Insurers on edge: Will Israel-Hamas conflict result in higher insurance premium?

The recent conflict in Israel has raised questions about its potential impact on insurance premiums, both locally and globally. It’s crucial to understand that the insurance industry is intrinsically related to socio-political realities around the world. Hence, geopolitical disturbances like warfare can have consequential effects on insurance premiums.  

Reinsurance costs: Reinsurance, which is insurance for insurance companies, might also get more expensive because reinsurers may raise prices to balance out the heightened risk in the region. Subsequently, primary insurers could also ramp up their premiums to offset the cost of the higher reinsurance. 

“Indian insurance companies often buy reinsurance to spread their risks. If global reinsurance costs rise due to a higher volume of claims stemming from the conflict in Israel, this could indirectly impact insurance premiums in India,” said Rahul M Mishra, Co-Founder and Director of Policy Ensure. 

Let’s take a look at how it can impact on related products insurance premium: 

1. Exporter premium: The conflict in Israel may lead to increased risks in shipping and trade routes, particularly in the Eastern Mediterranean. This could result in higher marine insurance premiums for shipments to or from the region. Besides, the Indian exporters who are shipping goods and services to Israel may face higher exporter insurance premiums, as stated by many experts.  

Naval Goel, Founder and CEO of PolicX.com, said, “The Export Credit Guarantee Corporation of India Limited (ECGCI) will have to charge higher premiums from the firms shipping to Israel due to risks involved on the ports of the country. The shipping costs to these countries will also see a hike. If the situation expands to targeting the Israeli ports, the premiums will shoot further, and the exporters can also be left with no insurance coverage. The higher premiums are implemented to compensate for any losses in a particular region exposed to war and uncertain situations.” 

2. Travel insurance premium: Your travel insurance premiums to the war hit, and neighbouring countries will also get costlier. These areas are considered high-risk regions; therefore, most health insurers can refrain from offering a travel plan too.  

Mishra said, “Travel insurance premiums for individuals visiting Israel or nearby regions may see a slight increase due to heightened travel risks. However, the impact on premiums is typically temporary and might normalize once the situation stabilizes.” 

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3. Global health insurance policy premium: Global health insurance policy premiums could indirectly result from the war. “The global health insurance policies may come with an added condition of no coverage for war-hit countries. The insurer can refuse to cover your medical bill in an active war zone. But you can regain the benefits of your global health plan once you reach a neighbouring country or the one which is covered in your policy,” said Goel. 

4. Political risk insurance: Political risk insurance is a financial product designed to protect businesses and investors from unpredictable losses due to political instability. It covers risks like government actions, war, terrorism, or civil disturbance, potentially protecting assets, contracts, or operations. This insurance is especially crucial for entities operating in high-risk regions.  

Mishra said, “Companies engaged in business activities in the Middle East or with Israeli ties might see increased premiums for political risk insurance. This insurance covers risks related to political instability, which can include war or conflict.” 

5. Cyber insurance: Cyberattacks have become a tangible threat in geopolitical conflicts, significantly altering risk evaluations. The surge in state-sponsored cyberattacks, particularly witnessed in the Israel-Hamas clash, will potentially drive cyber insurance premiums higher. Cyber insurance providers will likely reassess risk profiles, factoring in the increasing frequency and severity of cyber warfare.  

Mishra says, “As cyberattacks may increase during times of conflict or crisis, businesses may experience a greater need for cyber insurance. Consequently, premiums for cyber insurance might see an upward trend as businesses seek to protect themselves from potential cyber threats.” Thus, one can anticipate a sharp hike in cyber insurance premiums imminent.”