The political violence (PV) insurance market in the Middle East is under increasing pressure, with escalating military action threatening to disrupt commercial operations and lead to further “significant claims” from Gulf states, as PV business insured until the end of February remains at risk, Antares’ Wesley Selwyn has warned.
In a recent commentary, Selwyn, political violence and terrorism collective underwriter at specialist Lloyd’s Group Antares, warned that “no one is backing down” following the current new wave of strikes and that the number of incidents in the Middle East is likely to rise again, leading to more claims.
The latest exchanges between the United States and Iran have highlighted the region’s continued instability, with the destruction and loss of life at Kuwait International Airport a stark reminder that the crisis in the Middle East has hardly stopped.
“The events that began more than three months ago when the United States and Israel launched attacks on Iran are far from resolved and could escalate again at any time,” Selwyn said.
He continued: “Leaders on both sides are sending mixed messages and a permanent ceasefire appears to be some way off. As Israel continues its attacks on the south of the country, Lebanon appears to have become Israel’s main focus for the time being. Iran’s insistence that a lasting end to the conflict must include Lebanon risks further delaying negotiations and providing time for more strikes from both sides.”
Operational vulnerabilities extend deep into global trade routes, with the condition of sea lanes remaining a key friction point.
“Both the United States and Israel need to open the Strait of Hormuz, but neither side seems willing to give in first,” Selwyn noted.
Financial risks remain very high for the specialty insurance market. Underwriters hold a large amount of photovoltaic business underwritten before the February 28 incident, and these businesses are still actively responding to risks.
Selwyn explained: “Substantial PV business in the region remained at risk prior to the events of February 28, and following the initial strikes and widespread retaliation against Iran, many markets have further increased their exposure, with the risk of further significant claims remaining in the Gulf states.”
He concluded: “The incident at Kuwait International Airport will not only impact the operations of the airport and the airlines using it, but also impact business within the terminal, increasing the likelihood of claims for delays such as denial of access or loss of attraction, as well as standard coverage for property damage and business interruption. Regardless of whether the airport was deliberately targeted, the risk to insureds remains very real.
“PV insurers need to be very careful as the decline in notified events may increase again before this is over.”
