The ongoing Iran conflict in the Middle East also seems to be impacting the global insurance industry. According to international rating agency Moody’s Ratings, insurance companies covering coverage such as maritime, aviation and political violence may face large spreads due to the conflict.
Moody’s said in its report that due to rising tensions in the Gulf region, companies are increasingly demanding political violence and terrorism (PVT) insurance coverage to protect their spreads. Due to this, the conditions of such insurance are also seeing an increase.
However, the agency says the potential loss may be limited for insurance companies with large and diverse portfolios. This results in diverse risk selection, spread capping and re-insurance protection arrangements.
According to Moody’s, war exclusion clauses present in insurance policies will also provide protection to companies to some extent, although in many cases these clauses may lead to legal tensions.
The report also said that the current conflict could possibly be limited to a few weeks. After this, the pending blocked Strait of Hormuz route can again open for ships on a large scale. This sea route is considered very important for global oil supply.
The number of ships evacuated from the Strait of Hormuz has dropped significantly since the conflict began in late February, according to the data. Due to this, global energy supply and trade has also been affected.
Areas related to the aviation sector have also been mentioned in the report. According to Moody’s, the risk of damage due to grounding has increased due to closure of airfields and missile activities. Along with this, the possibility of multiple insurance claims arising from a single incident has also increased.
However, the agency says that in most circumstances the losses of the aviation sector can also be controlled. Insurance companies can price risks quickly and have strong risk limits and re-insurance protection.
But if the conflict continues for a long time, the possibility of multiple liability losses and complex insurance coverage may increase. Especially at airports where a large number of aircraft are parked and which are located in areas at risk of attacks.
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