Middle East conflict reshapes global reinsurance ahead of April renewals

The ripple effects of the Middle East conflict are reaching deep into global insurance markets, with the upcoming April 1 treaty renewals set to test how far the industry has adjusted to a prolonged period of geopolitical uncertainty.

According to WTW, the conflict has become a defining factor in the terrorism and political violence segment, reshaping capacity, pricing, and the structures underpinning reinsurance treaties.

Fergus Critchley, the firm’s global head of terrorism and political violence, said the market had settled into what he described as a new equilibrium. Insurers continue to offer solutions across major lines, he said, but with reduced line sizes, tighter terms, and higher rates than before the conflict began.

The strain, however, extends beyond frontline underwriting. Senior executives across the market have been scrutinising ceded structures, portfolio aggregation, and capital sensitivity as they seek to understand how Gulf-linked exposure has been layered and transferred upstream.

Market participants have said the response so far has remained consistent with established contractual mechanisms rather than panic, though the question of how well diversified and structured Gulf-facing exposure truly is remains open.

Critchley noted that some treaty programmes are renewing at April 1 and said WTW was watching for potential restrictions, though none were currently expected. Because insurers are writing smaller lines, more risk is being retained on a net basis, “which should help limit pressure on excess-of-loss structures for the main treaty renewal date of 1/1,” he said.

Should the conflict de-escalate, Critchley said insurer appetite would likely return relatively quickly, with the current shock-pricing environment subsiding — though not to pre-conflict levels. Coverage breadth, particularly around contingent exposures such as supply chain risks, “is likely to recover more slowly as insurers remain cautious,” he added.

A worsening of the conflict – whether through geographic expansion or increased intensity – would carry far greater consequences, potentially triggering stop-orders on underwriting new exposure and heightened referral requirements that could reverberate beyond MENA into the broader global marketplace.

For now, capacity outside the region remains largely intact. Pre-conflict war capacity of roughly US$3.5 billion and terrorism capacity of approximately US$5 billion has “only materially contracted within MENA,” Critchley said.

He also drew a distinction with the early stages of the Ukraine conflict. “Unlike the immediate reaction during the start of the Ukraine war, reinsurers have not signaled any intention to impose blanket regional exclusions,” he said.

Insurers are instead managing exposures through aggregate controls rather than broad-based treaty restrictions – a sign, he said, that the market is opting for discipline over retreat.