War insurers are on high alert

As we entered 2026, the Hull War insurance market remained soft, driven by abundant capacity and strong competition as underwriters vied for market share. Lead rate reductions of over 10% were readily available. The Excess AVN52E market followed a similar trajectory, albeit rate reductions in this segment were less pronounced to Hull War, as lead insurers have maintained a more disciplined approach to their pricing strategies.

From late February 2026, the situation took a significant turn as war erupted in the Middle East. This activity has profound implications and has significantly increased security risks across the region and beyond. As of this update, reports indicate that Iranian attacks have occurred in Azerbaijan, Bahrain, Cyprus, Iraq, Israel, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates.

The situation remains highly fluid. As of this update, loss notifications are emerging in other insurance lines, indicating substantial and mounting claims, but no major aviation losses have yet been reported. Aviation underwriters are carefully evaluating increased risk by territory to monitor their exposures and adjust to this fast-changing risk environment.

For now, war risk cover remains available, but as mentioned earlier, underwriters are confronting significant pressure from management directives to re-evaluate risks and tighten terms. Whilst we have not seen many formal notices to amend premium and/or geographical limits, as of this update, underwriters are applying additional risk rates, additional premiums and operational subjectivities in the region in respect of both Middle Eastern carriers operating into/out of their home bases, and on other non-scheduled passenger flights/repatriation carriage into/out of the region. Pricing tensions are also evident for AVN52, with some insurers now looking to charge for war liability in the primary on a per passenger basis.

This situation has created significantly increased workloads for all stakeholders and certain insurers have raised questions around the interpretation of policy conditions and material change. With no standardised market response, there is a significant pricing divergence across the market, with insurer positions and their perceptions of heightened risk notably inconsistent. This situation has heightened tensions between leaders and following markets, and adds a further level of complexity to negotiations. At Gallagher, we are proactively working with both underwriters, insurance industry bodies and our partners Osprey Flight Solutions to try and help bring a more realistic, objective, and consistent approach to the view of risk in the region, to help provide clarity for our clients as we navigate this evolving landscape. To this end, we urge clients to provide full information around all activities in the region and the operational mitigations that are being implemented to support our discussions and deal with insurers' concerns as they arise.

Looking ahead, it is impossible to predict the duration of the conflict. At the time of writing, Iran and US are reported to have agreed on a conditional two-week ceasefire, but Israel is continuing to carry out air strikes in southern Lebanon. Unpredictability remains while we wait to see how discussions and actions pan out. In the meantime, air access to and from the region is likely to remain disrupted, and the possibility of aviation losses cannot be ruled out. As of this update, some insurers have indicated that they will not offer any further reductions on future Middle Eastern-based renewals or those with significant regional exposures, but it remains to be seen whether this will materialise and become an unified market position and, in turn, whether this will translate into an upwards trend that will follow through to the renewals of airlines based in other regions. Much will depend on what transpires in the coming weeks and the situation remains complex.