For insurers across the Middle East, the main threat comes from investment losses, not policy payouts.
Dubai: Rising tensions in the Gulf have sparked concerns over shipping disruptions, airspace closures, and increased business costs. Many UAE residents are now asking a practical question: could the conflict lead to higher insurance premiums? Regional instability has the potential to impact financial markets, trade routes, and overall economic activity across the Gulf.
A new analysis from Moody’s Ratings indicates that the immediate impact of the Iran conflict on Gulf insurers is likely to remain limited. For UAE residents, the key question is whether the tensions could eventually push up insurance premiums. Here’s what it could mean for policyholders.
No immediate pressure
Moody’s expects any disruption to be short-lived under its baseline scenario. The report notes: “Our baseline scenario is that the conflict will be relatively short-lived, likely a matter of weeks, and that navigation through the Strait of Hormuz and air traffic will then resume at scale.”
Under this scenario, Gulf insurers are not expected to experience significant financial strain. Moody’s adds: “GCC insurers would not face immediate material pressure on their credit profiles.”
Other ratings agencies share a similar view. Fitch Ratings noted that “the effective closure of the Strait of Hormuz… is likely to be temporary given its vital economic role.”
For UAE residents, this indicates that insurance premiums are unlikely to rise in the short term solely due to the conflict.
No Significant Claims Expected
War-related damage is generally excluded from standard insurance policies in the region.
Moody’s notes: “The direct claims impact of the conflict will likely be negligible for all GCC insurers, as war risk is typically excluded from standard insurance policies in the region.”
Specialist Coverage Handles War Risks
War risks are typically covered by specialist insurers in international markets rather than regional providers. Because of these exclusions, GCC insurers are unlikely to face large claims directly related to military activity.
Financial Risk Comes from Markets
The greater exposure for insurers lies in their investment portfolios rather than their underwriting. Moody’s explains: “The primary transmission channel would be through insurers’ investment portfolios rather than their underwriting performance.”
Insurance companies hold substantial investments in equities and real estate. Regional instability can depress asset prices, reducing the value of insurers’ holdings. Moody’s estimates that “a 20% decline in real estate and equity valuations would reduce our rated companies’ total equity by around 7%.” However, most large insurers maintain capital buffers strong enough to absorb such losses.
Smaller Insurers More Vulnerable
The report highlights differences across the sector. Large insurers generally have diversified investment portfolios and stronger capital positions, making them more resilient.
Smaller insurers, however, often have greater exposure to real estate and equities and thinner capital buffers, leaving them more sensitive to market volatility.
Premiums Could Come Under Pressure
Insurance pricing could be affected if the conflict drags on and starts to impact broader economic activity. Moody’s cautions: “Risks would increase if disruption persists.” A prolonged conflict could weaken investor sentiment, depress asset prices, and slow economic growth across the region.
Potential Impact on Premiums
Moody’s also notes that slower economic activity would dampen premium growth, which is a key factor supporting the sector’s stable outlook. If insurers face lower growth and tighter profit margins, adjustments to pricing could eventually follow.
What to Watch Next
Several developments could influence insurance pricing in the coming months:
- Duration of the conflict
- Stability of shipping and air routes through the region
- Performance of financial markets
- Economic growth across the GCC
For now, analysts expect the sector to remain stable. Any changes in insurance premiums would largely depend on the length of the geopolitical disruption and whether it begins to affect regional economic activity.
