The insurance landscape is caught in a state of flux because of the rapid escalation of the military conflict between Israel and the US on one side and Iran on the other, according to Mr Suresh Nair, Executive Director of Gargash Insurance, which is a Dubai-based insurance broker.
At press time, military action against Iran by Israel and the US was ongoing and several countries in the region have been pulled into the conflict to varying degrees.
Even in the initial days of the hostilities, direct and indirect effects on sectors such as logistics, transport and energy, were evident. Within hours of the joint US-Israeli attacks on Iran that started on 28 February, airlines in the region suspended scheduled commercial flights. In addition, Iran closed the Hormuz Strait to shipping. Existing war risk insurance coverage on marine shipping has been cancelled by international P & I Clubs, with reinstatement of coverage being looked at on a case-by-case basis at much higher rates, if at all.
Normal property policies carry blanket war exclusions. To mitigate risk, interest in purchasing war risk insurance coverage has increased. Speaking to Middle East Insurance Review, Mr Nair, who is also a Vice President (International) of London-headquartered Chartered Insurance Institute, said that the take-up is expected. However, it is anticipated to be limited because of reduced capacity/availability and increased prices due to the ongoing conflict.
“Clearly, an extraordinary situation is developing,” Mr Nair said.
He also said, “It would be disingenuous to suggest that insurance markets regionally and globally will not be impacted adversely by the conflict. The impact will clearly be dependent on the extent and duration of the hostilities.”
However, he added, “Overall, the UAE economy and insurance industry have always shown strength and resilience—bouncing back quickly and strongly after major weather events, pandemics, and global economic downturns in the past—which should and will be the North Star ahead.”