The political violence and terrorism (PV&T) reinsurance market faces an “exceptionally active” environment during the July 1 renewal season, Howden said, as underwriting appetite in the Middle East is reshaped and broader changes in global risks, from civil unrest in the Americas to active attacks in Europe, further increase complexity for existing insurers and new market entrants.
“After the strikes in the Middle East escalated, most people in the region took a ‘pause’ approach to new inquiries. Since then, interest has gradually reopened, albeit unevenly,” explains Howden.
The United States and Iran are currently in the midst of a fragile diplomatic transition after months of intense military conflict. Diplomatic developments and military tensions continued to collide this week as U.S. and Iranian delegations concluded a crucial round of indirect talks in Doha.
Yesterday, the two sides established a direct emergency hotline to prevent an unexpected escalation of the situation and finalized a mechanism for Iran to obtain $6 billion in unfrozen assets for humanitarian supplies.
However, the situation remains highly unstable. Incidents at sea have disrupted shipping in the Strait of Hormuz, while Iran’s military has threatened to expand the range of its ballistic missiles. The core dispute over transit fees on strategic waterways also remains unresolved.
Wajih Tabbara, Head of Real Estate, Construction and Political Violence at Howden Re Dubai, commented: “The market is changing rapidly and continues to change. What we are seeing is that the market is dealing with the consequences of major loss events in real time.
“Limited capacity, tighter controls and underwriting decisions are all made based on a target list that can change within 24 hours. For customers in high-risk areas, the priority now is to secure insurance and provide clean risk data and clear instructions on risk management.”
Several previously closed markets have adjusted positions, while others are now only reviewing firm orders, reflecting inbound business volumes, with some reinsurers receiving more than 50 submitted orders per day, the company said.
Howden continued: “In the Middle East, many reinsurers are currently reducing risks involving Western interests and certain critical infrastructure sectors: airports, refineries, desalination plants, ports and similar exposures.
“Acceptable occupancy remains difficult to define with precision, given that the hit list is constantly changing on an almost daily basis. Capacity is being deployed in intentionally limited line sizes, with single-site risk and smaller constraints achieving greater success than large multi-site programs.”
Howden observed that the PV&T market is already facing upward pressure on rates, tighter underwriting controls, reduced line sizes and increased attachment points.
At the same time, risks in areas considered high-risk face ongoing challenges in ensuring broad coverage and adequate capacity, particularly for independent political violence placements.
However, a new dynamic is said to be emerging. Howden said new capacity is entering the market, particularly the recently formed MGA and consortium that has PV&T as a business line.
“Despite the current volatility, markets with mature regional expertise and rigorous risk management continue to selectively deploy capacity, particularly against well-protected risks with rigorous risk management standards and clear risk data,” the company added.
While the Middle East continues to dominate PV&T’s narrative, Howden also stressed that broader market conditions deserve equal attention.
The company continued, “Globally, premium revenue for this category is estimated to be approximately $1.5 billion, while insured losses are estimated to be nearly twice that amount. The impact of this imbalance extends far beyond any single region.
“Along with major conflict scenarios, smaller, geographically dispersed events are taking shape. In recent years, civil unrest incidents, active attacks, and riotous activity have occurred across the Americas, Europe, and Africa. The cumulative attrition of these events is increasingly important to overall class performance.”
Olivia Pullen, director of terrorism and political violence at Howden Re London, said: “The category is entering a new phase. The market is well aware of large-scale conflict scenarios in Ukraine and the Middle East, but what we also need to increasingly focus on is the accumulation of smaller incidents happening around the world.”
“These events are sometimes not obvious individually, but they add up. From a PV&T and extended risk perspective, there are not many geographies that are truly considered risk-free right now. Disciplined, globally diversified underwriting has never been more important.”
Looking ahead, Howden said that depending on the duration and scale of further escalations in the Middle East, regional treaty aggregates are expected to come under increasing pressure.
If this situation persists, it may prompt the retrocession market to take a more cautious approach to capacity deployment, accumulation management and overall exposure to PV generation and transmission risks in the region.
