War, Risk, and Liability: What the Iran Conflict Means for Insurance Lawyers
- UCL Law for All Society
- Mar 14
- 4 min read
By Iman Hafeez
Wars are usually analysed through military strategy or diplomacy. Yet behind every missile strike lies another, less visible battleground: the global insurance market. The escalating conflict between the United States, Israel, and Iran is already reshaping how insurers price risk and allocate liability. For insurance lawyers, the consequences are immediate. As shipping routes are disrupted and energy markets destabilised, insurers and their legal advisers must determine who ultimately bears the financial cost.
One of the most immediate impacts of the conflict has been a surge in demand for political violence insurance. Businesses across the Gulf are increasingly seeking protection for physical assets ranging from energy infrastructure and pipelines to hotels, ports, and data centres. These policies cover damage resulting from war, terrorism, and related events such as missile debris or civil unrest. As the conflict has widened, investors and infrastructure owners have rushed to secure coverage to protect against potential losses caused by retaliatory strikes across the region. For insurers, this influx of demand creates both opportunity and uncertainty. Policies must be drafted carefully to define the scope of coverage, while insurers must assess whether claims triggered by missile strikes or collateral damage fall within policy terms. In this environment, insurance lawyers play a central role in structuring policies and resolving disputes when damage occurs.
Marine insurance represents another critical pressure point. The Strait of Hormuz, through which roughly one-fifth of global oil shipments normally pass, has become a focal point of risk as attacks on commercial vessels and threats of closure disrupt maritime traffic. Several ships have already been damaged by projectiles or drone strikes, while others have been re-routed or delayed as insurers reassess their exposure. War-risk insurance premiums for vessels operating in the region have risen dramatically, and in some cases insurers have cancelled existing policies in order to renegotiate coverage at higher prices. Because war and terrorism risks are typically excluded from standard marine insurance policies, shipowners must obtain specialised war-risk cover to operate in conflict zones. When premiums surge or coverage becomes unavailable, the consequences ripple throughout global trade.
These developments generate a host of legal questions. Shipowners and charterers may dispute whether vessels are obliged to sail through high-risk areas, whether ships should be considered “off-hire” (meaning the charterer is no longer required to pay hire fees because the vessel cannot perform its agreed function) or whether contracts become frustrated when voyages can no longer proceed safely. Insurance lawyers may also be called upon to interpret the scope of war-risk clauses, determine liability for damaged cargo, and address claims arising from pollution or environmental damage if tankers are struck while transporting oil. Taken together, these issues illustrate how geopolitical conflict transforms the maritime insurance market into a complex arena of contractual and liability disputes.
Aviation insurers face similar challenges. Airspace closures across several Gulf states have grounded large commercial fleets, leaving planes stranded at airports that have already been targeted by missile and drone strikes. Aircrafts parked on the ground in conflict zones face the risk of destruction even if they are not directly involved in military operations. This raises a particularly significant legal question: whether insurers remain liable for damage under aviation war-risk policies if coverage is withdrawn or renegotiated mid-conflict. Courts may ultimately have to determine whether a given aircraft was already exposed to a “war peril” at the moment policies were altered, a distinction that could carry enormous financial consequences for both insurers and airlines.
The legal pressures discussed above do not exist in isolation as the conflict also threatens broader economic disruption. With one-fifth of the world’s crude oil and liquefied natural gas supply passing through the Strait of Hormuz, a prolonged closure of this chokepoint could trigger major energy shortages. This could drive oil prices sharply higher and place strain on global supply chains. In such circumstances insurers may face a wave of claims under political risk and trade credit policies. Businesses will use such claims as protection against losses caused by political events as companies fail to fulfil contractual obligations or struggle to repay debts amid economic instability. Companies operating in the region may also abandon projects or withdraw personnel, potentially triggering claims for forced abandonment. This is where political risk insurance covers the costs of leaving a project behind due to circumstances beyond the insured’s control.
The US-Israel-Iran conflict is both a test and a reminder of the insurance industry’s role in the global economy. Insurance functions as a mechanism for absorbing and distributing risk, enabling international trade to continue even in volatile geopolitical conditions. But when conflict intensifies, the boundaries of what can be insured are pushed to their limits. For aspiring lawyers, these developments are a vivid illustration of why commercial awareness matters. Geopolitical events reverberate through financial markets and the legal systems that hold global commerce together. As the conflict continues to unfold, insurance lawyers will be at the forefront of navigating its legal and economic consequences.
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Edited by Artyom Timofeev
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