GlobalData: Demand for Political Risk Insurance Will Explode as Geopolitical Tensions Increase

According to GlobalData, while the war between the USA-Israel and Iran destabilizes a large part of the Middle East; Businesses such as hotels, data centers and pipelines face increased risks of damage. Leading intelligence and productivity platform GlobalData predicts that rising geopolitical tensions will rapidly increase demand for political risk insurance.

Since the beginning of the Russia-Ukraine war, geopolitical tensions have led to a sharp increase in demand for cyber insurance; However, GlobalData's survey data shows that the demand for political risk insurance is rising at almost the same pace. With the recent missile attacks on points such as the Fairmont at the Palm hotel in Dubai, it seems that the entire region between Israel and Iran is at risk due to missile attacks and downed drones. Insurance industry representatives who participated in the survey conducted on Verdict Media sites in the 4th quarter believe that the highest demand will be seen in cyber insurance due to geopolitical tensions. However, one in four participants predicts that the real demand will be in political risk insurance. Supply chain insurance is also expected to be popular during this period due to heavy restrictions on major shipping routes.

"War Exclusions" Increase Risk

GlobalData Senior Insurance Analyst Ben Carey-Evans explains:

"Political risk insurance is vital for businesses close to potential danger zones, as most insurance policies include a 'war exclusion'. This means, for example, a hotel's This means that traditional commercial property or business interruption insurance may not pay in the event of damage as a result of a military attack. Additionally, legal disputes may arise over the terms of the contract in question. Currently, in regions such as the UAE and Qatar, the risk of damage from intercepted missiles or accidental attacks is extremely high.”

Major tourist destinations such as Dubai and Abu Dhabi face greater exposure as the conflict continues. The serious possibility of high-value property damage is likely to further fuel demand for political risk insurance.

Carey-Evans concludes:

"Insurers looking to sell political risk, cyber or supply chain insurance will see a massive increase in business through 2026. However, in doing so, they will also be taking on significant risk themselves. Therefore, pricing the product and accurately understanding the level of risk they are exposed to will be critical."