Helium scarcity presents a unique underwriting challenge. However, while it pressures costs and revenues across multiple sectors, it rarely manifests as a singular 'event' that triggers widespread losses across diverse insurance lines, according to Moody's Risk Management Solutions (RMS) Chief Research Officer Dr Robert Muir-Wood.
He told Middle East Insurance Review that helium scarcity may matter more indirectly for insurers, “through macroeconomic and energy-price-related effects on insured businesses and, separately, through impacts on investment portfolios exposed to helium-dependent industries”.
The helium shortage has arisen following Iranian missile attacks in March on Qatar's Ras Laffan Industrial City, which is the world's biggest helium production base. It accounted for a third of the global helium supply. The Hormuz Strait blockade has also affected the helium supply chain.
Dr Muir-Wood said, “While there could be additional attacks on Ras Laffan Industrial City, we currently understand that roughly 17% of its helium production capacity was directly damaged and may take several years to restore; the majority of capacity could potentially be brought back online over a much shorter timeframe, possibly a few months.”
Contingent business interruption
“Whether contingent business interruption (CBI) claims arise will depend heavily on individual policy wording, trigger definitions, and, critically, whether losses occurred before or after war exclusions were applied on facilities around the Gulf.”
He also noted that in the immediate aftermath of the attacks, reinsurers moved quickly to apply war exclusions for facilities around the Gulf, with many policies subject to exclusions set out in early March and imposed shortly thereafter.
“Looking ahead, we would expect continued reliance on war and related exclusions for affected geographies, along with closer scrutiny and potential tightening of force-majeure definitions and coverage triggers at renewal,” Dr Muir-Wood added.
“For noble gases specifically, insurers may also consider exclusions or sub-limits where on-site storage materially increases loss severity.”
Higher costs associated with insurance premiums, not inflation
Dr Muir-Wood also highlighted that in many supply chains, “transport and risk transfer costs already exceed the underlying commodity value”.
“Higher war and strikes, riots and civil commotion (SRCC) insurance premiums could further add to delivered helium costs and accelerate rerouting and cost pass-through,” he continued.
“This is distinct from claims inflation, which is driven by repair and replacement bottlenecks rather than higher insurance pricing alone.”
Supply diversification may not work as a risk mitigation strategy
According to Dr Muir-Wood, “established facilities such as Ras Laffan Industrial City present a different risk profile than new projects”.
“A key issue for insurers and investors is diversification of supply: if Gulf facilities are perceived as presenting elevated geopolitical risk, this can increase the strategic appeal of geographic diversification, even where new projects carry higher execution and operational risk,” he explained.
“Insurance capacity may be available for unproven facilities, but pricing and terms will reflect political, war and SRCC risk, aggregation concerns, the scope of applicable exclusions and exposure to supply-chain and logistics disruptions, as well as the quality of engineering and risk controls.”
Dr Muir-Wood also pointed out that the Middle East conflict has changed significantly since it began on 28 February, and is still evolving quickly. He added, “Supply conditions and restoration timelines could shift materially depending on how the conflict develops”.
“The availability of energy sources and chemical products can dynamically change, and recovery of petrochemical and processing plants can take significant time, with knock-on effects for supply chains and long-term prices,” he concluded.