An Insurance War Without Borders

The maps have been redrawn. Not just on the ground in the Middle East, but inside the policy documents that CFOs have relied on for years. 

The Iran war exposed something corporate finance teams are newly realizing about their insurance policies: what they think is covered might not be. Surprises are showing up across boardrooms in Houston, London, Singapore, and anywhere else that depends on energy, international freight, or global supply chains.

Before February 28, when the U.S. and Israel launched a joint attack on Iran, the insurance market was in a peculiar cycle. Andrew George, president of Marsh Specialty, which covers a range of lines including aviation, energy and power, cyber, and marine and cargo, describes a market awash in capital. Insurers had been generally profitable for two or three years running, which drew in more capital and pushed insurance prices down. 

“There’s a bit of a spiral right now where prices are coming down and down and down,” George says. Many insurance providers are still offering coverage in a difficult and unpredictable moment, but how they pay out on claims is changing.

The Strait of Hormuz is one of the world’s busiest oil transit areas. In 2025, nearly 34% of global crude oil trade passed through it, according to the Energy Information Administration. When it became a conflict zone, marine insurance providers began to reprice and change what they would cover. 

George outlines how this works in practice. Marine policies typically feature what he calls “breach areas” or warranty zones: regions that trigger a notice-of-cancellation clause, usually 24 to 48 hours, which is less a termination than a chance to renegotiate. When war conditions change the risk profile, the broker goes back to market and usually ends up paying extra premium or accepting restricted coverage for vessels transiting high-risk corridors. 

Insurance, or the lack thereof, isn’t the reason ships are avoiding the Strait of Hormuz right now, George points out. It’s the people who make decisions on risk: “It’s the prudent operators saying, ‘We do not want to put our crew in harm’s way.’” 

The economic consequences of the Iran conflict are real. Voluntary rerouting—sailing around the Cape of Good Hope rather than through the strait—generates costs that most standard cargo policies simply don’t cover, says Carlton Wilde, a partner at Houston-based law firm Bracewell who has built his career representing corporate policyholders in coverage disputes. 

“Those added freight, fuel, and delay costs typically fall outside covered perils,” he says. Companies are absorbing the extra expenses themselves, often without an end in sight.

What makes the latest Persian Gulf conflict difficult to model is that countries central to the war present different coverage landscapes. 

In Israel, with its state-owned Inbal Insurance Company, much of the property damage and business disruption is absorbed by government mechanisms, which is why the private insurance loss estimates, while significant, look modest relative to actual damage. George put the political violence and war market losses from the region at roughly $3 billion to $4 billion: real money for a specialty market, but not catastrophic for global insurance broadly.

Iran is a different story, and the reason is sanctions, Wilde says.

“Even if a claim is facially valid and the policy clearly covers the loss, OFAC [Office of Foreign Asset Controls] regulations and EU sanctions rules can prohibit the actual transfer of claim proceeds if any party in the transaction chain has a nexus to a sanctioned person or jurisdiction,” he says. Global insurers aren’t covering Iranian assets because they legally cannot; the risk sits with the Iranian state and whatever domestic mechanisms exist, which are limited by the same sanctions that keep Western capital out.

Lebanon may be the most exposed. According to GlobalData’s market analysis, war risk insurance and reinsurance are now the defining pressures on the Lebanese market, with reinsurers introducing cancellation provisions tied to regional escalation: meaning coverage that exists on paper can be withdrawn as conditions deteriorate. Property and casualty account for less than 20% of a market that, even in total, generated only around $1.3 billion in gross written premiums in 2025—a figure that reflects how little corporate and property risk is insured in the war-wracked country, an analysis by Credit Libanais of the government of Lebanon’s Insurance Control Commission’s quarterly data shows. 

Collectively, the situations for insurers in Israel, Iran, and Lebanon highlight a disconnect. Today’s standard commercial insurance policies were written for an era when “war” had a different definition: armies understood battlefields, declarations of war, identifiable states. Modern conflict doesn’t look like that.  

“Companies are discovering too late that their policies don’t map onto modern hybrid-warfare scenarios,” observes Wilde. Drone strikes, missile attacks, government-ordered port closures, Houthi interdiction of commercial vessels are all events that carriers increasingly classify as “acts of war” and exclude from standard commercial coverage.

Business interruption without direct physical damage is particularly exposed. Courts have consistently required a physical loss nexus to trigger coverage, and most geopolitical disruptions don’t produce physical signs. A supplier goes offline because its port is closed. A shipment gets delayed because a vessel operator declines to transit the strait. Revenue disappears, but nothing physically broke. No policy responds.

Confiscation and political risk coverage faces the same problem. Companies assume their political risk policies cover government interference with overseas assets, Wilde notes, but many of those policies carve out losses tied to sanctions compliance or dealings with already-restricted jurisdictions.

Contingent business interruption exhibits a similar gap; upstream supplier disruption can be unrecoverable if the supplier’s property touches a sanctioned entity or territory.

The cyber exposure from the Iran conflict is possibly the least understood risk on most corporate balance sheets. Wilde is unambiguous: “Companies are significantly underestimating it.”

Following the 2017 NotPetya attacks, Merck and other corporate giants fought with their insurers over whether Russian state-backed malware counted as an act of war. Lloyd’s of London issued market guidance requiring explicit exclusions for state-backed cyber activity. Those exclusions have migrated through the London market and into U.S. carrier forms. Any company that assumes its cyber policy covers all hostile cyber activity is likely carrying uninsured exposure. 

The attribution problem makes it worse. Determining whether a given attack was state-sponsored can take months; carriers have an incentive to hold payment pending an attribution determination. State-affiliated cyber attacks may test conflict exclusion clauses, says Yasir Andrabi, global head of Agentic AI Solutions, Insurance, at professional services firm Genpact, and the lines between categories are blurring in ways that current policy language hasn’t caught up to.

The market is shifting, though not in ways most CFOs might expect. What has changed is pricing in specific segments. 

The political violence market, which had been “extremely inexpensive” for years, has seen what George calls “significant shifts in risk pricing,” partly because the pool of premium is small enough that a $3 billion to $4 billion loss event hits it disproportionately hard. On the coverage side, Wilde points to carriers “classifying an expanding range of events as acts of war”: a form of tightening that doesn’t show up in premium quotes but does when a claim gets denied.

For CFOs, it all means carefully reviewing policies and assuming that they cover less than you’d like. 

“The biggest misconception is that having insurance is the same as having protection,” says Wilde. The buried provisions—war risk carve-outs, sanctions compliance clauses, physical damage requirements, attribution conditions—are what determine whether a claim actually gets paid. Most CFOs have never stress-tested their insurance programs against a real conflict scenario. It may be time.