First ‘they’ were bluffing, then it was supposed to be ‘over in a week,’ now warring parties in the Middle East are butting heads over which of them truly holds the cards in the blockade of the Strait of Hormuz.
Since the Apr. 8 break in hostilities between the U.S. and Iran, marine experts estimate about 40 ships have transited the Strait. Crude oil prices continue to swing. And Israel’s continued actions against Lebanon threaten to shatter the fragile ceasefire.
What happens if the ceasefire doesn’t hold? Will insurance capacity dry up if the war in the Middle East continue? And where can commercial clients find coverage for their risks during wartime?
Capacity
Although re/insurer risk appetite can reduce substantially during a conflict, it doesn’t necessarily go away, says James Lloyd, a senior vice president specializing in political violence and terrorism at Marsh Risk.
“There’s still appetite. The political violence market’s quite robust in terms of its ability to underwrite during live conflicts,” he tells Canadian Underwriter. “So, while appetite is cautious…it’s certainly not closed to accepting new business and renewal business within those territories for war risks.”
Even though the Middle East could currently be described as “on fire,” insurance companies are still offering cover within certain countries in that region, says Tarique Nageer, terrorism placement advisor at Marsh Risk.
‘“It’s not completely devoid of cover. It’s just [that] everything is done on a case-by-case basis, and obviously it’s priced appropriately.”
Adds Lloyd: “As a benchmark, rates increased probably tenfold [compared to] pre-conflict in territories such as the United Arab Emirates.”
Affordability risks
Meanwhile, affordability risk for Canadian insureds is “concentrated rather than system-wide,” says Marcos Alvarez, managing director of global financial institution ratings at Morningstar DBRS.
He notes Canada’s broader commercial market was relatively soft at the start of 2026 as property capacity was abundant. Where affordability pressure may appear, he adds, is in specialty placements as opposed to property cover for small- and medium-sized enterprises.
“In the current environment, the most exposed buyers are Canadian firms that rely on London market capacity for terrorism, political violence, marine war, aviation war, or political risk cover,” he tells CU.
“If the conflict is prolonged, the issue will be higher retentions for local carriers, narrower wording, and selective capacity withdrawal for sensitive risks rather than a broad-base insurance shortage across Canada.”
Commercial coverage shifts
However, continuation of the war may have Canadian commercial insurance clients with operations in the region rethinking their insurance coverage purchases.
For one thing, clients that had not previously purchased the full political violence suite of perils are starting to include more coverage. “We’re seeing clients upgrading their coverage from terrorism to include war,” says Lloyd. “That’s certainly a trend that we started to see.”
Another trend relates to clients with exposures historically covered within the cargo (land-transit) market, but that have since received notices of cancellation. They are looking to buy back that coverage, to some degree, within the political violence market.
“Also, we’re talking to clients a lot about active assailant insurance,” Nageer adds. “That is a separate product, but also within concerns for a lot of clients because the active assailant cover is a blend between a property plus a casualty policy. It gives a lot of extra expenses in crisis-management services, which clients find valuable in this day and age.”
From a Canadian insurance perspective, adds Alvarez, “the bigger issue is not a surge in domestic claims overnight, but the way a global conflict can tighten specialty capacity and reprice risks that are largely underwritten through London.”