New commentary from a range of executives at Howden Re has suggested that the effective closure of the Strait of Hormuz following escalating conflict in the Middle East could act as a stress test for the re/insurance sector, but with the reinsurance market remaining well capitalised and engaged, there is no expectation of a broad-based withdrawal; instead, the response is likely to be characterised by targeted repricing, tighter terms, and an increased focus on aggregation and structure, particularly around mid-year renewals.
On 28 February 2026, a major escalation of the Middle East conflict began when the United States and Israel launched coordinated airstrikes on Iranian military and leadership targets.
Iran responded with missile and drone attacks on Israel and U.S. military bases across the region.
The disruption from the ongoing conflict has halted maritime traffic, driven sharp increases in war risk premiums, and led to the rapid withdrawal and repricing of insurance capacity across multiple lines.
The Strait of Hormuz, notably, is a critical global chokepoint through which approximately 20% of the world’s oil supply and a significant share of liquefied natural gas flow daily.
According to analysis from Howden Re, the impacts of the closure of the Strait extend well beyond marine war risk into energy, political violence, aviation, trade credit and the wider macroeconomic environment.
Howden Re added that this is not only a single line loss event, but a scenario with the potential to affect the broader sector, unfolding in real time and testing the resilience of the global risk transfer market.
David Flandro, Head of Industry Analysis and Strategic Advisory at Howden Re, continued, “The most immediate impacts are currently evident in political violence/war, marine and energy risks, but the bigger issue for the industry may ultimately come through what we describe as the macro transmission channel.
“A sustained disruption in the energy supply would raise the risk of renewed inflationary pressure, higher interest rates and the potential for broader sector capital impairment. That combination could affect insurance capacity more materially than insured losses from individual vessels or infrastructure claims.”
Andrew Foot, Managing Director, Howden Re, added, “While much of the headline attention has focused on shipping and the associated losses seen to date, the impact on the energy industry is far more complex.
“Infrastructure strikes, precautionary shutdowns and prolonged outages create significant business interruption exposure, much of which may sit outside traditional war risk coverage. This is a highly correlated risk environment that was previously considered tail risk.”
According to Howden Re’s analysis, demand for political violence and terrorism coverage has risen sharply, particularly for Western-operated assets in the Gulf, driving pricing multiples higher and prompting more selective underwriting.
Aviation, cyber, and trade-related lines are also said to be experiencing elevated risk assessments as the conflict spills across borders and disrupts supply chains.
“Political Violence capacity is still available, but underwriting discipline has tightened considerably. Insurers are focusing closely on aggregation, war terrorism boundaries and the interaction between local policies and global reinsurance treaties. The key question is no longer whether capacity exists, but how it is deployed and structured,” Richard Miller, Managing Director, Howden Re, explained.
Meanwhile, insured losses in trade credit and political risk lines remain limited for now, but Howden Re has warned that prolonged disruption to shipping routes and energy markets could materially raise default and non-payment risk.
Phil Bonner, Head of Global Specialty Treaty, Howden Re, said, “The Credit and Political Risk market has remained resilient through recent geopolitical shocks, but the situation in the Strait of Hormuz has significant potential impact.
“What was previously a stable, dependable line is now moving firmly into strategic focus, as insurers and reinsurers reassess counterparty exposure, supply chain disruption and sovereign risk. We expect a more selective deployment of capacity and a greater emphasis on aggregation and event definition as the market adjusts to a more complex risk environment.”
Sean Riordan, Managing Director, Credit & Financial Risk, Howden Re, added, “Maintaining safe and open transit through the Strait of Hormuz is critical to global trade flows and the stability of the broader credit system.
“A sustained disruption would be expected to manifest initially as credit and liquidity stress, affecting payment performance, letters of credit, and contractual obligations. For insurers and reinsurers, the key variables are duration and security: how long disruption persists and how effectively routes are protected.
“These factors will ultimately determine whether credit stress remains contained or translates, over time, into claims across trade credit, sovereign credit, and political risk portfolios.”
Despite the severity of current conditions, Howden Re’s analysis has indicated that the reinsurance market remains well capitalised and engaged, with no expectation of a broad-based withdrawal.
As noted at the beginning of this article, the market response is instead expected to take the form of targeted repricing, tighter terms, and an increased focus on aggregation and programme structure, particularly at mid-year renewals.
Flandro concluded, “This is, nevertheless, a reminder that geopolitical risk can propagate through insurance markets far faster than traditional loss development models assume. Technical discipline, transparency and active monitoring are essential in this environment.”
