The escalating Iran conflict between the United States, Israel and Tehran is prompting insurers and reinsurers to reassess their exposure across multiple lines, with Supercede co-founder Ben Rose (pictured above) warning that the crisis is testing how well reinsurance structures can absorb geopolitical volatility.
"Reinsurance is essential to a functioning insurance market, but it is not a blank check," Rose said. "Carriers will not ignore the true level of risk simply because cover is available or cheaper: they have brands and long-term customer relationships to protect."
Rose added that underwriter pricing serves as a signal to the broader market. If cover becomes prohibitively expensive, he said, that is a prompt to ask whether the activity remains safe or sustainable.
The market data bears out those concerns. War risk premiums have climbed as high as 1% of a ship's value, up from roughly 0.2% before the conflict began. Dylan Mortimer, marine hull UK war leader at Marsh, estimated that ratings are trending between 1% and 1.5% of vessel value, with variation depending on a vessel's position relative to the Strait of Hormuz.
With most tankers valued between $200 million and $300 million, those figures translate into hull war risk costs of up to $7.5 million per vessel. Analysts at Jefferies estimated that potential industry losses from at least seven vessels reported damaged could reach $1.75 billion.
Sheila Cameron, CEO of the Lloyd's Market Association, said roughly 1,000 vessels remain in the Persian Gulf and surrounding waters, approximately half of which are oil and gas tankers with an aggregate hull value exceeding $25 billion.
JPMorgan analysts placed total insurance exposure for Gulf-operating vessels at approximately $352 billion.
The Iran conflict has also exposed fragility in the reinsurance chain. Multiple P&I clubs, including NorthStandard, Steamship Mutual and Skuld, canceled war risk cover after their reinsurers withdrew support.
Stephen Rudman, head of marine Asia at Aon, noted that the hull war market has reacted most immediately, with cargo war risk premiums also rising on a voyage-by-voyage basis.
Morningstar DBRS warned in a recent report that reinsurers may respond by raising attachment points or reducing capacity, leaving primary underwriters retaining more risk. The agency said the conflict poses significant underwriting and investment challenges across marine, aviation, property, travel and supply-chain lines.
Moody's, in a separate cross-sector analysis, concluded that missile and drone attacks in the Gulf are increasing tail risk for specialty insurers, though disciplined underwriting should allow large carriers to absorb losses under a baseline scenario. A prolonged Iran conflict, the rating agency cautioned, would raise the probability of multi-asset losses.
Two weeks in, Rose said, insurers will have assessed where reinsurance structures protect them and where they fall short. He warned that Supercede is also watching second-order effects.
"Reinsurers will be carefully assessing the broader economic fallout to understand how changes to global growth, inflation and interest rate trends may impact their portfolios and investments," he said. "For now, the macro factors are taking center stage, but the longer the conflict continues, the greater the risk that Iran hits something big, tall or expensive."
