The ongoing Iran-Israel military conflict that erupted on 28 February 2026 followed weeks of mounting tensions. But what began as a highly anticipated conflict has now surpassed expectations in both intensity and impact.
The scope of the hostilities and their likely long-term consequences spell significant repercussions for the wider region for the foreseeable future, according to insurance consultant Omar Gouda who spoke with the news outlet Amwal Alghad.
Mr Gouda said that the expected biggest repercussions of the conflict on the insurance industry, from both the technical and financial perspectives, would be the accumulation of geographical risks in vital waterways (the Strait of Hormuz, the Red Sea/Bab el-Mandeb, and the Eastern Mediterranean), as well as in vital sectors such as energy, shipping, aviation and maritime transport.
In retaliation against strikes by Israel and the US, Iran launched attacks on five of the six GCC states. The five are Bahrain, Kueait, Watar, Saudi Arabia and the UAE. The Iranians have also widened the scope of their attacks to include airports, ports and commercial buildings, apart from US military bases in the region.
Geopolitical tensions threaten the solvency of insurers
Mr Gouda added, “The attacks are expected to put pressure on companies’ solvency and capital, especially with rising loss expectations and increased demand for reinsurance, particularly given increases in premiums, especially for war risks. The effects will deepen if the fighting continues for an extended period. All of this will impose constraints on available capacity and increase capital requirements.
He added that the expected volatility in financial markets, investors’ tendency to hedge and adopt conservative investment policies, and their focus on maintaining liquidity, as is typical during such crises, limit companies’ ability to absorb such sudden technical shocks.
Mr Gouda predicted that insurance markets would tighten, with shorter coverage periods and renewals, or even the permissible durations in quotes being limited to 24-48 hours. He also anticipated stricter coverage terms, along with higher deductibles, and that the most serious risks—war, terrorism, and political hazards—might even be excluded.
He noted that some reinsurance markets might impose higher retention rates and adopt a more conservative approach to coverage and pricing. This would typically lead to higher prices, especially for coverages that rely on loss mitigation. He added that temporary or quarterly premiums might be imposed in high-risk regions, and the Middle East could be divided into sub-regions for pricing. He concluded that all of these would put pressure on insurance companies and customers in the medium term.
Insurers urged to carry out stress tests
Regarding his expectations for changes in underwriting and risk management policies at local insurance companies, as a result of the conflict, Mr Gouda explained that companies must immediately address the changes, which will affect reinsurance renewals. He also stressed the need for a greater focus on due diligence and accurate information, particularly with clients that operate regionally, to assess their vulnerability to critical coverages such as revenue loss and to estimate the recovery periods required in case of losses.
Mr Gouda also recommended that insurers conduct stress tests that take into account the heightened risks, incorporating war or political scenarios into the tests. He proposed updating geographical risk accumulation maps, reviewing net retention limits, restructuring reinsurance programmes, and increasing reliance on facultative reinsurance as the intensity of risks increases.
Investments
On the asset front, he believes that some insurers may resort to more conservative liquidity and capital management, increase reserves, review investment policies to reduce highly volatile assets and develop contingency plans to pay large claims or purchase emergency reinsurance capacity due to high backlogs or a reduced willingness among reinsurers to accept business.
He anticipates a significant rise in retention requirements imposed by reinsurers on insurers, along with a surge in the price of war risk reinsurance, which could double or even increase substantially until the situation stabilises or new capital/reinsurers enter these markets.
In conclusion, Mr Gouda clarified that all these scenarios and possibilities naturally depend on the speed of the return to normalcy and the resolution of regional tensions. They also vary depending on geographical location, the negotiating power of local markets with reinsurers and the performance of their insurance portfolios.