The global insurance industry has been placed on high alert as Israeli authorities confirmed that the latest military offensive against Iran is expected to continue for up to 14 days, sending shockwaves through financial markets and triggering operational recalibrations across sectors heavily reliant on regional stability, particularly aviation and maritime transport.
In a campaign described by Israeli officials as “extended and necessary,” strikes commenced Friday against Iranian nuclear and military assets. While the opening salvo was dramatic – with reports of over 200 fighter jets targeting missile production sites and command structures – the Israeli Prime Minister warned that operations would persist “as long as required,” suggesting a medium-term period of disruption.
Underwriting agencies and reinsurers are now urgently reassessing exposure to a region already beset by complex geopolitical risk. The killing of senior Islamic Revolutionary Guard Corps (IRGC) commanders, coupled with retaliatory drone activity from Tehran, has heightened fears that a limited military action could devolve into a wider conflagration encompassing regional actors and vital commercial corridors.
Following the escalation, Iranian, Iraqi, and Jordanian airspace was shuttered, and Israel’s Ben Gurion airport ceased operations entirely. Eurocontrol has reported the disruption of nearly 2,000 European flights, with 650 cancellations within a single day. Insurers now face increased liabilities linked to aviation war risk covers, while airlines are re-routing via Saudi and Turkish airspace, incurring significant cost escalations.
Aviation insurers are already bracing for additional claims arising from operational detours, grounded aircraft, and potential loss of income. Flight operators such as Lufthansa, Emirates, and Air India have suspended or diverted services, with Israeli carriers El Al and Israir evacuating fleets to secure locations. Analysts predict a sharp uptick in short-term premium rates on war risk and business interruption policies for affected operators.
Simultaneously, marine insurers are scrutinising the situation in the Strait of Hormuz and Gulf of Aden. While the U.S.-led Combined Maritime Forces have affirmed that commercial transit remains open, the advisory classification for the region has been raised to “significant.” The UK and Greek maritime authorities have urged vessels to log transits and steer clear of high-risk waters.
The risk of a shipping disruption remains acute. The Strait of Hormuz, through which nearly a fifth of global oil supply passes, has previously been a flashpoint in Iran’s strategic calculus. Although traffic continues for now, the slightest escalation could compel hull and cargo insurers to revise coverage terms or suspend underwriting altogether for some Gulf-bound voyages.
The immediate market response has been volatile. Brent crude surged past $90 a barrel in intraday trading, prompting concern among insurers about the knock-on effects for transport, energy, and industrial policyholders. Meanwhile, equities tied to aviation and logistics, such as IAG and Ryanair, dipped sharply, reflecting investor unease over fuel costs and travel disruption.
With both the geopolitical and economic landscape shifting rapidly, brokers and risk managers are urging clients to review their existing coverage portfolios and consider scenario-based modelling for conflict escalation.
Several global reinsurers, including those based in London and Zurich, are reportedly initiating internal reviews of aggregate exposures in the Levant and Gulf regions. One Lloyd’s underwriter, speaking on background, described the situation as “highly dynamic and laden with unknowns,” adding that rating agencies are expected to monitor insurers’ war risk exposure closely in the coming fortnight.
For the insurance sector, which has only recently stabilised from the aftershocks of the Russia-Ukraine war and ongoing Houthi activity in the Red Sea, the emergence of another flashpoint in a strategic corridor could recalibrate risk appetites for years to come.
With Israel indicating a sustained military campaign and Iranian reprisals already in motion, underwriters are grappling with the prospect of an elongated risk event rather than a single shock. For insurers, reinsurers, and policyholders alike, the coming days will test the resilience and adaptability of the industry in managing conflict-induced volatility across multiple domains.
