Credit rating agency Fitch Ratings said the ongoing Iran conflict is expected to have the most direct impact on the London market and global specialty insurance companies, given that they are directly exposed to the impact of naval and air warfare, political violence, trade credit and energy lines.
Fitch analysts warned that protracted conflict in the Middle East could affect insurers indirectly through loss cost inflation, falling asset values and rising defaults. However, the rating impact of conflict on the global insurance industry will be limited if it is short-lived and avoids significant damage to oil production and transportation facilities.
Fitch said: “We believe the impact on insurers’ earnings is manageable at current rating levels because, except in some very specialized markets, war risks are generally excluded unless the duration and scope of the conflict expand. Prolonged economic and financial market volatility could affect insurers indirectly through loss cost inflation, lower asset values and higher default rates.”
The ratings agency does not expect significant claims from property damage, business interruption or cyber insurance policies because they typically do not cover acts of war.
The ratings agency said the conflict has led to a tightening of capacity and created associated loss risks across the war risks insurance market, driven by sharp repricing.
Fitch said: “First claims in Q1 2026 will give us an idea of the impact on earnings, but we expect the impact to be limited for most insurers as the Russia-Ukraine war escalates, as in 2022 We believe indirect, second-order losses from conflicts are more likely to impact ratings than direct (re)insured losses, which are likely to be much lower. Rating impacts could also arise from potential changes in sovereign or bank ratings that would be more likely to occur if conflicts are more protracted or disruptive than Fitch’s base case assumptions. “
Fitch clarified that Lloyd’s is required to carry war insurance when traveling through areas on the Joint War Council list, such as the Strait of Hormuz.
Recently, war risk marine and aviation insurance in the region were either canceled within a short period of time or rewritten at higher rates, resulting in large fluctuations in marine war insurance premiums for ships passing through Hormuz, but the increase was as high as 20 times the standard of 0.25% of the ship’s insurance value. The aviation war clause covers fleet damage and confiscation, but not business interruption.
Dylan Mortimer, commander of the Marine Corps at Marsh, said near-term rates for the Marine Corps’ line of business in the Gulf could rise by 25-50%.
According to the report, there are currently about 1,000 ships in the Gulf and surrounding waters, with a total hull value of more than US$25 billion. Total insured losses from ship destruction can amount to hundreds of millions of dollars, depending on the type of ship and cargo.
In addition, Fitch highlights that maritime war protection and indemnity insurance will also cover pollution risks in the event of a major oil spill, with a typical limit of USD 500 million per event. The risk of gathering is high due to the number of ships near Hormuz.
It is worth noting that the U.S. International Development Finance Corporation (DFC) recently revealed that Chubb will serve as the lead partner of its US$20 billion maritime reinsurance plan, aiming to restore commercial shipping in the Gulf and help restart energy and trade flows in the Strait of Hormuz.
Fitch added: “Political violence and terrorism coverage is often part of property insurance and may be triggered by war. The extent of exposure is uncertain but could result in losses for GCC countries, particularly including data centers and other infrastructure previously considered safe. We believe losses have been limited so far, but further attacks on critical infrastructure remain a significant risk.”
In addition, Fitch noted that claims from trade credit and political risk insurers could rise steadily if energy price shocks or trade disruptions trigger bankruptcies of businesses relying on Gulf trade routes. Standard war exclusions limit direct trade credit exposure, but the energy, petrochemicals and transportation sectors remain vulnerable, particularly in Asian markets.
Finally, Fitch said that despite significant reinsurance by Gulf insurers, global reinsurers have reduced their exposure to the region. For the diversified reinsurance group, credit rating agencies view the conflict at this stage as an earnings event driven by specialty lines.
“However, the potential for related losses could increase earnings volatility, which could put pressure on capital if the conflict persists or if the global economy and financial markets suffer a more systemic shock,” Fitch said.
A recent Moody’s report echoed this sentiment, noting that conflict increases the likelihood of large, concentrated claims if hostilities persist or escalate, thereby increasing tail risk for specialty insurers and reinsurers.
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