The Middle East conflict that dominated the first half of 2026 represents the fourth major supply shock to the global economy in the past six years, according to Swiss Re Institute's (SRI) latest sigma report ,"World insurance in 2026: Shock absorbers in a fragmenting world", released yesterday.
In SRI’s view, even with the recent ceasefire, the risk of recurring supply-side shocks is likely to remain elevated, as countries increasingly prioritise national security, strategic autonomy and supply-chain resilience over efficiency.
While these macro-level risks threaten global trade networks, the Middle East conflict has been confined principally to risks within the region, with exposed lines facing a dual shock through both severity and frequency. Marine, aviation and trade credit are directly affected by disruptions to trade routes, airspace and energy infrastructure, says the report.
Rates in aviation, hull and political violence have increased sharply, with insurers issuing war-risk notices of cancellation and repricing. Trade credit is exposed with a lag that can go from 3–24 months, depending on the severity and persistence of the shock, as cost pressures weaken corporate balance sheets and get exposed to second-order effects.
While the immediate impacts on defaults remain limited, sustained energy-driven cost pressures can erode corporate margins and increase insolvencies and payment defaults, particularly in energy-importing regions. Allianz Trade, for example, expects a 6% increase in global business insolvencies in 2026, with one-third of the increase attributable to the Middle East conflict. This points to a delayed but potentially meaningful increase in claims frequency which will be persistence dependent.
Demand for insurance coverage
Heightened uncertainty can sustain demand for coverage and improve underwriting conditions where capacity remains disciplined. This two-sided effect — higher risk alongside stronger pricing — means that the impact on specialty lines is not uniformly negative. “Just-in-case” supply-chain reconfiguration can support demand for marine cargo, marine war, aviation war, political violence, SRCC, trade credit, surety, BI/CBI, DSU and cyber, as firms seek protection for rerouting, delayed inputs, supplier failure and geopolitical volatility. These forces create conditions that are supportive of higher nominal premium growth and net income.
Outside specialty lines
The broader P&C impact from supply shocks is indirect rather than through large direct losses, particularly in current situation when market conditions are buyer-friendly.
Property is always exposed via higher construction costs, which are highly sensitive to energy and raw materials. For example, depending on the severity of the Middle East supply shock, construction-related claims severity could increase by 40–220bps in the US and 180–450bps in Germany, relative to pre-conflict assumptions.
In Casualty, motor insurance is similarly affected through higher repair and parts costs driven by supply chain disruptions. Casualty lines are less directly linked to oil but remain sensitive to broader inflation dynamics, including wages and healthcare costs. While those categories face a limited direct impact from the oil price shock, they could increase more in a higher-for-longer inflation environment due to second-round effects.
Premium growth and profitability
In contrast to claims, the impact on premium growth is more muted from the Middle East conflict. Higher oil prices weigh on economic activity and affordability, particularly in energy-importing regions, but the broader effect on insurance demand is limited overall. We expect a slight reallocation of growth across lines this year, rather than a broad-based contraction.
War has risen to become the top political violence risk for companies worldwide, and conflict persistence could accelerate demand for political violence and terrorism insurance, as supply chain risk management strategies are once again reimagined.