Middle East conflict 2026: Insurance impacts across marine, aviation, travel and beyond

The conflict in the Middle East has impacted a number of lines of insurance business since the US and Israel launched combined strikes on Iran in February. In this article, we examine some key impacts. 

Travel insurance: Cancelled flights and the war exclusion trap

Airlines have cancelled thousands of flights, disrupting plans and stranding many travellers either returning from, flying to, and/or transiting through some of the world's busiest airports. 

Many standard travel insurance policies exclude cover for disruptions caused by acts of war. Insurance will generally not reimburse additional costs that many will incur, such as the costs of additional flights, hotels and food. Although some passengers will be reimbursed for such expenses by airlines, many stranded abroad will not be compensated for much of their out of pocket additional costs incurred as a result of having to extend their stay.

Insurers can expect a spike in notifications and potential coverage disputes. From a consumer perspective, there is an education piece regarding exclusions that apply to travel insurance policies.

Some specialist travel insurance policies do cover war risks. For example, interruption for any reason coverage provides cover if a trip is cut short for reasons not covered under more standard cover. Specialist war zone travel insurance policies do exist for those visiting and temporarily working in high risk zones. 

Aviation insurance: Grounded fleets and hull and liability gaps

Many major global airlines have had to divert operations from Middle Eastern hubs (Dubai, Doha and others) or halt them entirely. Long-haul flights have had to be rerouted around closed airspaces, increasing fuel costs and operational complexity (i.e. fleet and staff locations). Grounded jets also incur additional costs sitting on standby at airports worldwide.

For aviation insurers, a key concern is the physical risk to aircraft on the ground. Large airline fleets remain grounded across the Gulf. There have already been missile strikes on airports in Dubai, Abu Dhabi, Bahrain and Kuwait, creating a significant risk of aircraft being destroyed or damaged in missile and drone strikes whilst they are grounded.

The aviation war market is issuing review notices to remove or reinstate cover on different terms for the affected countries. Following the decision in AerCap Ireland Limited & Others v AIG & Others [2025], aircraft could potentially already be deemed to be in the grip of a war peril such that war insurers may still be liable for any subsequent loss of or damage to the aircraft. 

The Grip of Peril doctrine is a principle in insurance law, most familiar in the marine context (derived from Institute War and Strikes Clauses), which holds that once any vessel (which can include an aircraft) has become caught up in or exposed to an insured war risk, that peril continues to operate even if the insurance policy is subsequently cancelled or the war risk cover is withdrawn. The insurer who was on risk when the peril first took hold remains liable for any resulting loss, even if the loss itself is only crystallised at a later point after cancellation. If an insured peril arises during the policy period and later results in permanent loss, the loss is still generally covered, provided the peril’s ‘grip’ was established during the policy period.

In AerCap, a key issue was whether the loss of the aircraft was caused by an all risks peril (in which case the all risks insurers would pay, at a higher insured value) or a war risks peril (in which case the war risks insurers would pay, typically at a lower value). The court found the loss of the aircraft was caused by a war risks peril.

This doctrine could be relevant to the situation in Iran because aviation war risk policies typically carry seven-day cancellation provisions, allowing insurers to cancel cover at short notice when hostilities escalate. In AerCap war risks insurers remained liable despite having issued cancellation notices as the war peril had already taken hold of the aircraft. Aircrafts were stranded in Russia following the invasion of Ukraine and effectively Russia had seized or retained aircraft. The war risks insurers could not escape liability by subsequently cancelling cover.

Non-war policies typically exclude war. There is a risk that missiles or air-defence interceptors could result in large hull and liability losses. Modern missiles and drones are capable of striking outside formally defined conflict zones, so war exclusions need to be carefully worded to minimise risk.

Revenue losses from operational disruption typically fall under business insurance policies that typically exclude war. The monetary cost of the conflict is likely to be significant for airlines.

Marine insurance: Insurance clubs halt Persian Gulf cover

The insurance market quickly responded to the conflict with the world's largest maritime insurance mutuals withdrawing war risk insurance cover for ships entering the Persian Gulf. Standard marine hull policies exclude war. Shipowners typically buy separate war-risk cover, often on a per-voyage basis, which typically have seven-day cancellation provisions. New terms are expected to follow as the insurance industry struggles to price these risks. 

The withdrawals are likely to discourage ship owners from entering the Persian Gulf in the short term. About a fifth of the world's supply of crude oil passes through the Strait of Hormuz, (which is the only exit route for the Persian Gulf) and the countries bordering the Persian Gulf produce around 40% of global oil output. 

The scale of the premium increases being contemplated is significant. Reinsurers' appetite for war-risk exposure has tightened significantly.  

If underwriters judge the risk to be effectively unquantifiable, some may simply refuse to quote, reducing capacity. Ships with business connections to the US or Israel may be unable to obtain coverage at any price, effectively barring them from the region with obvious knock-on effects for global oil supply chains.

Marine and aviation: Loss of hire insurance 

A loss of hire insurance policy (or 'loss of earnings' insurance) is a specialist marine and aviation insurance product that compensates the insured - typically a shipowner, aircraft owner or lessor - for the loss of income they suffer when their asset becomes unavailable for use following an insured event.

Aircraft lessors whose aircraft are grounded at Gulf airports, and marine vessels trapped in the Gulf, are rendered unable to generate lease rental income. They will, in turn, look to their loss of hire (loss of use) policies and potentially even total loss if detained over 12 months.

The off-hire may not be caused by an insured peril under the underlying policy, and if an underlying hull insurer declines the physical damage claim due to a war exclusion, the loss of hire insurer can similarly decline (similar to the material damage proviso in a regular business interruption policy).

Vessels are avoiding the Gulf and rerouting the significant additional distance around the Cape of Good Hope. This adds significant voyage time and travel costs. From a loss of hire perspective, rerouted voyages can generate off-hire claims in more complex charterparty arrangements. Additional time at sea increases the risk of mechanical breakdown and consequential off-hire. For cargo owners, the extended voyage times give rise to delay claims in the supply-chain insurance market. 

Disputes can also be expected between owners and charterers on whether:

• owners are obliged to comply with orders into affected areas;
• vessels are placed off-hire; and
• contracts have been frustrated due to force majeure clauses. 

Cargo insurance: Containers at risk

Large numbers of containers in transit are now stuck. Diverting other cargo around the Cape of Good Hope will create additional cost, delays and congestion, threatening supply chains.

Extended types of war cover may have been purchased applying Institute War Clause endorsements for Cargo and Air Cargo. Such endorsements likely apply to physical loss or damage only. Other types of loss, such as consequential losses, delay and loss of market are often expressly excluded from cover. 

As with other insurance, underwriters covering commodities moving through the Gulf are also reviewing, cancelling and renegotiating policies.

Property: Assets in the crossfire

For commercial property owners, the coverage landscape is challenging. Commercial property insurance almost universally excludes war risks and, unlike other exposures, cover is not readily available as a separate war risks policy. 

Losses to commercial property, including iconic structures, might not be covered. Landmark assets and major hotels in the region may be insured through specialist political violence and terrorism programmes. 

Business interruption losses arise not only from physical damage but also from evacuations, forced closures and damaged infrastructure. Losses will be experienced throughout the region, particularly in Abu Dhabi’s dense commercial zones.

The energy sector: Oil prices and supply chains

The conflict has caused a jump in global oil, fertiliser and gas prices and strained global supply chains. Political risk insurance protects businesses from financial losses due to government actions or political instability (such as war). Trade credit insurance covers non-payment of invoices due to commercial risks (insolvency, default) or political events. These products are designed to keep credit flowing and secure international trade, investments, and supply chains.

The rise in the price of oil, rescheduling pressures and global economic downturn (if one materialises) are likely to cause an increase in trade credit and contract frustration claims as businesses struggle with higher costs and interrupted supplies. 

Tankers have been targeted and mines have reportedly been deployed in the Strait of Hormuz. Energy insurance protects companies involved in the production, transport, and storage of energy - including oil, gas, and renewables - against risks like property damage, business interruption, pollution, and equipment failure. There is increased exposure to a major pollution event. Energy insurance policies typically contain war exclusions, however war risk policies are often purchased to fill this gap. 

At the time of drafting, it is reported that Britain has just two days of gas as Middle East flow runs dry. This shortage could have wide ranging impacts on companies, the economy and insurers. 

Reinsurance: Tightening capacity 

Consequences of the conflict are also impacting reinsurance. Reinsurers are lifting attachment points, tightening event definitions and cutting capacity, leaving primary carriers with higher net retentions. The impact will be most acute for insurers with concentrated marine, aviation and energy books with limited diversification. 

Conclusion

Focus is on the specialist war market as insurers issue cancellation notices and grapple to understand the extent of their exposure. War exclusions will offer some comfort to insurers. However, the conflict is simultaneously pressuring marine, aviation, property, travel, energy, trade credit and political violence markets across multiple jurisdictions. Volatility in this critical region will impact war premiums.

Policy wordings and tightly controlled underwriting will become even more important for insurers.