Kennedys, an international insurance law firm, has warned that the developing conflict involving the United States, Israel and Iran presents the prospect of a rare, multi-line event for the global insurance and reinsurance market.
In Kennedys’ assessment, the combination of sustained military action, disruption to energy flows and prolonged regional instability could test political violence, marine, aviation, trade credit and political risk covers simultaneously.
According to Kennedys, the escalation began when US and Israeli forces carried out air strikes on Iranian targets, reportedly killing senior members of the regime, including Ali Hosseini Khamenei.
The firm notes, however, that the removal of senior leadership figures has not brought clarity as to the conflict’s trajectory. Instead, Iran has responded with missile and drone attacks across the Gulf and against Israel, extending the geographic footprint of risk.
Kennedys observes that retaliatory strikes have targeted locations in the United Arab Emirates, Qatar, Bahrain, Kuwait and Saudi Arabia, in addition to Israel and Cyprus. While missile defence systems have intercepted many projectiles, some have reached their targets.
The firm refers to reports of damage to both civilian and commercial assets, including retail complexes, hotels, ports, airports, energy infrastructure and LNG facilities. In Kennedys’ view, if the strategic objective is economic disruption, insured property is likely to remain exposed.
In the political violence market, Kennedys anticipates a potential accumulation of claims for physical loss and damage to privately owned assets. Many primary policies in the Gulf are written locally but reinsured into London, meaning that losses may flow into the international reinsurance market. The firm suggests that aggregation questions could become central, particularly if multiple strikes are characterised as part of a coordinated campaign.
Marine insurers, Kennedys states, are already confronting heightened exposure. Parts of the Red Sea, Gulf of Aden and Persian Gulf are designated excluded areas under many hull war policies, requiring negotiated terms for cover. The marine liability market, including fixed premium P&I and charterers’ liability insurers, has reportedly issued cancellation notices for certain territorial risks, with reinstatement subject to revised conditions.
Kennedys highlights reports of vessels attacked in the Strait of Hormuz and off Oman, resulting in casualties and structural damage. The firm notes that a successful strike on a laden tanker could trigger substantial pollution liabilities. Beyond direct attack, the possibility of the Strait of Hormuz being closed—reportedly announced by Iran’s Islamic Revolutionary Guard Corps—raises concerns about delay, detention and supply chain interruption, even in the absence of physical damage.
The firm points to prior detentions of vessels by Iranian authorities and anticipates further politically motivated seizures. If ships become trapped within the Persian Gulf, claims may arise under loss of hire policies and, where detention is prolonged, under constructive total loss provisions commonly triggered after 12 months.
Kennedys suggests that disputes between owners and charterers are likely, particularly regarding the legality of voyage orders into affected areas, off-hire provisions and arguments of contractual frustration.
Additional navigational risks are also identified. Kennedys notes that vessels may disable AIS for security reasons, increasing collision risk, while GNSS and GPS interference—already observed in the region and in the Baltic and Black Seas—could impair navigation systems and contribute to grounding or collision incidents.
Cargo interests face parallel pressures. Kennedys estimates that around 135,000 containers, valued at approximately US$4 billion, are currently in transit in the region. Diversion via alternative routes, including around the Cape of Good Hope, is likely to increase cost and delay, with consequential supply chain effects.
The firm emphasises that cargo policies may respond differently from hull covers, particularly where war and strikes risks are separately insured. Classification of events as war or terrorism, and the operation of delay exclusions in cases of detained but undamaged goods, may become areas of dispute.
In aviation, Kennedys reports that airspace closures across Qatar, the United Arab Emirates, Bahrain and Kuwait have left significant fleets grounded. Missile activity has reportedly affected airport infrastructure in Dubai, Abu Dhabi, Bahrain and Kuwait, creating exposure for aircraft on the ground.
Although aviation war insurers may seek to review or amend territorial cover, Kennedys draws attention to the High Court’s reasoning in AerCap Ireland Limited & Others v AIG & Others [2025], in which Mr Justice Butcher considered when aircraft are deemed to be in the grip of a war peril. The firm suggests that, depending on the timing and policy wording, cover may already have attached before any notice of change in terms.
Beyond physical damage, Kennedys identifies the energy market as a central systemic risk. Approximately 20 per cent of global crude oil and LNG shipments pass through the Strait of Hormuz. The firm refers to reports that Qatar has halted LNG production following attacks on its facilities and that Saudi Arabia has paused operations at the Ras Tanura refinery after a drone strike. Energy price volatility has followed, with oil and gas markets reacting sharply.
In Kennedys’ assessment, a prolonged closure of the Strait could have macroeconomic consequences extending well beyond the region. A sustained increase in oil prices could place pressure on inflation and economic growth, with knock-on effects for insured credit risk. The firm considers that trade credit insurers may see an increase in claims if private obligors become insolvent or if sovereign buyers, particularly energy importers, encounter repayment difficulties.
Even absent a global recession, Kennedys anticipates that contract frustration claims may arise where parties are unable to perform due to shipping disruptions or curtailed energy production. The firm also notes the potential for claims under political risk policies for forced abandonment if multinational companies withdraw staff and suspend operations in response to deteriorating security conditions.
Kennedys concludes that the conflict presents not merely a regional war risk issue, but a cross-class exposure capable of generating correlated losses across property, marine, aviation and credit lines. The scale and duration of hostilities, and the status of the Strait of Hormuz, are likely to be decisive in determining whether the market faces a contained regional loss or a broader systemic event.
