As Iran’s attacks on Israel risk an escalation, and with the ongoing Israel-Hamas conflict expected to persist, risks to insurers remain, although, at present, insurers in Israel, the Gulf region, and Europe are not significantly affected, according to S&P Global Ratings.
Currently, S&P believes foreign insurers’ exposure to Israel through insurance and reinsurance is “relatively immaterial and should not affect the ratings on foreign insurers.”
However, there’s a risk that any expansion of the conflict could impact capital markets and foreign insurers’ investments.
Regarding Gulf region insurers, analysts at S&P state, “We expect credit conditions for rated insurers in Gulf Cooperation Council (GCC) countries to remain broadly stable in 2024, supported by robust capital buffers and adequate growth and earnings prospects.”
While a full-scale conflict in the Middle East is not expected, S&P warns that it would have severe economic, social, and political consequences for the entire region, including insurance markets.
Adverse effects on trade, financial flows, and tourism could harm the growth and earnings of regional insurers. In such a scenario, insurers with weaker capitalisation or significant exposure to high-risk assets might face rating pressure.
For Israeli insurers, S&P doesn’t anticipate any immediate changes to insurance ratings despite ongoing conflict and instability. The Israeli government has a scheme to cover property losses from the conflict and military life insurance claims, reducing insurers’ direct risk.
However, prolonged conflict could impact insurers’ investment portfolios, although they recovered swiftly after Hamas’s initial attack on Israel in October 2023.
