(Re)insurers in the Middle East will be closely monitoring the conflict taking place in the region as it spreads across the countries in the GCC and the Levant region.
In a statement, AM Best London Senior Director, Head of Analytics Mahesh Mistry noted that a global dimension to the conflict also cannot be ruled out following the launch of drones toward targets in eastern Mediterranean EU countries like Cyprus, and potential inflationary pressures as a result of a sudden rise in petrochemical prices and supply chain disruptions.
Following the targeting of civilians, infrastructure and shipping in non-combatant states, a joint statement co-signed by the affected states of Bahrain, Jordan, Kuwait, Qatar, Saudi Arabia and the UAE stated that the actions represented a dangerous escalation that threatens regional stability.
While not immune to the consequences of the conflict in recent days, marine insurers have been quick to adjust pricing in directly affected and regional waters. While much coverage has been given to oil price increases due to tankers being unable to proceed through the Strait of Hormuz, the export of liquified natural gas (LNG) is equally vulnerable. Qatar, one of the largest exporters of LNG, has shut down its production facilities.
While large property risks, such as refineries and infrastructure are reinsured on the international market, domestic insurers generally retain little of the risk. Underwriting expertise, terms and conditions alongside exclusions, are largely driven by foreign-leading (re)insurers, with the primary market ensuring policies are back-to-back.
Insureds will also need to carefully review their terms and conditions regarding business interruption insurance – direct and contingent – to ensure that they are aware of any exclusions.
Marine, trade credit, and political risk insurance will likely see the most direct and immediate impacts. While cyber insurers have been excluding war or state-sponsored attacks, there are products that cover war risks that could be affected in the medium term if cyber risks escalate by state-sponsored actors.