International credit rating agency Fitch Ratings said the withdrawal of Persian Gulf hull war risk marine insurance is expected to have a negative credit impact on U.S. property and casualty insurers with substantial exposure to Gulf shipping routes.
Fitch notes that the move is likely to have a broadly neutral impact on large, globally diversified re/insurers, as their naval portfolios represent only a small portion of their overall business.
Fitch said the magnitude of the rating impact over the next 12 months will largely depend on how losses develop and how long shipping disruptions last. Earnings volatility and capital strength will be the main factors affecting the credit results of affected insurance companies, the agency said.
Specialist underwriters with double-digit premiums in the Gulf shipping sector are facing the greatest pressure, Fitch said. The agency noted that while war risk pricing has risen sharply, potential losses in policy volumes could offset the benefits of higher rates. Fitch added that these insurers may also face greater earnings volatility, uncertainty about reserves and possible capital constraints if claims arise.
In contrast, Fitch said diversified global reinsurers with naval war risk exposure below about 5% of total premiums and strong capital buffers are unlikely to face significant rating pressure from potential losses.
Fitch noted significant asset risks in the region. Data from Skytek shows that the value of ships currently exposed in the Persian Gulf is approximately $22.5 billion. Fitch said the risk stems from the potential for ships to be damaged, destroyed or seized, particularly high-value oil tankers and cruise ships. The agency estimates that if several large ships are declared total losses, industry losses related to the current crisis could exceed $5 billion.
Fitch said the most immediate threat to insurers relates to ships transiting the Strait of Hormuz. The waterway carries about 20% of the world’s oil supplies and liquefied natural gas flows, as well as about 30% of the world’s nitrogen fertilizer trade, the agency noted. Fitch notes that restrictions on ship movement through the region since the conflict intensified may reduce the frequency of near-term claims but increase the concentration of risk for existing ships in the area.
Fitch added that if the route is effectively closed for longer than six months, the risk profile could worsen as ships become stranded in the area. Fitch said that under standard policy conditions, insurers could face total loss claims on vessels that remain impounded and are not released within 12 months.
The agency highlighted that naval war risk premiums have risen sharply while available capacity has tightened. The agency noted that as tensions have escalated, many insurers have canceled existing hull war policies or stopped writing new business in the Persian Gulf. However, Fitch also said that strong levels of reinsurance capacity into 2026 may limit the scale of further pricing increases.
Fitch said premium increases are likely to continue until the end of 2026. The agency said this could support underwriting profits for insurers with selective exposure to the region, although lower volumes and uncertainty about future government intervention could limit overall gains.
Fitch also highlighted the U.S. government’s support measures. Through the U.S. International Development Finance Corporation, the government has committed up to $20 billion in rolling reinsurance capacity for hull, machinery war risk and cargo insurance covering shipping in the Gulf. Fitch said this support could help limit extreme tail losses for participating insurers.
However, Fitch warned that government-backed reinsurance could also crowd out private market capacity once the immediate crisis eases. Fitch Ratings noted that this could put pressure on the marine insurance specialist’s underwriting volumes and pricing in the longer term.
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