Iran conflict exposes the hidden gaps in corporate insurance

The U.S. and Israel launched a joint attack on Iran on February 28, and the shockwaves reached well beyond the battlefield — straight into the policy documents that corporate finance teams had long taken for granted. From Houston to Singapore, companies exposed to energy markets, international freight, and global supply chains are discovering that their insurance coverage contains exclusions they never anticipated. The gap between holding a policy and actually being protected, legal and insurance specialists warn, has rarely been wider.

In brief

—Joint U.S.-Israel attack on Iran triggered global insurance repricing
—Rerouting costs around Cape of Good Hope mostly not covered
—Cyber, sanctions and war clauses blocking many corporate claims

A market already under pressure when the missiles flew

Before February 28, the commercial insurance market was deep into what Andrew George, president of Marsh Specialty, describes as an unusual cycle. Insurers had been broadly profitable for two or three years, which attracted fresh capital and pushed premiums steadily lower across most lines. "There’s a bit of a spiral right now where prices are coming down and down and down," George says.

Corporate risk analyst reviewing insurance policy documents at a desk — Illustration © Toptenplay

That dynamic created a false sense of security. Abundant capacity meant companies could buy coverage relatively cheaply, but the terms embedded in those policies — particularly around war, political violence, and sanctions — were quietly tightening even as headline prices fell.

The conflict changed the calculus instantly in specific segments. George estimates political violence and war market losses from the region at roughly $3 billion to $4 billion — real money for a specialty market, he notes, even if it does not threaten global insurance broadly. Because the pool of premium in the political violence segment is small, a loss of that scale hits it disproportionately hard, and pricing has already seen what George calls "significant shifts."

The Strait of Hormuz and the rerouting costs no policy covers

The Strait of Hormuz sits at the center of the conflict’s insurance implications. According to the Energy Information Administration, nearly 34% of global crude oil trade passed through it in 2025. When the strait became a conflict zone, marine insurers began repricing and restricting what they would cover for vessels transiting the corridor.

Cargo vessel rerouting through open ocean away from conflict zone — Illustration © Toptenplay

Marine policies typically include what George calls "breach areas" or warranty zones — regions that trigger a notice-of-cancellation clause, usually within 24 to 48 hours. The clause is less a termination than a forced renegotiation: brokers return to market and typically pay an extra premium or accept restricted coverage to keep a vessel moving through a high-risk zone.

Yet insurance terms are not the primary reason ships are avoiding the strait. George is direct on this point: "It’s the prudent operators saying, ‘We do not want to put our crew in harm’s way.’" The commercial consequence of that caution falls on cargo owners.

Voluntary rerouting around the Cape of Good Hope rather than through the strait adds substantial freight, fuel, and delay costs — and those costs, according to Carlton Wilde, a partner at Houston-based law firm Bracewell who represents corporate policyholders in coverage disputes, "typically fall outside covered perils." Companies are absorbing those expenses themselves, often with no clear end date.

See the rest on the next page ⬇⬇