Navigating the Tides: Middle East Conflict & The Insurance Market Outlook

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The geopolitical landscape in the Middle East is shifting rapidly, creating ripples across global trade and the insurance sector. On 11 March 2026, Qatar Insurance Company (QIC) and Crowe UAE Academy hosted a critical webinar to break down the complexities of the current crisis, with a focus on the logistics through Strait of Hormuz and evolving risk mitigation for broker partners. Subject Matter Experts from Crowe UAE Academy shared insights on how the Middle East conflict affects marine, war risk, property insurance, and political violence Insurance in UAE, GCC, Persian Gulf and entire Middle East.

Executive Summary

The recent escalation in regional tensions - marked by significant military strikes and threats to maritime corridors - has forced the insurance industry to recalibrate. As the "handmaid of commerce and trade," the insurance sector is now at the forefront of ensuring trade resilience through specialized coverages like Political Violence and Terrorism (PVT) and War Risk policies.

Key Concepts Discussed

Strait of Hormuz: Critical to the insurance market

The Strait is a vital maritime corridor through which roughly 20 million barrels of crude oil and oil products flow daily, representing 20% of the world’s Oil Trade. While international Treaty UN Convention on the Law of Sea (UNCLOS) prohibits any nation from legally closing it, a "de facto" closure occurs when Insurers determine the risk is too high to provide War Risk coverage. Without insurance, vessels cannot secure financing or crew, effectively collapsing trade through the corridor.

Marine insurance premiums reacting to the conflict

War risk premiums on Vessels and Tankers passing through Strait of Hormuz have surged dramatically. In just 48 hours, rates rose from 0.2% to as high as 1% of a ship's value if the Owners/ Operators or Charterers wanted to retain War cover intact on their H&M Insurance Policies, and the War Insurance rates are subject to change on weekly basis. For a tanker worth $100 million, the cost for comprehensive insurance including War coverage can jump from $200,000 to $1,000,000.

Aggregation Risk in Insurance: Managing Exposure in Times of Conflict

Aggregation risk refers to the possibility that a single large-scale event, such as war or political violence, triggers multiple simultaneous claims, potentially exhausting insurer and reinsurer limits.

The webinar highlighted that most Non-Marine and Aviation insurance policies exclude war-related risks, including indirect damages, which limits insurer exposure to war risks in such policies. The War risk is excluded even in mandatory health insurance policies however with a caveat that obligates the Insurers to provide treatment for bodily injuries requiring medical treatment until they are stabilised, paving way for possible disputes resulting from differences in interpreting this caveat. There is therefore potential for future regulatory changes which may stipulate   inclusion of passive war risk coverage under health insurance.

Reinsurers manage aggregation risk by closely monitoring exposure levels and limiting coverage in high-risk regions, ensuring their overall risk remains controlled despite potential large-scale events, with possible implications for availability of capacity in the market.

Which reinsurance lines are most exposed?

Experts highlighted that marine and aviation reinsurance lines are among the most exposed during conflict scenarios due to built-in war cancellation clauses. Policies such as marine hull, marine cargo, Protection and Indemnity (P&I), charterers’ liability, and other marine liabilities allow insurers to issue short-notice cancellations - typically seven days, or as little as 72 hours where U.S. interests are involved - leading to immediate withdrawal of war risk coverage in high-risk zones like the Gulf of Oman and Iranian waters. Aviation policies follow similar provisions, but with a 7 days’ notice period across the board. War coverage following the issuance of notice of cancellation (NOC) can be reinstated but at a price which is multi-fold of what was prevailing prior to issuance of NOC. In contrast, Political Violence and Terrorism (PVT) insurance remains non-cancellable mid-term under standard wordings (e.g., AFB 1-8), making it uniquely exposed as insurers must continue coverage for the policy duration. This distinction underscores how most lines manage risk through flexibility, while PVT coverage carries sustained exposure during periods of conflict.

Scope and Perils of Political Violence and Terrorism Coverage

During the webinar, experts outlined the breadth of Political Violence and Terrorism (PVT) insurance, particularly under the widely used AFB 1-8 wording, which represents one of the most comprehensive forms of coverage in this space. These policies typically cover a range of perils including 1. terrorism, 2. sabotage, 3. strikes, riots and civil commotion (SRCC), 4. malicious damage, 5. insurrection, revolution or rebellion, 6. mutiny or coup d’état, 7. war or civil war. In recent years, counterinsurgency has also been introduced as an additional peril, although it is not yet universally adopted by all insurers. In practice, most insureds opt for bundled coverage encompassing at least seven of these perils, rather than standalone options such as terrorism-only policies. The discussion also highlighted that war risk on land is often addressed separately through specialized facilities such as the Arab War Risk Insurance Syndicate (AWRIS), in which several regional insurers, including those from the UAE, participate - providing dedicated coverage distinct from standard PVT policies.

Potential Business Opportunities for Insurance Market During Middle East Conflict

The webinar highlighted that while insured parties have limited ability to mitigate war-related risks, the insurance industry itself stands to benefit from increased demand and pricing power. Political Violence and Terrorism (PVT) insurance is seeing a surge in demand, often being added to property policies, with premiums rising significantly due to heightened regional exposure. War-related risks in marine cargo, hull, and liability lines are also driving higher premiums, creating increased revenue opportunities for insurers and reinsurers despite constrained capacity. In the short term, there is also potential for government-backed schemes or insurance pools to emerge, helping manage passive war risk and terrorism exposures where private capacity becomes limited.

Looking ahead, post-conflict reconstruction is expected to generate substantial insurance demand across construction, health, and personal accident lines, often incorporating elements of war risk coverage. The potential easing of sanctions could further unlock new markets, particularly with increased participation from regional players such as Iranian insurers and reinsurers. Additionally, as businesses become more aware of political risk exposure, demand for PVT coverage is likely to remain elevated for years, reinforcing long-term growth opportunities for the insurance sector, similar to trends observed after past geopolitical conflicts.

Expert Q&A: Understanding the Impact

Q: Under a marine open cover policy that includes War and SRCC coverage, if the insurer issues a notice discontinuing these coverages due to current global conditions, will this apply to the existing open cover policy as a whole, or only to new shipments declared after the notice?

A: The applicability depends on the cancellation clause within the marine open cover policy. Typically, while a standard cancellation period is 30 days, war and SRCC risks are subject to shorter notice periods - usually 7 days and further reduced to 3 days where U.S. or Canada interests are involved. Once such notice is issued, the withdrawal of coverage applies from the end of the notice period, meaning it generally impacts future shipments declared after the notice rather than those already covered prior to cancellation, subject to the specific policy terms. Notwithstanding, the war risk coverage can be reinstated but at a substantially higher price often, with the premium rate fluctuating almost daily.

Q: The client has already paid approximately 80% of the premium in advance, including charges for War and SRCC coverage. Given that the policy is still in force, on what basis is the insurer cancelling these coverages mid-term, especially when the premium has already been collected?

A: The insurer’s ability to cancel War and SRCC coverage mid-term depends on the policy’s cancellation clause. Marine open cover policies typically allow 30 days’ notice for cargo risks, but only 7 days for war and strikes risks, and as little as 48 hours for U.S./Canada exposures. If such provisions exist, the insurer is contractually allowed to withdraw these specific covers despite advance premium payment, with a corresponding refund for the unused portion of the Turnover, if the marine premium rate is given on a combined basis, i.e., without bifurcating between marine risk and war risk. On the other hand, if the Marine Rate and War Rate are separately provided in the policy, and if the Insured does not want to continue with the war coverage for the rest of the policy period, the Insurer would be bound to refund the unused portion of war premium alone. However, if the policy contains no cancellation clause, a notice of cancellation may constitute a breach of contract. Since only war coverage is being withdrawn and not the entire policy, the cargo coverage for the rest of the perils (other than War) remains valid - but the client may opt to cancel the full policy and seek a pro-rata refund of the deposit premium.

Q: What is the difference between "Active" and "Passive" War Risk?

• Active War Risk: Involves direct participation in hostilities; almost universally excluded.
• Passive War Risk: Covers innocent bystanders caught in a conflict zone, and is relevant for health, Life and personal accident insurance only and not for Property & Casualty, Marine and Aviation Risks. Crucial Note: Passive war risk is not automatically covered in standard health insurance policies in the UAE and must be specifically endorsed. Group Life Insurance Policies generally provide passive war coverage, however with a caveat that if the Insured Member is travelling to a Country after it has been recognized as a conflict zone where war or war like situation prevails, passive war risk will not be covered.

Q: Whether passive war is normally covered?

A: Passive war risk is not normally covered under standard personal accident and health insurance policies. It must be explicitly included in the policy terms; otherwise, it is excluded. While active war risk is almost always excluded unless covered by specialized and expensive policies, passive war risk also requires specific endorsement - even in mandatory health insurance, where it is typically not included by default. Life Insurance Policies covering death and disability however do offer passive war coverage, at times with caveats attached. Passive war is not relevant for property, casualty, marine and aviation policies.

Q: Does Political Violence (PV) coverage need to be issued as a separate policy, or can it be added to an existing PAR policy at an additional cost?

A: Political Violence (PV) coverage is typically issued as a separate policy. However, it can also be added to an existing PAR policy through an endorsement, subject to additional premium. In such cases, the insurer usually obtains reinsurance support from a specialized PV underwriter.

Q: How has one of the well-known insurance companies announced and offered Political Violence (PV) coverage in the current situation?

A: The insurer has most likely secured a reinsurance arrangement - either through a treaty or a specialized facility - to offer PV coverage. While such coverage remains available in the UAE and wider GCC, pricing is significantly higher than pre-crisis levels. In a treaty arrangement, insurers have flexibility to set their own pricing and terms within agreed limits, whereas under line slips or pre-underwritten facilities, pricing and terms are largely dictated by reinsurers or specialist PV underwriters.

Q: Do delays or stalled shipments caused by war-related events qualify for Business Interruption (BI) claims?

A:  Marine Insurance Policies exclude loss, damage or expense caused by delay even though the delay be caused by war related events, except for General Average Claims. Business Interruption (BI) policies typically exclude losses arising from war-related events. Under marine insurance (including Institute of War Clauses), delay itself is specifically excluded - even if the delay is caused by an insured peril. As a result, any financial loss due to delayed or stalled shipments is not covered. However, limited coverage may be available if the insured has purchased specialized policies such as cargo rejection or contamination insurance, where goods (e.g., perishable items) are damaged, rejected, or destroyed due to delay. Without such extensions, neither delay-related losses nor BI claims linked to war events are typically admissible.

Q: Is war risk cancellation limited to the West Asia region, or does coverage continue for the rest of the world?

A: In general, war risk coverage continues for the rest of the world, particularly for marine cargo, marine hull, and P&I insurance. However, coverage is often restricted or cancelled for specific high-risk zones - such as parts of West Asia - based on formal cancellation notices issued by underwriters. These notices typically define affected areas using precise geographic coordinates and may prohibit coverage for vessels or cargo transiting those regions. Additionally, if a policy includes a cancellation clause, insurers have the right to withdraw war coverage more broadly, depending on the terms of the notice. Cover can however be reinstated at a price (which is substantially high depending on the situations) quoted by some specialist Underwriters and such prices rapidly change, and in extreme situations, reinstatement may not be possible at all.

Q: Can insurers cancel War Risk coverage on existing policies?

Yes. Standard Marine Open Cover policies typically include a cancellation provision for war and strike risk.

• Standard notice: Usually 7 days.
• US/Canada interests: Can be reduced to 48 or 72 hours. Once cancelled, shippers must renegotiate terms at current market rates.