Three months in: How the Iran conflict’s impacting P&C capacity and pricing

Insurance-related impacts of the now three-month-old U.S and Israeli military action against Iran remain limited, says a recent report from Morningstar DBRS.

“Given that standard property and casualty (P&C) insurance policies generally exclude coverage of war-related perils, the direct impact of the Middle East war on the broader industry remains limited,” the ratings agency says.

It adds potential direct losses are largely concentrated within the specialty underwriting segment that offers war coverage as well as energy, marine, aviation, and other coverages affected by geopolitical friction.

“A lot of what we studied [shows] that overall there hasn’t been a big or notable impact from the hostilities so far on the companies that you would think are the most affected by the Middle East conflict,” says Nadja Dreff, a senior vice president and sector lead for Global Insurance & Pension Ratings at Morningstar DBRS.

Related: How the Iran war affects insurance coverage for terrorism

Although there have been some reverberations (despite war exclusions), they are “not significant enough to really change the market capacity or pricing or any of the…rate concerns in terms of their ability to withstand those,” she tells Canadian Underwriter.

From a broader macroeconomic perspective, the conflict has affected many different industries, she says. Generally, inflation is likely to increase in response to high energy prices and supply shocks stemming from the continued closure of the Strait of Hormuz, and those inflationary impacts could impact returns on insurers’ investment portfolios.

The ratings agency notes insured losses reported in first quarter 2026 “appear well contained and manageable relative to industry capacity,” even with documented attacks on Gulf-region energy infrastructure, ships and other industrial assets.

Global P&C insurers will be able to manage, she says, “with impacts largely confined to specialty lines that are well within existing earnings buffers.”

Related: Where to find commercial cover for wartime risks if the U.S.-Iran ceasefire fails

The report flags a high number of shipping vessels, which are currently waiting and unable to move within the Strait or Hormuz, as a potential driver of future claims.

“If that continues for a long time, say 12 months or so, all insurers that have provided marine coverage before [the conflict could] potentially see [constructive] total loss claims if these ships continue to be stranded,” Dreff says. “It is loss of use.”

Meanwhile, the report notes escalating uncertainty will drive demand “for political risk, trade credit, and energy-related coverage…as corporates seek protection…” Increased demand for some specialty insurance coverages, combined with war-risk premiums, will create a financial tailwind for companies, Dreff says, provided losses stay with expectations.

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Related: A protracted Iran war spells trouble for Canada’s insurers

Standard insurance policies generally don’t cover war-related losses. Since those claims are usually catastrophic in nature, they’re hard to both diversity and price. As such, coverage is stitched together from various specialty products like terrorism and political violence, energy and offshore risk, marine and aviation war risk, trade credit and political risk, Morningstar DBRS’s report says.

“The policies are offered by globally diversified P&C insurers with specialty carrier subdivisions,” the ratings agency adds.

“Our view is that the capacity is there, and it’s going to stay…to continue to be there. If you think of it in terms of the global capacity of the industry…under those market conditions, insurers are very reluctant to, in fact, increase prices. That’s why our view is that they will stay stable, if not lower,” Dreff tells CU.