Following the recent escalation of conflict in the Middle East, S&P has indicated that reinsurers’ capital adequacy is strong enough to mitigate the potential risk of credit quality deterioration, although those with broad geographic footprints and significant exposure to specialty markets in the region are likely to be the most affected.
Readers will know that the Middle East conflict escalated sharply over the weekend, with a series of strikes and retaliatory attacks triggering significant destruction and disruptions across Iran, Israel, Iraq, Jordan, Cyprus, and several Gulf Cooperation Council states.
“The human toll continues to rise, and the economic disruption is already material,” S&P observed in a new report.
Major international airports across the region have reportedly been closed, while maritime activity has been significantly disrupted, including concerns over a potential shutdown of the Strait of Hormuz, the strategic chokepoint through which roughly 20% of global crude oil and seaborne natural gas shipments pass.
“We believe there will be sizable insured losses, and the conflict could have far‐reaching implications for the reinsurance industry. However, the ultimate magnitude and impact on the reinsurance sector remain highly uncertain at this point and will depend largely on the duration, scale, and evolution of the conflict. Given how fluid the situation is, the loss development could unfold over weeks or even months,” S&P explained.
According to the firm, the global reinsurance industry entered 2026 in a position of “considerable” capital strength, supported by strong underwriting performance and robust investment income.
As a result, the agency expects capital adequacy to remain a core strength of the sector, with reinsurers continuing to demonstrate resilience even under severe stress scenarios, including geopolitical shocks such as the current conflict.
Still, S&P noted that it sees several reinsurance lines exposed to increased volatility and potential losses, including specialty classes such as marine, aviation, energy, political violence, terrorism, and cyber, as well as property exposure in affected areas and policies covering supply chain or trade disruption.
“Marine insurers have already begun cancelling war‐risk coverage applicable to the conflict zone, including the Persian Gulf and adjacent waters. Reinsurers with broad geographic footprints and meaningful exposure to specialty markets in the Middle East are those most likely to be affected,” S&P added.
The firm concluded that it acknowledges a high degree of uncertainty surrounding the extent, duration, and consequences of the conflict in the Middle East.
“Regardless of how long the conflict lasts, we expect heightened political risks to persist. Potential spillover effects include disruptions in commodity markets, especially oil and gas; supply chain interruptions; renewed inflationary pressures; slower economic growth; and greater capital‐market volatility,” S&P said.
