions, while GNSS and GPS interference (already observed in the region and in the Baltic and Black Seas) could impair navigation systems and lead to grounding or collision events.
Freight interests face the same pressure. Kennedy estimates there are currently about 135,000 containers being transported in the region, worth about $4 billion. Diversion via alternative routes, including around the Cape of Good Hope, could increase costs and delays, with supply chain implications.
The company stresses that cargo policies may react differently to hull policies, particularly where war and strike risks are insured separately. The classification of an incident as war or terrorism, and the operation of delayed exclusions in the case of seized but undamaged goods, may become areas of contention.
In aviation, Kennedy reported that airspace closures in Qatar, the United Arab Emirates, Bahrain and Kuwait have grounded large fleets. Missile activity reportedly affected airport infrastructure in Dubai, Abu Dhabi, Bahrain and Kuwait, exposing aircraft on the ground.
While AerCap Ireland Limited & Others v AIG & Others may seek to review or amend territorial insurance, the Kennedy family draws attention to the High Court’s reasoning in AerCap Ireland Limited & Others v AIG & Others [2025]in which Butcher J considered when an aircraft was considered to be in danger of war. The company said that depending on the timing and policy wording, coverage may have been attached prior to any notification of a change in terms.
Beyond physical damage, Kennedy sees energy markets as a major systemic risk. About 20% of the world’s crude oil and liquefied natural gas transportation passes through the Strait of Hormuz. The company cited reports that Qatar had halted LNG production after an attack on its facilities, while Saudi Arabia had suspended operations at its Ras Tanura refinery following a drone strike. Energy prices fluctuated accordingly, and the oil and gas markets reacted sharply.
According to Kennedy’s assessment, a long-term closure of the strait could have macroeconomic impacts far beyond the region. Continued rises in oil prices could put pressure on inflation and economic growth, with knock-on effects on underwriting credit risks. The company believes claims from trade credit insurers are likely to increase if private debtors become insolvent or sovereign buyers, particularly energy importers, experience repayment difficulties.
Even without a global economic downturn, Kennedy expects frustration claims to arise when parties are unable to perform due to transportation disruptions or reduced energy production. The company also noted that if a multinational company withdraws employees and suspends operations due to deteriorating security conditions, it may be subject to forced abandonment claims under the political risk policy.
Kennedy concluded that the conflict raised not only regional war risk issues but cross-category risks capable of generating associated losses in property, marine, aviation and credit lines. The scale and duration of hostilities and conditions in the Strait of Hormuz could prove decisive in determining whether markets face limited regional losses or a broader systemic event.
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