The Middle East conflict is altering Asia-Pacific insurers’ risk profiles primarily through market volatility, energy prices, and trade disruption, even though their direct underwriting exposure to the region remains limited, according to S&P Global Ratings and other industry observers.
S&P Global Ratings said that while Asia-Pacific insurers’ direct underwriting links to the Middle East are modest, the conflict is affecting them through capital market volatility and potential supply-chain and energy disruptions. “Asia-Pacific insurers have limited direct exposure to the Middle East. They are feeling indirect pain, however, mostly through financial market volatility,” S&P Global Ratings said in a recent report. The rating agency said prolonged disruption to trade and logistics could dampen regional growth, push up inflation, and increase operating expenses for insurers. Under its base-case assumptions, S&P considers these pressures manageable, but it said risks would rise if disruptions and higher energy prices persist.
Global reinsurers and specialty carriers with broad international portfolios are expected to take most of the insured losses from the conflict, although war exclusion clauses in many property and specialty contracts limit direct claims. In response to heightened geopolitical risk, some nonlife insurers and reinsurers have started cancelling cover in higher-risk areas and purchasing additional reinsurance or retrocession protection. Some Asia-Pacific reinsurers participate in this risk indirectly through broker-driven facilities, specialty platforms, treaty programs, and retrocession markets. Given reporting lags on large losses, several have increased reserves in line with their 2026 large-loss budgets.
For primary carriers, one potential claims channel is marine and cargo insurance linked to Middle Eastern shipping routes. In most Asia-Pacific markets, these business lines contribute about 1% to 5% of total premiums. In Singapore, marine and cargo premiums have accounted for roughly 10% in recent years, consistent with its role as a regional shipping and insurance centre. S&P said Singapore-based property and casualty insurers are likely to continue relying on reinsurance to manage retained exposure to large marine and cargo losses, particularly under scenarios involving disruptions to major sea lanes.
S&P identified investment market volatility as the most significant indirect transmission channel from the conflict to Asia-Pacific insurers. A further escalation could intensify capital market and currency swings, affecting capital adequacy and earnings volatility. Most rated insurers in the region hold minimal direct investments in Middle Eastern assets and, according to S&P, maintain capital buffers that it views as sufficient to absorb short-term shocks. Taiwan’s life sector is an exception: life insurers there hold around 4% of invested assets – equivalent to 22.1% of total adjusted capital – in Middle Eastern sovereign and corporate bonds, with one rated insurer at 8%. This leaves that segment more exposed to bond price movements if risk premia rise.
Asia-Pacific’s reliance on imported energy adds another channel of vulnerability. Higher oil and gas prices can push up headline inflation and business costs, erode household purchasing power, and slow economic activity. S&P noted that while some economies maintain strategic crude stockpiles to manage near-term disruptions, a sustained supply shock could ultimately pressure insurers’ credit profiles through weaker premium growth and more challenging claims experience.
Under its base case, S&P assumes conflict intensity eases and constraints in the Strait of Hormuz moderate during April, with Brent crude averaging US$92 per barrel in the second quarter and about US$80 per barrel over 2026. In a downside scenario involving a prolonged conflict, Brent is assumed to peak at US$200 and average nearly US$130 during the year. In that downside case, S&P estimates inflation in mainland China would rise by about 1 percentage point, and by 1.4 to 1.6 points in India and Japan. GDP growth in those economies would be 0.3 to 0.4 percentage points lower in 2026, widening to 0.5 to 0.7 points by year-end. Monetary policy responses would diverge, with China remaining broadly accommodative, India tightening modestly, and Japan slowing policy normalization.
On the underwriting side, higher energy and input costs are expected to feed into claims inflation and pricing, especially in motor, property, and commercial lines. S&P said it would expect compounding claims expenses to prompt rate increases across these segments. At the same time, weaker trade and investment activity could reduce premium volumes in marine, cargo, trade credit, political risk, and business interruption covers if a downturn is extended. Capital markets volatility adds balance sheet risk through mark-to-market swings. Taiwanese insurers with large US dollar positions have already seen foreign-exchange-driven volatility, though they could also realize valuation gains on certain holdings in a risk-off environment.
For life insurers, S&P highlighted the potential for deterioration in mortality, morbidity, and lapse experience under weaker macroeconomic conditions and higher living costs. New business in discretionary savings products is particularly exposed in energy-importing economies dealing with slower growth and persistent inflation. Over time, higher interest rates can improve reinvestment yields and support margins in protection, annuity, and other long-duration products.
Sovereign and bank exposures provide a further transmission channel in a severe downside scenario. Insurers with larger allocations to low-income, net oil-importing economies such as Bangladesh, Pakistan, and Sri Lanka may experience greater balance sheet volatility through their holdings of government and bank securities. Banking systems in Cambodia, Indonesia, the Philippines, Thailand, and Vietnam – which have material exposure to low-income households and small and midsize enterprises – could also face greater stress in a prolonged downturn, with implications for insurers’ credit and counterparty risk management.
The Middle East conflict sits alongside other structural forces shaping Asia-Pacific insurance in 2026, including geopolitical realignment, persistent catastrophe risk, and AI adoption. Geopolitics was already prominent on insurers’ agendas at the start of 2025. Shifts in global trade are also influencing China’s role. S&P Global Ratings analyst Simon Wong has pointed to continued diversification of supply chains and destination markets, with China’s exports to the Global South having doubled since 2015 and now exceeding exports to the US and Western Europe combined.
Natural catastrophe risk remains a central feature of the regional landscape. Aon Plc estimated at least US$76 billion of economic losses from natural disasters in Asia-Pacific in 2025, with just over US$7 billion insured, highlighting a sizable protection gap. At the ASEAN Insurance Summit in November 2025, ASEAN secretary-general H.E. Dr. Kao Kim Hourn described this gap as both a challenge and an opportunity to broaden coverage, noting that ASEAN’s insurance penetration in 2023 was 3.2% of GDP compared with a global average of 7%.
AI is another cross-cutting theme. It featured prominently at the 2025 Singapore International Reinsurance Conference, where industry participants discussed workforce implications and new risk types. Steve Tunstall, general secretary of the Pan-Asia Risk and Insurance Management Association, said in an interview with S&P Global Market Intelligence that the growth of AI has made it harder for organizations and individuals to “tell a fact from fiction,” adding that “we've only just begun to see the implications from that in terms of cybersecurity threats.”
