Analysts at ratings agency S&P Global Ratings have said that reinsurance firms are likely to review rates for war coverage in the Gulf following the U.S. killing of Iran’s top military commander, General Qassim Soleimani.
Advisory warnings of the possibility of Iranian attacks on US ships and infrastructure have been observed after Iran said that it would seek revenge for the assassination of General Qassim Soleimani, which occurred via airstrikes in Baghdad last week.
S&P has said that the ratings on insurance companies in the Gulf are not immediately affected by the ongoing and growing geopolitical tensions between the U.S. and Iran, which has intensified since President Donald Trump ordered an airstrike which assassinated General Qassim Soleimani.
“Reinsurers are also likely to review rates for war coverage, as was the case following the attacks on oil tankers in the Strait of Hormuz in 2019, which led significant increases,” explains S&P.
Analysts add that a further escalation of the conflict could undermine both confidence and investment in the region, which in turn would lead to a slowdown in economic growth and greater market volatility in the region.
“We will closely monitor the potential long-term effect of the geopolitical tension in the region and the subsequent impact on the insurers’ business risk and financial risk profiles,” says S&P.
The Joint War Committee (JWC), which is comprised of underwriting representatives from Lloyd’s and IUA company markets, has also said that currently, there is no dramatic change to the strategic maritime picture in light of elevated tensions between the U.S. and Iran.
“There are clearly increased tensions in the Gulf region, with American assets now referenced, but the underlying maritime threat remains heightened with an ongoing possibility of escalation.
“The London insurance market has been operating with these strategic factors in mind since last May and underwriters will continue to ask appropriate questions of assureds in order to ascertain the risk dynamics of individual sailings seeking war-risk cover,” explains the JWC.
Industry commentary notes that some brokers in the region expect insurers to increase rates to reflect the perception of greater war risk for shipping in the Gulf. While it remains to be seen exactly how the latest escalation impacts rates in the maritime space, it’s likely that certain types of war cover for threats in the Gulf do rise, so long as conditions stay the same.