In today’s evolving political violence (PV) (opens a new window)insurance market, a mix of global and regional pressures are tightening reinsurance capacity and pushing up premiums. Whilst new entrants are adding fresh capacity this must be weighed against the need for sustainable prices in the face of growing risks. Global events such as regional conflicts, along with political unrest and targeted infrastructure hits, are generating losses for reinsurers in active zones – and this has a knock-on effect on terms and access for GCC-based clients.
Regional tensions and the capacity crunch
These pressures can sometimes be intensified by local developments, where disputes can overflow, posing risks of collateral harm in the GCC – places not at the heart of the action but close enough geographically. This nearer-to-home vulnerability, coupled with concerns over the location of US-linked assets, is heightening the call for political violence (PV) and strikes, riots, and civil commotion (SRCC) coverage in the GCC. This then places further stress on a sector already weighed down by claims from elevated-threat spots.
Understanding the drivers of rising costs
At the heart of escalating expenses is the surge in demand. With more firms pursuing PV safeguards, reinsurers – operating under finite war aggregates that cap deployable capacity for certain policy terms – are compelled to allocate carefully. Comprehensive PV arrangements, which bundle terrorism, SRCC, and war elements, deplete these limits quickly, rendering leftover capacity costlier. Those entering the market afresh, spurred by current affairs, frequently meet resistance: why grant them the favourable rates long-standing buyers have earned over years or decades? These veteran purchasers have, over time, helped steady the market; latecomers, responding to fresh threats, could face sharp budget impacts, steeper charges, or hurdles in obtaining coverage if they hold off.
This setup explains the upward trend in pricing: broader market forces, ranging from geopolitical strains to profitability drains in remote areas, produce ripple effects on GCC policy renewals. The same reinsurers managing Middle Eastern exposures are also dealing with setbacks in Ukraine or Russia, which undermines returns and leads to firmer rates. Still, the market’s progression brings openings – emerging underwriters in London’s non-Lloyd’s segments are applying capacity with greater agility, supporting customised arrangements that match client requirements.
Navigating a Squeezed Market
In navigating this squeezed PV market, clients in the GCC must shift from transactional, price-driven approaches to strategic, advisory-led purchasing. Rather than scattering risks across multiple brokers - often leading to market fatigue and suboptimal terms – clients should focus on partnering with specialists who can provide tailored advice.
The conversations that arise will often include the need to change buying habits, frequently rooted in past low-cost availability, with a shift toward adequate coverage based on true exposures, such as terrorism risks for corporate governance or SRCC for regional vulnerabilities.
Partnering with an insurance broker and risk consultant who can also work to advise boards and investors on the ripple effects of global events that can drain reinsurer profitability and tighten capacity. By prioritising long-term resilience over short-term savings, buyers can mitigate rising premiums through informed decisions that align policies with realistic threats. Smart navigation requires forging a partnership with experts who have a depth of understanding of market evolution, and who can advocate for balanced cost/protection solutions to secure optimal terms.
