Will UAE insurance premiums rise if Iran-US conflict escalates further?

Dubai: As tensions in the Gulf raise concerns about shipping disruptions, airspace closures and higher business costs, many UAE residents are asking a practical question: could the conflict eventually affect insurance prices. Regional instability can influence financial markets, trade routes and economic activity across the Gulf.

A new analysis from Moody’s Ratings suggests the immediate impact of the Iran conflict on Gulf insurers will likely remain limited. For UAE residents, the key question is whether the conflict could eventually affect insurance premiums. Here is what it could mean for policyholders.

Moody’s expects any disruption to be short in its baseline scenario. The report states: “Our baseline scenario is that the conflict will be relatively short-lived, likely a matter of weeks, and that navigation through the Strait of Hormuz and air traffic will then resume at scale.”

Under that scenario, insurers in the Gulf are not expected to face major financial stress. Moody’s adds: “GCC insurers would not face immediate material pressure on their credit profiles.”

Another ratings agency shares a similar view on regional disruptions. Fitch Ratings noted that “the effective closure of the Strait of Hormuz… is likely to be temporary given its vital economic role.”

For UAE residents, this suggests insurance premiums are unlikely to change in the near term because of the conflict alone.

War-related damage is generally excluded from standard insurance policies in the region.

Moody’s states: “The direct claims impact of the conflict will likely be negligible for all GCC insurers, as war risk is typically excluded from standard insurance policies in the region.”

War risks are typically covered by specialist insurers in international markets rather than regional providers. Because of these exclusions, GCC insurers are unlikely to face large payouts tied directly to military activity.

The bigger financial exposure for insurers lies in their investment portfolios. Moody’s explains: “The primary transmission channel would be through insurers’ investment portfolios rather than their underwriting performance.”

Insurance companies hold large investments in equities and real estate. Regional instability can push those asset prices lower and reduce the value of insurers’ holdings.

Moody’s estimates: “A 20% decline in real estate and equity valuations would reduce our rated companies’ total equity by around 7%.”  Most large insurers have capital buffers strong enough to absorb such losses.

The report also highlights differences across the sector. Large insurers tend to have diversified investment portfolios and stronger capital positions.

Smaller insurers often have higher exposure to real estate and equities and thinner capital cushions, which makes them more sensitive to market volatility.

Insurance pricing could change if the conflict drags on and begins to affect economic activity.

Moody’s warns: “Risks would increase if disruption persists.” A prolonged conflict could lead to weaker investor sentiment, falling asset prices and a broader economic slowdown across the region.

Moody’s also notes that slower economic activity would weaken premium growth, a key support for the sector’s stable outlook.

If insurers face lower growth and tighter profit margins, pricing adjustments could eventually follow.

Several developments could influence insurance pricing in the coming months.

For now, analysts expect the sector to remain stable. Any shift in insurance premiums would depend largely on how long the geopolitical disruption lasts and whether it begins to affect regional economic activity.