Rising hostilities between the United States, Israel, and Iran are placing unprecedented pressure on the global reinsurance industry. Insurers and reinsurers are reassessing risk across multiple lines, as the Iran conflict exposes the limits of traditional reinsurance structures.
Ben Rose, co-founder of Supercede, cautioned that the crisis is a crucial test of how well the reinsurance chain can absorb geopolitical shocks.
“Reinsurance is vital for a functioning insurance market, but it is not a blank cheque,” Rose said. “Carriers cannot disregard real risk simply because coverage is available or cheaper; they have reputations and long-term client relationships to protect.”
He stressed that underwriter pricing provides important market signals. “If premiums become prohibitively high, it raises the question of whether the underlying activity remains safe or sustainable,” he added.
War Risk Premiums Soar
The market has already responded sharply. War risk premiums for vessels navigating the Gulf have risen from roughly 0.2% of a ship’s value to between 1% and 1.5%, depending on a vessel’s location relative to the Strait of Hormuz, according to Dylan Mortimer, marine hull UK war leader at Marsh.
For tankers typically valued between $200 million and $300 million, this translates into hull war risk costs of up to $7.5 million per vessel. Jefferies analysts estimate potential losses from seven damaged vessels could reach $1.75 billion. Sheila Cameron, CEO of the Lloyd’s Market Association, highlighted that approximately 1,000 vessels remain in the Persian Gulf, with about half being oil and gas tankers valued collectively at more than $25 billion.
JPMorgan analysts place total insurance exposure for Gulf-operating vessels at an estimated $352 billion.
| Metric | Current Estimate |
|---|---|
| War risk premiums (pre-conflict) | 0.2% of vessel value |
| War risk premiums (current) | 1–1.5% of vessel value |
| Average tanker value | $200–$300 million |
| Maximum hull war risk per vessel | $7.5 million |
| Damaged vessels reported | 7 |
| Estimated potential industry losses | $1.75 billion |
| Vessels in Gulf waters | ~1,000 |
| Aggregate hull value (oil & gas tankers) | >$25 billion |
| Total insurance exposure (Gulf) | $352 billion |
Reinsurance Chains Under Strain
The crisis has also revealed weaknesses in the reinsurance chain. Several P&I clubs, including NorthStandard, Steamship Mutual, and Skuld, cancelled war risk coverage after reinsurers withdrew support. Stephen Rudman, head of marine Asia at Aon, noted that hull war coverage has been the most immediately affected, with cargo war risk premiums also rising on a per-voyage basis.
Morningstar DBRS warned that reinsurers may raise attachment points or reduce capacity, leaving primary insurers to retain more risk. Moody’s indicated that missile and drone attacks in the Gulf are increasing tail risk for specialty insurers, though disciplined underwriting could allow large carriers to absorb losses under a baseline scenario. A prolonged conflict, however, raises the likelihood of multi-asset losses.
Two weeks into the crisis, Rose said insurers are analysing where reinsurance structures are effective and where they fall short. “Reinsurers are monitoring broader economic impacts, including global growth, inflation, and interest rate trends. The longer the conflict persists, the higher the risk that Iran targets something large, tall, or extremely valuable,” he warned.