Rising geopolitical tensions and potential marine insurance exposure are emerging as key risks for insurers, analysts at Moody’s Ratings said during a recent webinar.
Speakers highlighted how conflict in the Middle East, evolving capital markets and pension reforms in Europe are creating new risks and opportunities for insurers and reinsurers. While the sector enters the current period from a position of financial strength, analysts warned that prolonged geopolitical disruption could still create significant pressure points.
Benjamin Serra, senior vice president, financial institutions, said the conflict could create direct exposure for the global insurance sector through marine cover.
“The Persian Gulf and the Strait of Hormuz is a key shipping route to export oil and gas,” Serra said. “These boats are typically insured by insurance companies or reinsured by reinsurance companies. So this is clearly a risk for insurance companies.”
Around 1,000 vessels are currently trapped in the Gulf, creating significant potential exposure for insurers covering ships, cargo and liability risks.
“The value of the boats which are trapped in the Gulf is around or above 25 billion US dollars,” Serra said. “Some insurance companies mentioned that the exposure could be as high as 40 billion or even higher.”
Despite the potential scale of exposure, Serra said the global insurance industry would likely be able to absorb such losses.
“Marine insurance is actually a much more concentrated market,” he said. “So even if these type of events in normal times can be absorbed by the industry, for the marine insurance market it would be actually a very sizable event.”
Mohammed Ali Londe, vice president - senior analyst, financial institutions, said insurers in the Gulf Cooperation Council region would likely face limited direct claims exposure, as war risks are typically excluded from standard policies.
Instead, the conflict’s impact is more likely to appear on insurers’ balance sheets than in claims activity.
“The main more immediate transmission channel is going to be through their investment portfolios rather than underwriting performance,” Londe said.
Disruptions to oil exports, tourism and regional economic activity could pressure regional assets, particularly real estate and equities, which make up a larger share of GCC insurers’ investment portfolios than in many Western markets.
“In a hypothetical situation, even a 20% decline in real estate and equity valuations would reduce these insurers’ total equity by around 7%, which would largely be absorbable given their existing capital buffers,” he said.
Despite rising geopolitical risks, analysts said insurers and reinsurers currently maintain strong balance sheets and profitability.
Serra noted that solvency ratios among major European insurers and reinsurers remain well above regulatory thresholds.
“They are above 200% for everyone, and they have actually increased for most of them between 24 and 25,” Serra said. “These big companies are entering the conflict in a position of strength when you look at the balance sheet.”
Recent financial results also show strong profitability across both primary insurance and reinsurance sectors, supported by higher pricing and improved underwriting discipline.
“Net income has grown in the last four years for primary insurance companies, and the growth is there as well for reinsurance companies,” Serra said.
Beyond geopolitical risks, analysts also highlighted structural changes in pension markets as a key driver of insurance growth in Europe.
Will Keen-Tomlinson, vice president - senior analyst, financial institutions, said the UK bulk purchase annuity market continues to expand.
“Current indications are that 2025 will close with a lower total deal value than 2024, although still around £40 billion, but with a record number of deals,” Keen-Tomlinson said.
Growing competition, including new entrants and alternative ownership models, is reshaping the market.
“What this is doing is driving pricing competition and also driving companies to play up and down the market in terms of deal size to where they typically would,” he said.
Louis Nonchez, assistant vice president - analyst, financial institutions, said the Netherlands’ pension reform is opening new opportunities for insurers.
“The reform enables, first, the transfer of pension assets and liabilities from pension funds to insurers, and also the development of defined contribution and insured pension solutions,” Nonchez said.
“We expect that pension-related revenues will become the main growth driver for Dutch life insurers over the coming years.”
However, competition and investment risks could still pressure margins as the market develops.
“The competition for pension buyouts could further compress margins,” Nonchez said.
Irina Metzler, analyst, financial institutions, said the European insurance sector is entering a more uncertain operating environment.
“Rising geopolitical tensions are increasing or adding a new layer of uncertainty and that's making also operating conditions more challenging for both life and P&C insurers,” Metzler said.
However, strong capital positions mean the sector is expected to remain resilient over the next 12 to 18 months despite the more uncertain backdrop.
