War of Words Over Middle East Insurance Claims
CNBC reported Tuesday that a single word is now dividing businesses from their insurers across the Middle East, and the financial stakes are enormous.
A Coverage Gap Years in the Making
Most companies operating in the region purchased standard terrorism and sabotage insurance. Far fewer bought the separate, more expensive policies explicitly covering war. That distinction is not semantic. Standard commercial property policies almost universally exclude war-related losses, a category that typically extends to invasions, hostilities, and actions by sovereign powers. Protection against those risks requires dedicated political violence or political risk policies. Even then, global insurance broker Marsh found that most regional businesses stopped short of full war coverage, opting only for terrorism and sabotage protection.
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Complacency After Years of Relative Calm
Industry experts say prolonged regional stability bred overconfidence. David Kinzel, Aon’s U.S. Practice Leader for Political Risk, told CNBC that companies with longstanding Middle East operations had grown accustomed to manageable geopolitical risk. They underestimated how fast conditions could deteriorate. Since the start of the Iran conflict through mid-April, 22 vessels were attacked in the Strait of Hormuz, according to Al Jazeera citing ship tracking data. War-risk premiums surged sharply in response. Many shipping firms rerouted cargo around Africa, adding weeks of transit time and millions in additional fuel costs per voyage. On land, strikes near data centers and manufacturing sites have complicated both property and cyber claims simultaneously.
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What “Hostilities” Actually Means for Policyholders
President Donald Trump has consistently avoided calling the Iran situation a war. His formal congressional notifications described “hostilities” that had “terminated,” a framing that carries legal weight under the War Powers Resolution. Insurers, however, are largely unmoved by political vocabulary. Baxter Southern, head of Marine at Howden U.S., told CNBC that marine insurance treats war as a description of perils rather than a political designation. What governs a claim is policy language and the specific facts of each loss. Insurers must demonstrate that a loss meets their contractual definition of war before invoking an exclusion. That burden is highest in cyber insurance, where war exclusions are near-universal but their application remains deeply contested across the industry.
The gap between political framing and contractual reality leaves many businesses in a precarious position as conflict-related claims continue to accumulate.
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