Middle East conflict raises coverage considerations for insurance policyholders

In the weeks since the United States and Israel conducted strikes on Iran, the conflict has widened across the Middle East. It has caused significant loss  of life, damage to property and disruption to trade. The aviation and shipping industries have been materially affected: airspace restrictions and airport closures have disrupted transport hubs and stranded freight and passenger planes in the region, while the effective closure of the Strait of Hormuz has halted a substantial proportion of global oil and liquefied natural gas deliveries. This closure, compounded by widespread operational disruption and damage to the region's onshore energy infrastructure has driven significant volatility in global oil and gas prices, raising renewed concerns on the reliability of supply chains.

The impact of the conflict raise important questions of insurance coverage across multiple insurance types. Affected policyholders should take immediate steps to review their coverage position.

Property insurance and war risk exclusions

Property insurance policies typically contain widely drafted exclusion clauses for damage caused "directly or indirectly" by "war, invasion, acts of foreign entities, hostilities (whether war be declared or not) … military or usurped power" and related perils.

Whether the conflict falls within the definition of "war" of a given policy is determined on the wording and factual matrix, but English case law indicates there is no technical definition of "war". There is also no requirement of a formal declaration of war from involved states for war exclusion clauses to be engaged. Furthermore, the exclusions are drafted in extremely broad terms, meaning that losses that would typically be covered may be excluded where war is an indirect cause of the loss. 

The impact will depend on the wording of the exclusion and the specific facts and circumstances, and property and business interruption policies should be scrutinised for war exclusions as soon as possible.

Marine and aviation insurance 

Extent of coverage 

Typical marine and aviation insurance policies exclude coverage for war-related risks.

Insurance markets in both lines provide separate "war risk" policies to address coverage gaps, particularly for assets transiting through designated high-risk areas. Holders of marine or aviation war risk policies should immediately review the terms of their policies to fully understand their coverage, including covered perils and any exclusions. 

Policyholders should pay particular attention to the notice requirements contained in the policy: typically, the policyholder must notify the insurer of claims or circumstances leading to potential claims within a specified timeframe, regardless of whether any loss has crystallised. Compliance with this notice requirement is a condition precedent to claiming under a policy and failure to do so will prejudice the policyholder's position. 

Cancellation notices and the 'grip of the peril' doctrine

Marine and aviation war risk policies typically permit cancellation or amendment of the policy by the insurer at short notice. Many cancellation notices have already been issued by insurers in respect of the current conflict; it is imperative that holders of war risk policies are alert to the receipt of notices from insurers and act promptly once these are received.

Where a cancellation notice is issued and cover is withdrawn, but removal of the insured asset from the region is legally or logistically impossible, coverage may depend on the application of the "grip of the peril" doctrine. In Russian Aircraft Lessor Policy Claims (2025 ) (an insurance coverage dispute between aircraft lessors and their insurers in respect of aircraft stranded in Russia and Ukraine after the Russian invasion of Ukraine in 2022) the court found that, despite the total loss of the assets occurring after the issuance of cancellation notices by the relevant insurers, the assets were in the "grip of the peril" before the issuance of cancellation notices. The policyholders had been deprived of their assets before the issuance of the notices, and the subsequent loss was the direct consequence of the peril that had already taken hold. The loss that followed was therefore not excluded by cancellation notices.

Trade credit insurance 

The conflict may interrupt businesses' ability to perform contractual obligations, with consequences extending beyond the immediate region as global trade is interrupted. Trade credit insurance, providing coverage to policyholders against non-payment for goods or services, could be an avenue to mitigate these losses.

Since war-related losses can be excluded from policies and insurers can issue cancellation notices at any time, policyholders are encouraged to review their policies to understand limitations of their coverage.

Political risk insurance

Political risk insurance, a specialist type of policy insuring against losses caused by political actors, including for forced abandonment, nationalisation or confiscation, could also be invoked to cover losses.

Unlike other insurance lines, policies do not typically exclude war and are underwritten to cover such risks. Political risk policies also often provide coverage for an enduring loss of rights in insured assets, rather than requiring actual property damage.

However, these policies commonly contain commercial disputes exclusion clauses. Conflicts often cause commercial disputes; it can be challenging to determine whether the underlying cause is a covered risk or not. As with other types of insurance, policyholders should carefully review policies and their definitions to ensure understanding of potential limitations and exclusions in their coverage. 

Cyber insurance

The conflict poses a heightened risk of cyber-attacks, and the extent of coverage under cyber insurance policies will depend on specific policy wording.

Since 31 March 2023, Lloyd's has required its members to include exclusion clauses in standalone cyber insurance policies for any "state-backed cyber-attack" (unless specifically exempted by Lloyd's) The Lloyd's Market Association (LMA) published a series of precedent clauses (LMA5629 - LMA5631) offering varying coverage, but each complies with this requirement.

Most cyber insurance policies are likely to exclude coverage for cyber-attacks where such attacks can be attributed to a state or where a state takes responsibility. The LMA precedent clauses require that, for the exclusion to apply, the attack must be attributable to a nation state. The clandestine nature of cyber-attacks means that, in reality, attribution can be very challenging; although there is some flexibility in the LMA model clauses for the parties to agree how state backed cyber-attacks will be attributed to a state. 

Moreover, policies vary on whether the exclusion applies to state-backed cyber-attacks generally, or whether they only apply within the context of a war. Affected, or potentially affected, policyholders should therefore review the precise wording of their policy to determine the application of their exclusion. 

Other risks to policyholders: aggregation wording

Aggregation wording (which allows insurers to group multiple claims into a single loss due to temporal, geographical or other connection) can limit a policyholder's ability to recover losses, particularly where a single event causes damage to multiple assets.

Policyholders should review definitions and ensure there is sufficient headroom in light of the threats presented by the conflict. 

Osborne Clarke comment

All insurance policies turn on precise definitions, and minor variations in wording can have significant implications for coverage. Policyholders should pay close attention to policy definitions to identify which events fall within their existing policies in order to understand their coverage limitations.

The conflict continues to evolve rapidly, with significant and wide-reaching implications for global trade, supply chains and insurance coverage. Policyholders should consider taking  immediate action to review their insurance position. Specifically, affected policyholders should:

• conduct an immediate and thorough review of all relevant insurance policies, including property, marine, aviation, political risk, trade credit and cyber insurance;
• ensure compliance with notice obligations contained in policies, notwithstanding that losses are yet to crystallise; and
• carefully monitor cancellation notices received from insurers, and review whether assets subject to such notices can be relocated. 

If you are a policyholder and would like to discuss the specifics of your policy further, please contact one of our experts listed below. 

Oliver Derham, trainee solicitor at Osborne Clarke, assisted with this Insight.