The recent escalation of the Middle East war introduces geopolitical instability with potential long-last
ing effects on commodities, financing conditions, global supply chains, and macro-credit conditions depending on the duration and scale of the conflict.
S&P Global Ratings’ base case for the Middle East war assumes that elevated hostilities will persist into early April, with the Strait of Hormuz facing material
disruptions. We continue to recognize the risk of spillovers and security incidents continuing beyond this period.
While market conditions have historically normalized quickly after geopolitical events, the c
urrent war appears distinct and some credit impacts are inevitable. The extent of those will depen
d on whether the effects remain localized or become more pervasive. Our initial assessment suggests
that insurers and reinsurers will be able to manage the situation over the short term, but the scale and duration of the war will dictate the ultimate outcome.
(Editor’s note: S&P Global Ratings says there is a high degree of unpredictability around the duration and scale of the Middle East war and its potential effect o
n commodity prices, supply chains, economies, and credit conditions. As a result, its baseline forecasts carry a significant amount of uncertainty. As situations ev
olve, S&P will gauge the macro and credit materiality of potential shifts and reassess its guidance accordingly.)
Insurers and Reinsurers Could Face Challenges on Multiple Fronts
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While standard insurance policies typically contain war and war-like exclusions, direct implicat
ions from the war could lead to rising insurance claims in specialty lines, including marine, aviation, energy, political violence, terrorism, war, and cyber. Property ex
posure in affected areas and policies covering supply chain or trade disruption could also increase insurance claims.
Secondary effects include investment performance implications from potential capital market volatility. Macroeconomic implications, such as rising inflation via incre
ased energy prices and lower global growth due to supply chain disruptions and reduced consumer spending, could affect insurers’ business volumes, claims development, reserve adequacy, and reinvestment performance.
Robust Capital and Earnings Provide Protection for Global Reinsurers
The global reinsurance industry entered 2026 with a strong capital position, supported by
robust underwriting performance and investment income. Global reinsurers, including most of the top 19, have limited direct asset exposure to the Middle East. In our view, their capital adequacy is sufficient to mitigate credit quality pressures stemming from the war.
