Morningstar DBRS, a global credit ratings, risk analysis and financial research firm focused on banks, insurance companies and financial institutions, said the financial impact of the ongoing Middle East conflict on global property and casualty (P&C) insurers will remain limited in the first quarter of 2026, despite continued disruption across the region and the closure of the Strait of Hormuz to standard shipping traffic.
In its latest commentary, Morningstar noted that to date, conflict-related insured losses have been largely contained within the specialty insurance market rather than the broader global property and casualty sector.
The company explained that most standard policies exclude war-related events, meaning direct risk is concentrated among insurers underwriting specialist products such as maritime war risk, aviation war risk, political violence, terrorism, energy, trade credit and cyber insurance.
Losses from known attacks on ships, industrial sites and energy infrastructure in the Gulf remain manageable, as measured by the capital strength and profitability of major insurers and reinsurers, according to Morningstar. The company said the conflict therefore did not develop into a wider capital incident for the industry.
Morningstar notes that geopolitical instability has also led to strong demand for specialty insurance products. It said businesses were increasingly seeking protection against political disruption, sanctions, trade disruption and energy-related risks, while insurers operating in these markets benefited from higher pricing and higher war risk premiums.
Meanwhile, Morningstar DBRS warned that a protracted conflict could lead to wider economic pressures on insurers, including the impact of inflation, weaker investment market performance and higher claims costs linked to higher energy prices.
The company views naval warfare insurance as the area facing the greatest degree of direct risk from the risk of physical damage, vessel seizure and transportation disruption.
Aviation war insurance and marine energy insurance were also described as highly exposed risks due to airspace restrictions, infrastructure damage and aggregate risks across energy operations. Political violence and terrorism insurance has also been affected by claims related to property damage and business interruption.
Morningstar explains that war-related insurance is typically offered through the specialty market rather than through mainstream domestic insurers because these risks are difficult to diversify and price. The company noted that such insurance is typically provided by large global insurance companies with specialized underwriting divisions, international reinsurers and syndicates operating through Lloyd’s of London.
During escalating conflicts, marine war insurance policies are often repriced with short-term cancellation clauses lasting 48 or 72 hours, according to Morningstar. Insurers may issue cancellation notices to trigger renegotiation of premiums and policy terms, rather than withdrawing coverage entirely, the company said. In practice, this often results in significantly higher pricing and more stringent conditions for ships operating in the affected areas.
The company added that political violence and terrorism policies work differently, as coverage typically remains in effect for the life of the contract even if geopolitical conditions worsen after the contract is signed. However, Morningstar DBRS said risk renewal pricing in conflict-affected areas is expected to rise sharply.
Morningstar cited recent comments from Lloyd’s, which said in a market update published on May 14, 2026 that it did not expect the conflict in the Middle East to become a capital event based on current exposure levels and the nature of losses reported to date.
The company also reviewed conflict-related losses or provisions disclosed by insurers and reinsurers in the first quarter. Larger, diversified insurance groups generally do not view the situation as a major underwriting issue because losses remain well within normal earnings tolerance levels, according to Morningstar DBRS data.
Chubb Limited mainly cited the wider economic impact of the conflict, including inflation and slower growth, but did not report significant direct claims risk. Similarly, Swiss Re did not disclose direct losses related to the conflict but set up $400 million in reserves to cover potential inflation and supply chain impacts related to ongoing instability.
Morningstar highlighted that among the more specialized insurers, Munich Re reported about 90 million euros in claims related to the Iran war. The company said about 60 million euros were related to global specialty insurance and about 30 million euros to property casualty reinsurance business.
Everest Group posted a pre-tax catastrophe loss of $90 million, which the company said was “primarily driven by losses related to the war in Iran and a number of mid-sized events around the world.”
Morningstar also cited a disclosure from Markel Group, which said “conflict in the Middle East” increased its combined ratio by two percentage points, with an estimated impact of $35 million. Convex Group disclosed “an additional approximately $23 million for the Iran war,” while management said increased regional pricing may help offset some of the loss burden over time.
International General Insurance Company (IGIC) reported $15 million in conflict-related losses, including $10.5 million in energy-related claims related to a collision between a ship and an offshore platform after the GPS system and navigation lights were switched off during hostilities, Morningstar DBRS reported.
Meanwhile, Hannover Re said it had received notifications related to the conflict in Iran but said it had not yet obtained reliable loss estimates due to ongoing uncertainty.
Morningstar concluded that based on first-quarter disclosures, losses related to the Middle East conflict remain covered by specialty insurance products and remain manageable for the global insurance and reinsurance industry.
The company also noted that if a vessel is stranded in the Strait of Hormuz for an extended period of time, the owner may ultimately seek a constructive total loss claim even if no physical damage occurs. Morningstar said a prolonged conflict could also lead to further supply chain disruptions, inflationary pressures, slower economic growth and reduced underwriting profitability in parts of the broader insurance market.
Even so, Morningstar DBRS said current market conditions continue to support stronger pricing and higher demand for specialty insurance categories, including political risk, trade credit, marine war and energy insurance.