A report by S&P Global Ratings has suggested Asia-Pacific insurers have limited direct exposure to the Middle East, with risks remaining manageable under its base-case scenario but likely to escalate if oil market disruptions persist for an extended period.
In its report, “Asia-Pacific Insurers: Market Volatility Is The Largest War-Related Impact,” S&P said its base case assumes the conflict will reach peak intensity and that the effective closure of the Strait of Hormuz will ease during April. However, some disruptions are expected to continue for several months.
According to the rating agency, Asia-Pacific insurers face potential losses from marine and cargo policies due to trade flows through Middle Eastern routes, though this segment generally represents a small portion of overall premiums.
War-related risks for Asia-Pacific insurers are reportedly mostly indirect, including via financial market volatility.
S&P added, “These insurers have sufficient capital buffers to absorb investment and underwriting stresses from the Middle East conflict under our base scenario, which is that the Strait of Hormuz’s effective closure will ease during April.
“In our downside scenario of a longer conflict, insurers operating in low-income net energy-importing economies would be most vulnerable.”
As of Monday the 13th, the conflict has entered a volatile new phase following the collapse of a fragile two-week ceasefire that had briefly halted 45 days of intense fighting.
This temporary truce, established in late March to allow for high-stakes negotiations in Islamabad, failed to produce a lasting agreement regarding Iran’s nuclear enrichment and control of the Strait of Hormuz.
With the ceasefire now void, the United States has initiated a naval blockade of all Iranian ports, while Israeli forces have simultaneously ramped up air campaigns in Lebanon, marking a significant escalation in regional hostilities.
S&P Global Ratings credit analyst Philip Chung commented, “Rising energy costs are pushing up inflation and exerting upward pressure on interest rates. A prolonged conflict would lead to higher input costs for insurers, weaker macroeconomic conditions, and higher living costs.
“For nonlife insurers, we would expect compounding claims expenses in motor, property, and commercial lines to prompt hikes in premiums.”
