When Geopolitics Becomes an Insurance Risk

The insurance market has spent years talking about geopolitical risk as something that was becoming more important. In 2026, that discussion has moved beyond forecasting. Conflict is already changing the way companies operate, the routes through which goods and energy move, the way supply chains are structured and, consequently, the risks that insurers are being asked to cover.

The Middle East offers a particularly clear illustration. But the underlying issue is broader than the conflict itself. What is changing is the relationship between a geopolitical event and the commercial losses that follow from it. A ship does not necessarily have to be hit for a company to suffer a loss. A refinery does not have to be damaged for production to be interrupted. A port can remain physically operational while becoming commercially inaccessible because the route leading to it is too dangerous or too expensive.

This is one of the reasons the subject has featured so prominently in the industry's own reporting this year — from a dedicated session on trade corridors and geopolitical fragmentation on the programme at this September's Monte Carlo Rendez-Vous, to a full slate of Middle East-focused panels at DWIC Connect, the region's dedicated insurance and reinsurance gathering. Across both, the question raised repeatedly by practitioners was not whether geopolitical risk belongs in underwriting, but how far its consequences extend into other areas of the global economy.

When the asset is intact but the business stops

One of the clearest illustrations comes from the energy sector.

"There is no physical damage, but still the traffic stops," said Erhan Ergunes, CEO of MNK International Türkiye, describing how energy clients across the region have been forced to look at risk more holistically after recent disruption exposed the limits of traditional physical-damage cover. Ships and cargoes have found themselves unable to move in or out of the Strait of Hormuz without ever being struck. "Many of these things were not covered under existing policies," Ergunes said. "The first question clients are asking is whether they're insured by this policy or not."

That distinction matters because insurance has traditionally been much easier to structure around a damaged asset than around a disrupted system. When a facility burns, the physical loss can be identified, measured and adjusted. When a shipping corridor becomes unusable, the consequences can spread across transport costs, delivery schedules, contracts, inventory, financing and customer relationships — often without a single insured asset ever being touched.

Atinc Yilmaz, regional CEO for Türkiye and Central Asia at broker Howden, said client insurance awareness has increased accordingly, with buyers now asking whether their maritime, storage and political violence exposures are adequately covered. Looking two years ahead, he expects a tighter focus on limits, security questions and resilience planning. "They should also start to discuss the risk scenario analysis, disaster recoveries, contingency plans," he said. "Insurance will not be sufficient at one stage; they should have their alternative scenarios already."

Geopolitics is becoming part of the commercial exposure

The scale of what is now at stake has been laid bare by the conflict itself. Yassir Albaharna, group CEO and executive director of reinsurer Trust Re, estimated recent insured losses in the region could reach between $3.5bn and $4.5bn — potentially making it the industry's largest political violence and war loss, and the biggest single-event insured loss to have struck the Gulf region.

Yet Albaharna and others were careful to note that the loss is not simply a story about capacity. "What is insured does not always get 100% reinsured," he said. "We expect reinsurers to honour their obligations, but that is not a carte blanche to pay all the claims. You have to see the policies." Oleksii Omelianchuk, founder and CEO of FortuneGuard, put the protection gap in starker terms: in the first two weeks of the conflict, a significant number of assets in the Middle East sought war-risk cover, but only a small percentage had actually secured it. "The key here is to make the region insurable," he said, "because no insurance, no investment."

That repricing has been sharp and, in the industry's own assessment, structural rather than temporary. War-risk and political-violence pricing rose from around 0.1% of asset values before the conflict to 2–4% or higher afterwards, according to Global Reinsurance's reporting from a Chatham House Rule roundtable on political violence and the GCC. "The risk is not going away anytime soon," one participant said. "Insurers and reinsurers will have to look at this as a structural change in the market." Attendees also noted that, relative to the headlines, physical damage was rarely the largest cost: "The property damage is not so big," one said. "In comparison, it's the business interruption that is really the largest, lurking losses."

The impact can also be seen in the trade data. Shipping analysts currently put Suez Canal transits at around 60% below 2023 levels as vessels continue to divert around the Cape of Good Hope — even as global maritime trade itself has proven resilient. Swiss Re Institute has characterised the Middle East conflict as the fourth major global supply shock to hit the world economy in six years, after Covid-19, the war in Ukraine and the 2025 tariff shocks.

That is an important distinction. Global trade has not simply stopped in response to geopolitical disruption. It has adapted. But adaptation has a cost, and those costs change the risk profile of the businesses involved.

Longer routes mean greater fuel consumption and longer exposure times. Alternative ports can become more important, concentrating cargo in places that previously handled less traffic. Suppliers may be replaced, contracts renegotiated and inventories increased. Energy buyers may seek new sources or invest in storage. Every one of those decisions changes the underlying exposure that insurers are being asked to understand.

In that sense, geopolitical risk does not stay in the geopolitical category. It moves through the commercial system.

The protection gap is not simply a shortage of capacity

There is another reason this deserves attention: the market does not appear to have a straightforward capacity problem.

Sebastien Larche, head of energy at Elseco, said the conflict had complicated force majeure, valuation and delayed-project questions for energy insurers, particularly where supply-chain disruption had increased rebuilding costs — but that the broader market had remained competitive throughout. "We are in a softening environment," he said, "and there is still lots of capacity available."

That creates a distinction between available capacity and adequate protection. An insurer can have the capital and appetite to write a risk while the client can still discover, after an event, that an exclusion, limit, trigger or definition of loss does not correspond to the way the disruption actually occurred. Brendan Plessis, executive vice president at Sukoon Insurance, framed the challenge for the industry directly: "Insurance as a financial service industry vertical needs to be able to answer, and answer quickly, these problems that governments can't. It's a question of relevance." Sukoon itself responded to recent tensions by introducing new motor war coverage — a small but telling example, Plessis said, of insurers needing to adapt as client requirements evolve.

This is particularly relevant to political violence more broadly. Allianz's 2026 research places political risks and violence at their highest-ever position in its global risk ranking, with war identified by 53% of respondents as the exposure they fear most. The implication is not that every company suddenly needs political violence insurance. It is that companies are increasingly examining whether their existing coverage reflects the geographical, logistical and geopolitical footprint of their actual business.

The risk can travel much further than the event

This is where the issue becomes particularly relevant to global trade.

Consider a disruption to a major energy corridor. The first consequence may be a delay in shipping. That delay increases freight and fuel costs. A manufacturer waiting for the cargo may have to slow production. Its supplier may face a liquidity problem. A lender may reassess the company's credit position. A buyer may seek another source of supply. A contract may be delayed or renegotiated.

The original event has not changed, but its economic consequences have moved through several different parts of the system.

Allianz's own 2026 Risk Barometer reaches a similar conclusion from the corporate side. It found that only 3% of respondents considered their supply chains "very resilient," while 51% identified geopolitical conflict causing global supply-chain paralysis as the most plausible "black swan" scenario over the next five years.

For insurers, that is an important signal. The relevant exposure is no longer necessarily located where the geopolitical event takes place.

Resilience is becoming part of the insurance conversation

Industry participants at this year's Middle East-focused sessions pointed towards a broader change in the role of insurance itself. Jonathan Biles, founder of Halo and Gate Insurance Group, put it plainly: demand for political violence and war cover tends to arrive only after the event that makes it necessary.

"At the end of the day, what we're trying to deliver is a client who wants to get a risk off their balance sheet and transfer it to somebody else," Biles said. That is a sensible ambition, but an incomplete one. Insurance is designed to transfer financial risk; it cannot, on its own, make a vulnerable supply chain structurally resilient. A company dependent on a single corridor may need insurance, but it may also need alternative suppliers, additional storage, different transport routes or a different inventory strategy.

Panellists at DWIC Connect expected exactly this kind of response to accelerate — more investment in alternative routes, pipelines, renewables and storage. "I see more investment in renewables, more diversification of sources," said Dyogo Oliveira, president of the Brazilian Insurance Confederation. "All of these projects require different kinds of insurance."

That is the second half of the story: geopolitical disruption is creating new insurance demand even as it strains existing cover. Those new pipelines, storage facilities and renewables projects are themselves assets requiring construction, property, liability, marine, energy and political-risk insurance. Elsewhere in the Gulf, brokers point to a pipeline of some 1,400 GCC construction projects due to start by the end of 2026 — roughly half of them infrastructure or energy-related, and more than half publicly financed — a pipeline insurers are positioning to capture even as they reassess the risks around it.

The market, in other words, is responding to geopolitical risk in two directions at once: protecting existing exposures, and financing the infrastructure designed to make future exposures less vulnerable.

Underwriting a system rather than an isolated asset

For insurers and reinsurers, this creates a difficult but increasingly important analytical challenge.

Traditional underwriting starts with the individual exposure: the vessel, refinery, warehouse, factory or infrastructure project. But the economic significance of that asset increasingly depends on the network around it. A port is valuable because of the trade that passes through it. A refinery depends on energy and feedstock arriving on time. A manufacturer depends on suppliers and transport routes that may run through an entirely different, and newly contested, part of the world.

The more interconnected these systems become, the more important accumulation analysis becomes as well. A single geopolitical event can affect multiple insured assets, several lines of business and more than one geographical market at the same time — which is one reason data and modelling are becoming more central to how insurers price these risks. As Karen Clark, CEO of catastrophe modeller KCC, put it in a related context: "AI can help in areas where the equations alone are not giving you perfect accuracy. AI can find patterns that the equations do not detect." The principle applies as much to geopolitical accumulation as to natural catastrophe: better data sharpens judgement, it does not replace it.

The challenge is not simply to model the probability of an event. It is to understand what happens afterwards, how the disruption propagates, and where the financial consequences eventually appear.

A market moving from event-based thinking to interconnected risk

The most interesting development, in our view, is therefore not simply that political violence cover has become more expensive, or that insurers are becoming more cautious around particular regions.

It is that geopolitical risk is increasingly being understood as a commercial risk multiplier.

The Middle East provides a particularly visible example because energy, shipping and strategic trade routes converge there. But the same logic applies elsewhere: sanctions can alter supply chains, export controls can redirect investment, conflict can change shipping routes, and competition for critical minerals can make previously secondary infrastructure strategically important.

The insurance industry cannot remove those risks. Its role is to understand them well enough to provide useful protection as businesses adapt.

That requires a broader view of exposure — one that connects the physical movement of goods with finance, infrastructure, energy, logistics and trade.

For Monaco Trade Forum, this is where the insurance story becomes part of the wider global-commerce story. The same disruption that changes an insurance policy can change a shipping route, a commodity flow, a financing requirement or an investment decision. These are not separate developments simply because they belong to different industries.

The next protection gap may therefore not be a lack of insurance capacity. It may be the gap between the way a business actually experiences disruption and the way its risks are structured and insured.

As geopolitical shocks become more frequent and global trade continues to adapt around them, that gap is likely to become one of the more important questions facing the insurance market.

The challenge is no longer simply to insure against the event. It is to understand how far the consequences of that event can travel.