RIYADH: The Iran conflict has increased tail risk for Gulf specialty insurers according to Moody’s Ratings, although diversified firms are expected to face manageable losses under its baseline scenario.
The agency said the conflict has effectively blocked the Strait of Hormuz, through which just five vessels per day transited in the first eight days of March, down from a pre-conflict average of around 100 daily transits, citing Portwatch data.
Moody’s baseline scenario assumed the conflict would be relatively short-lived with navigation through the passage eventually resuming at scale. In this scenario, losses are expected to be manageable for large, diversified insurers due to careful risk selection, aggregate claims limits and reinsurance protection.
Amid widening conflict that has disrupted shipping in the region, the US International Development Finance Corp. on March 11 announced a $20 billion reinsurance facility, with Chubb serving as lead partner, according to Reuters.
Without such war-risk coverage, ships and cargo worth hundreds of millions of dollars remain exposed to attacks in the waterway, through which about one-fifth of global oil flows normally pass.
