Iran Conflict Challenges Global Reinsurance Systems

The intensifying confrontation between the United States, Israel, and Iran is testing the resilience of the global reinsurance market, forcing insurers and reinsurers to reassess risk exposure across multiple lines. Experts warn that the crisis highlights the limits of traditional reinsurance structures in absorbing sudden geopolitical shocks.

Ben Rose, co-founder of Supercede, described the situation as a stress test for the industry.

“Reinsurance is essential to maintaining a functioning insurance market, but it is not a blank cheque,” Rose said. “Insurance carriers cannot ignore the true level of risk simply because cover is available or cheaper; they must protect their reputations and longstanding client relationships.”

He added that pricing by underwriters signals the wider market about the sustainability of certain exposures. “If premiums escalate sharply, it is a prompt to question whether the underlying activity is safe or sustainable,” he explained.

Sharp Rise in War Risk Premiums

Market data confirms the strain. War risk premiums for vessels operating in the Persian Gulf have surged from roughly 0.2% of a vessel’s value before the conflict to between 1% and 1.5%, depending on proximity to the Strait of Hormuz, according to Dylan Mortimer, marine hull UK war leader at Marsh.

For tankers typically valued between $200 million and $300 million, this equates to hull war risk costs of up to $7.5 million per vessel. Jefferies analysts estimate that potential losses from seven reported damaged vessels could total $1.75 billion. Sheila Cameron, CEO of the Lloyd’s Market Association, noted that roughly 1,000 vessels remain in the Gulf, about half of which are oil and gas tankers with an aggregate hull value exceeding $25 billion.

JPMorgan analysts estimate total insurance exposure for Gulf-operating vessels at approximately $352 billion.

Reinsurance Chains Under Pressure

The conflict has revealed vulnerabilities in the reinsurance chain. Several P&I clubs, including NorthStandard, Steamship Mutual, and Skuld, cancelled war risk cover after reinsurers withdrew support. Stephen Rudman, head of marine Asia at Aon, observed that hull war coverage has been immediately impacted, while cargo war risk premiums are rising on a per-voyage basis.

Morningstar DBRS warned that reinsurers may respond by raising attachment points or reducing capacity, leaving primary insurers to shoulder more risk. Moody’s also highlighted that missile and drone attacks increase tail risk for specialty insurers, although disciplined underwriting should allow major carriers to absorb losses under baseline scenarios. A prolonged conflict, however, could lead to multi-asset losses across sectors.

Two weeks into the crisis, Rose noted that insurers are evaluating both protection gaps and second-order effects. “Reinsurers are carefully monitoring global economic impacts, including growth, inflation, and interest rates. The longer the conflict continues, the greater the risk that Iran targets a major, valuable asset,” he said.