Impacts of war in Iran on the Aviation insurance sector

Following the escalation of conflict in the Middle East, aviation insurance has emerged as a critical pressure point. 

Changi Airport is a major gateway connecting Asia-Pacific with Europe and the Middle East. Airspace closures, rerouting and heightened geopolitical risk would increase operational complexity for carriers operating long-haul routes across affected regions. The aviation war market continues to address matters arising out of Russia’s invasion of Ukraine in February 2022, and further conflict in the Middle East only serves to compound issues affecting it, which in the short term will include policy cancellations and premium considerations. Ultimately, this will result in (re)insurers reassessing exposure accumulations linked to aircraft operating in or near conflict zones. 

Singapore-based aviation insurers and reinsurers would need to carefully manage exposure to hull war, passenger liability and third party risks. Capacity constraints in the global aviation reinsurance market could flow through to local renewals, potentially resulting in a hardening of the war market, in terms of pricing and amended terms. Prolonged disruption is an obvious concern for all aviation stakeholders (including insurers, operators, airports, lessors and passengers). While most standard consumer travel insurance policies exclude claims arising directly from acts of war, passenger/cargo delay claims will be inevitable, and business interruption claims from operators are likely.

Tristan Thompson, aviation partner, said:

As a regional insurance and reinsurance hub, Singapore would also experience indirect impacts through global reinsurance repricing. Many local carriers rely on international reinsurance markets for marine, aviation and specialty capacity. If global reinsurers harden their stance on geopolitical and war related risks, this is likely to translate into higher reinsurance costs at renewal, influencing primary pricing across affected classes.

For Singapore, the primary exposure from a war involving Iran would sit squarely in marine and aviation lines. Increased war risk premiums, tighter underwriting conditions and potential capacity constraints would test both insurers and insureds. The extent of impact would depend on the duration and geographic spread of the conflict, particularly whether key maritime and aviation corridors remain open and insurable.