When the world catches fire, who carries the risk?
CN&CO recently assisted Africa Re in launching Reinsurance Matters, a new webinar series designed to bring sharp thinking to the issues shaping the (re)insurance industry. In the inaugural session, Africa Re’s Tafadzwa Mugadza delivered a compelling talk on geopolitical tensions and their impact on the sector, using the ongoing US-Iran conflict as her central case study. Here are the key takeaways:
On 28 February 2026, what began as an ordinary day ended with three missiles fired in the Gulf, a tanker diverted from the Strait of Hormuz, and marine war risk premiums tripling within hours. It was clear the industry was facing something it had long treated as a remote tail risk: a real, live interstate war with systemic consequences.
A new era of geopolitical risk?
Two major conflicts in the space of four years have fundamentally challenged the assumption that interstate war is geographically contained and rarely systemic. As Tafadzwa put it: “The question for reinsurers isn’t just ‘is it covered?’ The real question is: are we entering a new era where geopolitics actually becomes a core driver of insurance losses?”
Operation Epic Fury, as the US-Iran conflict has been termed, has shown how quickly a conflict can escalate regionally, drawing in additional state and non-state actors and creating accumulation exposures that cut across multiple lines of business simultaneously.
The strait that stopped the world
Much of the immediate impact centred on the Strait of Hormuz, through which 20% of daily global oil and liquefied natural gas production passes. Its closure sent oil prices surging by more than 55% in a single month, from around $72 a barrel to $120 in early March, one of the largest one-month spikes on record.
The ripple effects were wide-ranging. Shipping was disrupted. Food exports from India were stranded at ports. Urea, a key raw material for fertiliser, could not move. And for Africa in particular, where most petroleum products are imported and currencies weaken when investors flee to safe havens, the inflationary pressure was acute. Energy infrastructure damage in the Middle East was estimated at between $34 billion and $58 billion, before factoring in ports, airports and industrial facilities.
Is war insurable?
At the heart of Tafadzwa’s presentation was a question the industry has wrestled with for nearly a century. The short answer, for private insurers and reinsurers, is largely no. War violates core insurance principles: it is never accidental, it creates catastrophic simultaneous losses that overwhelm risk pooling, and its duration and intensity are nearly impossible to predict. The industry’s response, formalised in 1938 following aerial bombardment of cities during the Spanish Civil War, was to exclude war from standard property policies. After 9/11, terrorism was similarly carved out, giving rise to the political violence and terrorism (PVT) market.
What is covered, and what is not
Marine has been the most immediately affected class. War risks cover is available separately from standard hull and cargo policies, but is typically cancellable on short notice. The conflict triggered a wave of cancellation notices, followed by reinstatement on revised terms with tighter warranties, higher deductibles and increased premiums. Tafadzwa noted that insurance withdrawal can function as an economic blockade independent of military activity: without cover, ships cannot sail, ports will not accept them, and banks will not finance cargo.
Aviation faces similar dynamics, with a 2025 UK court ruling confirming that where aircraft cannot physically extricate themselves from a conflict zone, coverage may persist even after a cancellation notice has taken effect.
Political violence and terrorism cover has seen a notable uptick in demand, with clients increasingly requesting war extensions, though insurers are cautious about extending cover where conflict could foreseeably spill over.
Political risk and trade credit do not require physical damage to trigger a claim. Asset seizure and forced abandonment give rise to political risk claims, while a deteriorating global economy increases trade credit losses as obligors default and sovereign debtors struggle with higher import costs.
Cyber risk has also escalated, with ransomware and denial-of-service attacks rising as threat actors exploit vulnerabilities in energy, finance and shipping. Contract language will be critical in determining what is and is not covered.
When private market capacity retreated, the US Development Finance Corporation established a reinsurance facility, initially at $20 billion and subsequently expanded to $40 billion, to support shipping in the affected region, representing a significant state intervention in a market that has historically kept government at arm’s length.
Where does this leave the industry?
The risk of further escalation cannot be dismissed. But perhaps Tafadzwa’s most important observation was this: the industry cannot afford to be purely exclusionary. If every geopolitical peril is simply walled off, insurers cease to serve the economies they exist to protect. The challenge is to find the boundaries within which such risks can be responsibly underwritten, priced and transferred.
That is a conversation the industry is only beginning to have, and it is exactly the kind of conversation that Reinsurance Matters was created to host.
If you would like to be invited to the next edition of Reinsurance Matters, drop us an email at talkto@cnandco.com.
