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The Iran war is likely to raise uncertainty in the global terrorism and political violence insurance markets, particularly in the United States and Europe, according to credit ratings agency Morningstar DBRS, in a commentary on the war.

While the insurance and reinsurance sector remains well capitalized and broadly able to absorb moderate losses, prolonged instability is likely to raise underwriting volatility and increase concerns around exposure accumulation across multiple specialty insurance lines, said the report, titled “,” published on March 18.

Morningstar DBRS explained that the main credit risk for insurers and reinsurers is how losses accumulate across multiple insurance lines rather than sharp increases in attack frequency.

“Terrorism and political violence incidents can trigger claims simultaneously in property, marine, aviation, and business interruption policies. In addition, distinguishing between terrorism, sabotage, cyber incidents, and acts of war may become more difficult, increasing the potential for insurance coverage disputes.”

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Morningstar DBRS noted that demand for terrorism and political violence insurance typically increases during periods of geopolitical tensions “as businesses reassess their exposure to politically motivated disruptions.”

As a result, insurers may opt to re-assess exposure accumulation, tighten policy working, and reprice risks linked to politically sensitive assets or high-profile urban areas, it said. At the same time, businesses with internationally exposed operations, such as multinational companies, airlines, logistics operators, infrastructure owners, and hospitality groups, may decide to re-evaluate their risk management strategies and seek broader coverage.

Potential targets could include diplomatic facilities, commercial buildings, critical infrastructure (such as ports, airports, pipelines and data centers), and locations associated with Western or Israeli interests, the report said.

“The interconnected nature of global supply chains amplifies these risks. Disruption to a single infrastructure asset or transportation hub can result in insured losses across multiple lines, including property damage, contingent business interruption, and marine cargo claims,” the report added.

“North America and Western Europe are likely to remain the most exposed regions outside the Middle East because of their concentration of high-value insured assets and symbolic targets.”

In recent years, the market has become more competitive (with softening rates) “as additional underwriting capacity entered the political violence sector.” “However, a sustained geopolitical crisis could lead insurers to re-examine pricing and coverage terms. For instance, assets considered politically sensitive may face higher premiums or lower available limits,” DBRS Morningstar explained.

Strong Capital Buffers

The terrorism and political violence insurance sector generally maintains strong capital buffers with diversified underwriting portfolios that help absorb localized shocks, the report stated. “We believe that the insurance and reinsurance industry remains well positioned to absorb moderate terrorism and political violence losses because of its strong capitalization and diversified underwriting portfolios.”

The effect on credit profiles from the ongoing Middle East conflict may vary depending on insurers’ exposures to specialty lines and politically sensitive regions. “Insurers with concentrated exposure to marine war risk, aviation, or political violence insurance may experience greater earnings volatility than diversified carriers.”

“We believe that the global insurance sector’s strong capitalization and diversified underwriting base should limit the immediate impact of the geopolitical escalation,” according to Marcos Alvarez, managing director, Global Financial Institution Ratings, for Morningstar DBRS, in a statement accompanying the report. “Nevertheless, prolonged hostilities could increase underwriting volatility and lead to tighter conditions in certain specialty insurance markets, particularly for assets perceived as politically or strategically sensitive.”

Topics Catastrophe Natural Disasters Underwriting