The facultative reinsurance market is likely to be significantly affected by the ongoing Middle East armed conflict, according to Mr Gamal Sakr, Regional Director, Cairo Regional Office for Northeast Africa & Middle East - African Reinsurance Corporation (Africa Re).
Speaking to Middle East Insurance Review, he outlined the current and expected impact of the ongoing conflict in the Middle East on the reinsurance business.
He said, “War risks across sectors—including marine, aviation, energy, and land-based assets—are predominantly placed through facultative placements. When geopolitical tensions escalate, underwriters reassess their risk appetite immediately.”
He added that this typically leads to a sharp increase in rates, stricter underwriting conditions, and in some cases a withdrawal of capacity. “If the conflict persists or expands geographically, the impact on facultative placements could become more pronounced. In particular, sectors reliant on logistics, shipping, and transportation may face difficulties securing adequate insurance coverage.”
Rate increases
The lines of business expected to be most affected by the region’s hostilities are aviation, energy, marine cargo, and marine hull, pointed out Mr Sakr. “These sectors are directly exposed to geopolitical and operational risks associated with armed conflict and disruptions to shipping routes.”
He added that rate increases and capacity constraints are already being observed in risks located or operating in areas perceived as high-exposure zones. “This includes parts of the Eastern Mediterranean and the Middle East, particularly from Lebanon and Iraq through the Gulf Cooperation Council region, as well as key maritime routes such as the Strait of Hormuz and the Bab-el-Mandeb.”
Treaties
Mr Sakr said, “At this stage, it is still premature to determine the full impact on reinsurance treaties.”
He added that in most non-marine reinsurance treaties—such as property, engineering, and accident lines—losses arising directly from war or war-like acts are typically excluded. “Therefore, these treaties are unlikely to face direct exposure from the conflict.”
Marine
Marine business is somewhat different, he said. “Marine cargo and hull policies may include war-risk coverage; however, once hostilities escalate, reinsurers generally react quickly by increasing war-risk premiums significantly or withdrawing coverage altogether. This has already been observed in the market.”
In addition, he noted, war coverage in sectors such as aviation and energy is usually placed in the facultative market rather than under treaty arrangements. “As a result, treaty portfolios are generally insulated from direct war-related losses.”
Capacity and government support
With regard to reinsurance capacity, Mr Sakr said that in the short term, underwriting capacity may become more limited for high-risk exposures. “Reinsurers and insurers tend to reduce their participation levels when geopolitical risk increases, particularly in marine and energy segments operating in sensitive regions.”
He added that there are already discussions in some markets about potential government support mechanisms to help sustain coverage for vessels operating in strategic waterways such as the Arabian Gulf and the Strait of Hormuz. Such initiatives are sometimes necessary to maintain trade flows when private market capacity becomes constrained.
Lengthy conflict to aggravate implications
Beyond the insurance market itself, a prolonged conflict could have broader economic implications, he said. “One potential outcome is increased volatility in oil prices, which could in turn influence inflation and interest rate dynamics, similar to what occurred following the Russia–Ukraine war.”
From a reinsurance market perspective, Mr Sakr said that the industry has been experiencing relatively soft market conditions since mid-2025. “Major geopolitical events can influence pricing cycles; however, whether this conflict will materially alter the current market trend will depend on the duration of the war and the scale of insured losses.”