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Feb 2024

7 October

Source: Middle East Insurance Review | Nov 2023

The history of mankind is littered with incidences of war. It’s what we have always done and it’s probably what we will always do. But it doesn’t make it any less shocking each time war breaks out.
 
The insurance industry was not designed to be particularly well equipped to deal with the outbreak of such conflict since, along with acts of God, acts of war are generally excluded from protection cover.
 
Still reeling from the effects of Russia president Vladimir Putin’s invasion of Ukraine, on 7 October the region and the world had a second conflict to contend in the Israel-Hamas war.
 
At the time of writing, this war has the potential to bring Egypt, Lebanon, Syria and Iran into the fray if efforts to de-escalate the situation are unsuccessful. Many thousands of lives have already been lost and hundreds of thousands of people have been displaced.
 
The unvarnished reality is that the coming weeks could bring chaos to the Middle East – or the foundations for stability could be established.
 
The insurance sector will not be allowed the luxury of sitting it out and waiting to see what happens next. Coverage and pricing could come under intense scrutiny.
 
Insurance Egyptian Federation of Egypt chairman Alaa El Zoheiry told Middle East Insurance Review, “If we add the war in Palestine now, I believe that the hardening of the market will continue not only this year but for many years to come.”
 
And reinsurers will not escape. “I believe most reinsurance companies will decline providing war cover for this line of business in the hot area,” Mr El Zoheiry said.
 
Trust Re group CEO Yassir Albaharna has a different take on events. “I don’t think the MENA reinsurance markets will be greatly impacted, as far as increases or restrictions in coverage … Possibly, the immediate effect would be in marine and aviation which is already a specialist market demanding separate war rates,” he said.
 
It is likely that marine insurers with significant business in the region will be on tenterhooks for some time until the situation becomes clearer.
 
In the complex modern political and commercial landscape, the issue of war and conflict manages to weave in cyber, ransomware, terrorism and piracy. Navigating this complex reality is a nightmare for insurers and reinsurers alike.
 
Even prior to 7 October, IMF economists were echoing the sentiment of big institutional investors in fearing that increasing geopolitical conflicts will undermine growth. This might begin with the disruption – or destruction – of global supply chains but it could end with a large and lasting drag on global growth.
 
“While estimates of the cost of fragmentation vary, greater international trade restrictions could reduce global economic output by as much as 7% over the long term, or about $7.4tn in today’s dollars,” the IMF said in August.
 
If the price of oil begins to whipsaw in response to the war and the threat of escalation, the macroeconomic picture could become murkier still. M 
 
Paul McNamara
Editorial director
Middle East Insurance Review
 
 
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