The current conflict in the Middle East has been as disruptive commercially as it h
as been geopolitically. Many businesses operating in the region are suffering from a combination of sharp demand declines, blocked routes to market, surging input
costs, and physical damage to assets.
Consequences are being felt by manufacturers, logistics operators, energy companies, and retailers alike. For businesses navigating these impacts, the question is not
only whether insurance coverage exists, but whether the finan
cial evidence is sufficient to support a claim once coverage is established.
The quantum of any business interruption claim is only ever as credible as the evidence behind it. This disruption is already visible across key sectors. By way
of illustration, commercial traffic through the Strait of Hormuz — a k
ey choke point for approximately a quarter of global seaborne oil trade, significant volumes of LNG, and critical fertilizer supplies — has fallen from 138 vessels per day to near zero.
Another heavily impacted sector is hospitality. The World Travel & Tourism Council estima
ted that the conflict is the travel and tourism sector across the Middle East by at least US$600 million per day in international visitor spending. These operational shocks are now crystallizing into insurance claims.
Exclusions for war, terrorism, and hostile acts could be an obstacle for many policyholders. Whether a policy provides coverage is a contested question that will determine the outcome of many of these claims. That threshold qu
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estion is for legal counsel to address. What follows assumes coverage can be established and focuses on the financial complexity of supporting any claim
. The strength of a business interruption (BI) claim will depend not only on the q
uantum of the loss but equally on the availability of financial evidence and a robust analysis to support it.
The Policy
Before any loss is quantified, the financial expert must understand the relevant terms of the policy, such as coverage limits, duration of indemnity, deductibles, and waiting periods. There are two primary methods for quantifying a BI claim:
Gross Earnings Policy (commonly referred to as the “top-down” method) covers the loss of gross earnings from the date of the insured event until operatio
ns are restored (as defined under the insurance policy, not the financial statements, which are rarely the same.) It generally does not extend to the post-reopening recovery period. That is, once commercial operations resum
e, indemnity ends.
Profits Policy (commonly referred to as the “bottom-up” method) covers the loss of gross profit until revenues return to pre-loss levels, subject to the maximum indemni
ty period (commonly 12 months).
It is important to assess the relevant policy, since the two approaches can produce materially different outcomes in practice.
Establishing Causation
A BI claim arising from geopolitical conflict presents a distinct evidentiary challenge. Unlike a fire or a flood, the commercial consequences of conflict may accumulate gradually, through a series of interconnected disruptio
ns. Demonstrating that a specific revenue shortfall is attributable to the conflict, rather than to pre-existing trends or other market factors, requires clear, contemporaneous, and sufficient documentation.
The most relevant evidence to establish causation will vary by sector but typically includes dated cancellations and supporting correspondence, government travel advisories, trade restrictions, supplier disruption notices,
internal financial information, and third-party market data that capture broader industry trends. Contemporaneous evidence is generally far more persuasive than evidence reconstructed after the fact.
