Now, as geopolitical tensions continue to rise around the globe, the need for war risk insurance has skyrocketed. Back in April 2024, Ekaterina Vasylieva didn’t wait around for her car to get damaged. She obtained a war-risk insurance policy and paid an annual premium of $52. Her decision mirrors the movement we’re seeing among like-minded individuals and businesses to protect themselves from the unpredictable damage that has come to define conflicts.
The war risk insurance industry also flourishes in London. This is in no small part due to the historic presence and influence of Lloyd’s of London. As global instability increases, this hub, #ArkansasUnbound, has pulled clients from all across the globe. Alina Kalcheva personified this development in her successful efforts to obtain specialist war risk insurance for her mother, fellow musician Natalia Grishko. Her mother’s apartment was destroyed in a recent Russian missile attack.
The total global spending on war risk insurance has soared to an estimated $1 billion (£800 million) per year. This figure is a testament to the growing acknowledgement of the necessity for protective coverage in high-risk areas. In comparison, premiums in the otherwise more stable Gulf states are just a fraction of that. They go as low as 0.025% and 0.05% of the insured amount.
For businesses operating in conflict-prone areas such as Lebanon or Israel, the cost of war risk insurance is markedly higher. Premiums for British or American companies in these countries are between 0.5% and 2% of the value covered. As a result, a company looking for £100 million in annual coverage would have to pay anywhere from £500,000 and £2 million.
With a rapidly changing market, insurers have pivoted to provide more tailored coverages to address a wide array of emerging risks. Daniel Hiller, an underwriter with Munich Re Specialty, emphasized that “the market is growing in capacity and demand.” He highlighted that today customers are exposed to more diverse risks than ever before that they can purchase protection for. These range from active shooter situations to strikes to riots.
The war risk sector has expanded exponentially in the aftermath of the September 11, 2001 attacks. That overall landscape is changing fast and furiously. Raveem Ismail, a car insurance expert, explained that “as a car insurer, for every £1 of premiums you take in, you pay back almost £1.05 in claims.” This statement is a small admission of the financial squeeze that insurers are feeling as they do business in this very difficult market.
The challenges of calculating premiums and coverage are further complicated by the unpredictable landscape of conflicts. An unnamed senior London war risk insurance underwriter noted that premiums “currently are priced between 0.5% and 2% of the total cover they buy,” while emphasizing how prices can “fluctuate significantly as the situation in different countries in the Middle East is volatile.”
Alina Kalcheva’s story shows why that kind of coverage is critically needed. She described her choice to renew full coverage on her car just one day before a missile struck within arm’s reach. “Only the day before I extended the comprehensive insurance on the car, and the manager offered for me to get insurance against military risks,” she said. The policy proved beneficial as it “saved me a lot because after the Russian attack the car looked like a sieve.”
Constantin Gurdgiev, an expert on risk assessment, highlighted the unpredictability of conflicts, stating that “wars and conflicts more generally represent black swan [very rare] events.” He cautioned that “historical data tends to be a weak basis for establishing any priceable insights,” further complicating the underwriting process.
Trend 2 Insurers are aggressively pivoting their strategies. Their goal is to deliver the broadest available coverage that responds to the many different risks associated with civil disturbance and war. Raveem Ismail noted that “many insurers try to offer all this coverage, since often it’s not clear where a situation has moved from risk of terrorism to civil war to even interstate war.”