Geopolitical Tensions in Iran Raise Global Insurance Concerns, Says Morningstar DBRS

Rising geopolitical tensions centred on Iran are heightening concerns within the global insurance sector, particularly in lines covering terrorism and political violence, according to ratings agency Morningstar DBRS. The report warned that prolonged instability in the Middle East could lead to greater volatility in risk underwriting, as well as “stricter insurance terms for businesses and investors worldwide.”

Despite the uncertainty, analysts noted that the insurance industry maintains a high degree of resilience, underpinned by strong capitalisation and diversified portfolios that allow large companies to absorb moderate losses arising from terrorism or politically motivated incidents. However, the primary risk, they stressed, lies not necessarily in the frequency of attacks but “in the potential for simultaneous losses across multiple insurance lines.” A single event, such as an attack on critical infrastructure or a major urban centre, could trigger claims across property, marine, aviation, and business interruption insurance policies. This phenomenon, known in the industry as risk accumulation, represents “one of the most significant challenges for insurers, as it can heavily impact financial results within a short period.”

The analysis also highlighted the growing difficulty of distinguishing between different forms of risk, including terrorism, cyberattacks, and acts of war. In scenarios where attacks exhibit a hybrid character, disputes could arise between insurers and policyholders over whether an incident is covered under existing contracts. At the same time, the geographical scope of risk is expanding beyond the Middle East, with historical patterns demonstrating that major conflicts often correlate with increased politically motivated violence in other regions. North America and Western Europe, in particular, are seen as increasingly exposed due to the concentration of high-value assets such as diplomatic centres, shopping complexes, and hotels. Key infrastructure including ports, airports, energy networks, and logistics hubs is considered especially vulnerable, given its strategic and economic importance. The interconnected nature of global supply chains further amplifies this risk, as disruption at a single hub can cascade across multiple sectors simultaneously.

Demand for terrorism and political violence insurance is rising as companies reassess exposure to geopolitical uncertainties and seek broader coverage. Multinational corporations, airlines, shipping companies, and operators of critical infrastructure are all among those facing heightened risk in an uncertain global environment. Morningstar DBRS cautioned, however, that “the increase in demand is expected to be accompanied by stricter terms and higher premiums,” with insurers likely to adopt a more selective approach, especially for politically sensitive assets. Reinsurers also play a decisive role in determining available insurance capacity, influencing how much risk primary insurers can underwrite. In the event of a prolonged crisis, reinsurers may choose to limit exposure to high-uncertainty risks or raise contract trigger thresholds, developments that would ultimately be reflected in higher costs for clients.

State-backed terrorism insurance programmes continue to act as stabilising forces in the market, ensuring coverage remains available even during periods of heightened uncertainty. These schemes, implemented in many countries following the September 11 attacks, function as a safety net, although they typically apply only to specific categories of incidents. According to Morningstar DBRS, the global insurance market is entering a period of elevated uncertainty, where “managing risk accumulation and adapting to new geopolitical realities will be critical.” While the sector’s fundamental resilience remains strong, the scale of its exposure will ultimately be determined by “the evolution and duration of the conflict” in the coming years.

By fLEXI tEAM