Gulf Businesses Buy Up Political Violence Insurance as Conflict Spreads

The recent escalation of conflict in the Gulf region has led to a surge in political violence insurance purchases, resulting in increased premiums and potential rating pressure for companies operating in the region. The stock prices of Gulf insurers and carriers have seen a sharp, short-term sell-off, with a 3-7% decline in the shares of large-cap Gulf insurers and aviation- and marine-focused listed groups.

The banking and construction sectors have been particularly affected, with banking-sector indices falling 1.2-2.0% and construction firms seeing a share-price drift of -2% to -4% over the month. The energy sector has been relatively insulated, with energy-sector indices remaining flat.

The increase in political violence insurance purchases has also led to a jump in marine-hull insurance rates, with a 25-50% increase in premiums quoted by Marsh’s Dylan Mortimer. Insurers are raising premiums by 15-20%, which is eroding profit margins and prompting rating-agency warnings.

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