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 “Iran War May Increase Concerns About Terrorism and Political Violence Insurance Underwriting Beyond the Middle East,” 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 wording, and reprice risks linked to politically sensitive assets or in 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.”
