The hostilities in the Middle East have triggered a surge in discussions and notifications regarding Constructive Total Loss (CTL), but these have not yet translated into a material rise in accepted claims. The industry is seeing a trend where assets remain physically undamaged but are effectively "trapped" in conflict zones.
In an interview with Middle East Insurance Review, Riyadh Re CUO Belhassen Tonat highlighted the severe operational disruptions currently facing the maritime sector. Vessels are frequently unable to exit ports, evacuate crews, access fuel, or obtain the necessary permissions to transit critical sea lanes due to:
“In March alone, more than 20,000 seafarers were effectively trapped in the Arabian Gulf, highlighting the seriousness of the situation from both an operational and humanitarian standpoint,” Mr Tonat said.
Despite these crises, the (re)insurance market remains largely insulated. “Most marine contracts are built around a physical damage trigger,” Mr Tonat noted. “Prolonged immobilisation, on its own, generally does not result in significant insured losses.”
Offshore assets and "economic paralysis"
A similar dynamic is playing out with offshore assets. Operations are frequently halted due to elevated threats, yet losses often go unrecovered due to war exclusions or the lack of physical destruction.
Mr Tonat suggests this represents a pivot point for the industry:
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The problem: Geopolitical risk is increasingly manifesting as economic paralysis rather than kinetic destruction.
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The goal: Insurance must evolve to protect balance sheets against these non-physical disruptions.
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The challenge: Creating “next-level insurance” that addresses balance sheet impacts while remaining commercially viable and affordable for both the client and the insurer.
Cyber: High activity, muted claims
The intersection of cyber risk and regional conflict tells a similar story of intensified risk without a corresponding surge in payouts.
Mr Tonat pointed to credible evidence of a conflict-linked spike in malicious cyber activity, including:
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Hacktivism and state-aligned attacks.
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Destructive malware targeting critical infrastructure, energy, and finance.
Despite the increased frequency of attacks, the immediate impact on insurance claims has been limited. Mr Tonat attributes this to three main factors:
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Retention: Many incidents fall below policy deductibles.
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Absorption: Costs are often absorbed as internal operational expenses.
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Exclusions: Incidents are subject to rigorous scrutiny under state-sponsored act exclusions.
“While we aren't seeing a dramatic short-term spike in attributable claims, the risk environment has fundamentally intensified,” Mr Tonat warned.
The shift toward ideologically motivated cyber warfare reinforces a new reality: cyber risk is no longer just a localized operational headache. It has evolved into a strategic, systemic exposure with significant "tail-risk" implications for the global market.