Tehran, Iran. Rising geopolitical tensions centred on Iran are increasing concern in the global insurance sector, particularly for coverage linked to terrorism and political violence, according to ratings agency Morningstar DBRS.
Potential impact on underwriting and terms
Morningstar DBRS warned that prolonged instability in the Middle East could lead to higher volatility in risk underwriting, as well as stricter insurance terms for businesses and investors worldwide.
Industry resilience and core risk
The report said the global insurance industry remains resilient despite uncertainty, supported by strong capitalisation and diversified portfolios that enable large companies to absorb moderate losses from incidents of terrorism or political violence.
Analysts said the primary risk lies not necessarily in the frequency of attacks but in the potential for simultaneous losses across multiple insurance lines.
Risk accumulation across multiple policies
Morningstar DBRS said a single event, such as an attack on critical infrastructure or a major urban centre, could trigger claims across policies including property, marine, aviation and business interruption insurance.
The report described this as risk accumulation and said it represents one of the most significant challenges for insurers because it can heavily impact financial results within a short period.
Coverage disputes and hybrid threats
The analysis highlighted growing difficulty in distinguishing between different forms of risk, including terrorism, cyberattacks and acts of war.
It said that in an environment where attacks may have a hybrid character, disputes could arise between insurers and policyholders over whether an incident is covered under existing policies.
Wider geographic exposure
Morningstar DBRS said the geographical spread of risk is expanding beyond the Middle East, with historical patterns showing that major conflicts are often linked to increased politically motivated violence in other regions.
It added that North America and Western Europe are seen as more exposed due to the concentration of high-value assets such as diplomatic centres, shopping complexes and hotels.
How do you expect insurers and businesses to respond to the potential for simultaneous losses across multiple coverage lines?
