Global reinsurers are bracing for earnings volatility as the Middle East conflict threatens to disrupt two of the world's most critical shipping routes.
Yet despite the mounting pressure on specialty insurance lines, the reinsurance sector's fortress balance sheet suggests the industry will weather the storm without serious damage.
The Strait of Hormuz alone handles roughly 20% of global crude oil and seaborne natural gas shipments. Potential disruptions could ripple violently through energy and commodity markets, while the conflict itself is already forcing reinsurance underwriters to reassess risk appetite across war, aviation, energy and cyber exposures.
S&P Global Ratings found that the 19 largest global reinsurers hold limited direct asset exposure in the Middle East. The real problem lies elsewhere: in specialty insurance lines, where claims tied to war risk, political violence and terrorism could mount quickly.
Reinsurers and marine insurers have begun withdrawing or curtailing coverage from the conflict zone entirely, leaving primary carriers scrambling for protection.
History offers a sobering template. During the Ukraine conflict, war-risk premiums for affected vessels rocketed from a baseline of 0.025% to rates between 1-5% of hull value. Red Sea tensions saw premiums spike nearly tenfold, jumping from below 0.1% to as much as 1% per transit.
For Hormuz transits, premiums previously around 0.25% are expected to exceed 0.5% if hostilities continue. A $100 million vessel transiting the Suez nine times annually could face $2.7 million in additional war-risk insurance costs alone.
Reinsurers, meanwhile, are lifting attachment points, cutting capacity and tightening event definitions – pushing higher net retentions onto primary carriers.
Stress testing also paints a concerning picture. A single total loss of a large vessel could generate combined hull, cargo and liability claims of $200-300 million.
Regulatory modeling shows that prolonged crisis scenarios could collapse profits from $600 million to a $1.6 billion loss, driven by elevated claim frequencies and skyrocketing reinsurance costs.
Yet reinsurers are not defenseless. Global reinsurance capital reached $760 billion as of September 2025. Early 2025 results from 11 major reinsurers delivered combined net income of approximately $31 billion - a 16% jump versus 2024 - with combined ratios in the low-90s range.
S&P has not changed its sector outlook, citing solid capital buffers and disciplined underwriting. Still, reinsurers holding broad exposure to specialty markets in the Middle East face the highest risk of claims activity, and uncertainty about the conflict's ultimate financial effects lingers.
