The Global Insurance Industry Just Ran the Numbers on the Iran War, The Losses Are Staggering

Something important changed in the first week of March 2026 somewhere in the underwriting rooms of Lloyd’s of London, amid the quiet murmur of actuaries and the special hush that occurs when numbers stop behaving the way anyone expected. Within days of the start of the US and Israeli air campaign against Iran on February 28, the world’s insurance industry was doing something it hardly ever does with any urgency: canceling policies in the middle of contracts and instantly changing the terms of coverage. For ships trying to pass through the Strait of Hormuz, marine war premiums increased to twenty times their usual rate. Twenty times. When you consider that figure for a moment, it reveals something rather unsettling about how rapidly a long-theorized scenario became an operational reality.

The narrow waterway between Iran and Oman, known as the Strait of Hormuz, has long been considered a catastrophic variable in the worst-case models used by the insurance industry. If it were to close properly, it would simultaneously stress-test the entire global system. It’s not quite closed. However, it’s so uncomfortable that vessel transits through the waterway decreased from an average of about 100 ships per day prior to the conflict to about five in the early days of March. Five. There are currently about 1,000 ships operating in Gulf waters with a combined hull value of more than $25 billion. If a single loaded tanker is destroyed, the entire insured loss could reach the hundreds of millions. Even at partial disruption levels, the math quickly becomes concerning.

The multi-line nature of the exposure is what makes this situation truly complex, more complex than most conflicts that result in insurance claims. This isn’t just an aviation incident, a political violence incident, or a marine incident. They are all operating simultaneously and feeding into one another. This is precisely what Kennedys, an international insurance law firm, noted in an assessment released in early March: political violence, marine, aviation, trade credit, and political risk covers could all be put to the test at the same time by prolonged military action, energy disruption, and regional instability. Such convergence is comparatively uncommon. Reinsurers model this situation but secretly hope it never comes to pass.

There is already evidence of the damage caused by Iran’s retaliatory attacks on Gulf Cooperation Council nations. Early in the conflict, hotels in Bahrain and Dubai were affected. Drone strikes resulted in a fire, forcing Abu Dhabi National Oil Company to close a refinery. After an attack on its refinery complex, Bahrain’s Bapco Energies declared force majeure on its group operations. The Iranian government reportedly issued an apology for the attack on the Port of Duqm in Oman. If this information is true, it implies that the IRGC’s dispersed command structure is causing strikes that even Tehran did not fully approve. From the standpoint of an underwriter, that type of command ambiguity is one of the more concerning developments of the last few weeks because it makes it more difficult to define the geographic spread of risk and predict the trajectory of attacks.

In mid-March, Fitch Ratings released its own analysis and came to the conclusion that most insurers’ earnings impact would probably be manageable if the conflict stays brief and prevents significant damage to oil production facilities. That is most likely the proper baseline view. However, the word “if” is doing a lot of work in that sentence, and it’s important to pay attention to what Fitch identified as the more dangerous scenario: the second-order economic effects rather than the direct insurance losses, which are mostly limited by war exclusions in standard policies. A protracted conflict could cause loss cost inflation, depress insurers’ asset values, and lead to corporate borrower defaults, especially in Asian markets that rely significantly on imports of Gulf hydrocarbons. Compared to a single major marine claim, those indirect pressures are more subtle, more difficult to price, and possibly more long-lasting.

In this narrative, the aviation image is a separate thread. Major fleets have been grounded at regional airports due to airspace closures over Qatar, the United Arab Emirates, Bahrain, and Kuwait. Insurance companies are now paying more attention to ground accumulations at major hubs like Dubai than they typically do to airports that are among the busiest and most efficiently operated in the world. A drone or missile strike that damages several aircraft parked at one airport would be a significant, correlated loss event. Rapid repricing and cancellation are made possible by aviation war policies, but this flexibility is reciprocated; airlines in the area are finding that coverage is becoming more costly and, in certain situations, more conditional.

Observing all of this, there’s a sense that the insurance sector is handling the crisis more skillfully than the headlines indicate, but the margins are also smaller than the official assurances suggest. In the baseline scenario, Moody’s anticipates that the majority of losses will be absorbed by large, diversified insurers. That’s probably accurate. However, trade credit exposure—the silent, gradual risk that arises when international supply chains break down and corporate buyers are unable to fulfill their commitments—may yet turn out to be the longest tail of all. The pressures that don’t appear in a single claims notification but build up over several quarters include energy importers under payment pressure, petrochemical companies dealing with supply disruption, and logistics operators navigating routes that now add weeks and significant cost to every voyage around the Cape of Good Hope instead of through Hormuz. The numbers have been run by the industry. Perhaps the most startling part is yet to come.