Global reinsurers have begun to include new provisions to cancel the entitlement to insurance amounts in policies to protect against a large-scale conflict in the Middle East, a move that threatens to increase costs and risks for companies operating in the region. Israel And the region, according to the British Financial Times newspaper today.
According to the newspaper, the withdrawal from reinsurance companies – which share risks with primary insurance companies and play a major role in the global economy – reflects growing concerns in the financial sector about the direction of Israel’s war on the sector. Gaza Which I started last October.
Cancellation terms were included in some contracts concluded with insurance companies as part of the renegotiation of policies at the end of last year and the beginning of this year, according to what the newspaper quoted 4 sources, whom it did not name, while two of them said that such clauses are completely new and had not been included before. .
If these provisions are triggered, it will mean that the insurer will not have reinsurance cover for any newly insured items or assets, such as commercial buildings damaged by a missile attack, and the increased risk will likely be passed on to the customer in the form of higher premiums or reduced coverage. According to the newspaper.
The newspaper quoted an executive at one of the major reinsurance companies as saying that the risk of things getting out of control is very high, as the industry faces a problem in this region in the foreseeable future.
According to the newspaper, the global insurance sector has exposure to Israel of about $10 billion, through political violence policies, according to industry estimates.
One of the reinsurance brokers who spoke to the newspaper was surprised that insurance companies would accept cancellation terms, which they believed would increase uncertainty and raise more fears about escalation.
The newspaper quoted the sources as saying that reinsurance companies also demanded much higher prices, and prompted primary insurance companies to set a maximum limit on the amount of coverage they provide to clients in Israel and neighboring countries, such as Lebanon and Jordan, adding that some reinsurance companies demanded that these countries be excluded from concluding contracts. , but its success was limited.
Reinsurance companies were looking to “increase prices and reduce coverage in a meaningful way” for Israel and the wider region, according to what the newspaper quoted a report by AON, one of the largest insurance brokerage companies in the world, which was reflected in the market through a significant rise in prices. For international and local groups seeking to protect infrastructure and property.
Exclusion of Israeli assets
Some companies chose to renew insurance policies while excluding coverage of Israeli assets, and relied instead on the state compensation fund, according to the newspaper, citing two market sources.
The capital of global reinsurance companies amounts to about $600 billion, and they have already begun to raise prices after years of losses caused by inflation, a series of natural disasters and the war in Ukraine, which helped raise coverage prices for companies everywhere.
The latest moves follow similar post-war actions in Ukraine, where reinsurers responded more aggressively by halting contracts in entire countries.، The British newspaper quoted an informed source as saying that there is “frustration” among insurance companies regarding the recent cancellation provisions.
Red Sea attacks
The marine insurance market witnessed a sharp rise in the cost of travel through the Red Sea and the Suez Canal as a result of the wave of attacks launched by Houthi groupAccording to the newspaper, ship owners had to notify the insurer before moving through a specific part of the Red Sea, and pay an additional premium.
It quoted market participants as saying that these additional fees had jumped by 10 to 15 times in recent months, which contributed to the decisions of some customers to reroute their ships around Africa.