Conflicts involving cyber operations, sanctions and proxy attacks are complicating the enforcement of war exclusions and creating uncertainty around claims outcomes, says the International Association of Insurance Supervisors (IAIS) in its “Global Insurance Market Report (GIMAR) Mid-year update”.
The report reads, “Insurers are increasingly relying on restrictive clauses and adjustments to policy wording to manage these uncertainties. Additionally, cyber incidents could pose risks across multiple insurance lines, including cyber, marine, property and liability insurance. However, the insurance industry has made good progress in reducing silent cyber exposure, with cyber risks increasingly being explicitly covered under standalone policies.
“While the cyber insurance market remains relatively small, insurers are actively managing risks through measures such as setting coverage limits and exclusions. These evolving dynamics highlight the growing need for robust risk management frameworks and operational resilience.”
The mid-year update highlights war exclusions and cyber risks in a section dealing with transmission channels of geopolitical risk in non-life insurance. The two other key areas of focus in this section are i) inflation, energy prices and claims costs, and ii) maritime, shipping and aviation risks.
Inflation
Elevated inflation and rising commodity prices, particularly the surge in oil and gas prices, are a key transmission channel for non-life insurance. High energy costs are driving up claims across multiple insurance lines, particularly non-life segments such as motor, property and liability insurance. Long-tail lines, such as liability and workers’ compensation, are especially vulnerable, as inflation risks depleting reserves and weakening profitability and solvency. Insurers are facing difficulties in keeping premium repricing aligned with rising claims costs, while increasing replacement costs and reserve pressures could add to the strain on financial performance.
Marine and aviation
Marine and aviation insurers are encountering elevated risks due to disruptions in shipping routes and airspace. These include war-risk incidents, cargo losses, piracy, vessel rerouting and contingent business interruption claims. Rising freight costs, energy prices and jet fuel prices, which have nearly tripled in some cases, are exacerbating pressures on underwriting margins and increasing exposure to operational risks.
Global insurance
The IAIS also says that mid-year results highlight stable solvency and profitability positions in aggregate in the global insurance sector, supported by continued strong operational performance, effective asset-liability management and robust capital buffers. Liquidity positions have also remained stable for many insurers, although some challenges persist due to increased allocations to illiquid assets, share buybacks, debt repayments, dividend payments and market volatility. M