Impact of Iran Strikes on Insurance: Rising Risk and Market Adjustments

Insurance Industry Adjustments to Geopolitical Risk

• 🌍 Insurers are actively assessing and pricing in existing and potential future risks stemming from geopolitical events.
• 🚢 Ships are notifying insurers of planned transits through affected regions, prompting adjustments to terms and conditions.
• 📉 The number of Western ships in the Red Sea has significantly decreased due to rising risks.

Key Concerns and Coverage

• ⚠️ The primary concern for insurers is the continued openness of the Strait of Hormuz.
• 🛡️ Insurance solutions like war risk and political risk coverage are available for geopolitical conflicts.
• 💼 Contingent business interruption coverage can protect against financial losses from disruptions to third-party suppliers or customers.

Major Insurers and Reinsurers Exposed

• 🏦 Major carriers with exposure include syndicates with Lloyd's of London, Chubb, AIG, Allianz, and AXA.
• 🌐 Large reinsurers like Swiss Re, Munich Re, and Everest Group also have exposure to these risks.

Rising Premiums and Potential Exclusions

• 📈 Marine insurance premiums have already risen significantly, with shippers paying 60% more than a month ago.
• ✈️ Aviation insurance costs are also expected to increase, with potential exclusions for certain zones in the Middle East or North Africa, possibly leading to flight cancellations.
• 💻 Most cyber insurance policies exclude coverage for state-sponsored attacks, which could lead to lengthy litigation if claims are denied.

Contagion Effects and Market Opportunities

• 🔗 Contagion effects, even without direct exposure to Iran, can disrupt cargo transportation, airspace, and canal access, impacting global supply chains.
• 💰 Despite disruptions, there may be an opportunity for insurance and brokers due to rising demand.
• 🚀 The cost for an oil tanker has surged dramatically, from $24,000 to $100,000 per day, with potential to reach $150,000.
• 🔄 Shippers and aviation companies may change routes and behavior proactively before new premiums are levied.