Insurance companies in the Gulf maintain stable credit despite the war | S&P report

Stability of the credit conditions of insurance companies in the Gulf

Amid escalating geopolitical tensions in the Middle East, Standard & Poor's Global (S&P Global) has affirmed that the creditworthiness of the insurance sector in the Gulf Cooperation Council (GCC) countries remains remarkably stable despite the ongoing conflict. This stability reflects the resilience of the Gulf financial sector and its ability to absorb external shocks, thanks to prudent economic policies and robust regulatory frameworks.

General context and historical background of regional tensions

Historically, the Arabian Gulf region and its surrounding waterways, particularly the Strait of Hormuz and the Red Sea, have been vital arteries for global trade and energy supplies. Since late 2023, security tensions have escalated with a rise in missile and drone attacks targeting commercial vessels and shipping lanes. These incidents have revived memories of past crises in the region, putting global markets on edge. The disruptions have affected critical shipping lanes, resulting in a significant decline in maritime and commercial air traffic on some routes and posing unprecedented challenges to global supply chains.

Impact of the crisis on insurance coverage pricing

A Standard & Poor's report explained that these security developments prompted insurance and reinsurance companies to take swift precautionary measures. Companies resorted to repricing insurance coverage, particularly for war, shipping, and aviation risks, while tightening policy terms to reduce exposure. Despite these necessary measures to protect financial positions, the agency noted that it is still too early to accurately assess the full financial impact of these tensions on the region's insurance sector.

Financial performance forecasts and loss containment

Looking ahead, the agency added in its report that it expects revenue growth to slow in most Gulf insurance markets during 2026, as a natural response to economic cycles and adjustments to growth strategies. Despite the significantly increased likelihood of substantial financial losses due to ongoing attacks, the report confidently predicts that major insurers and reinsurers will be able to effectively contain these losses. This is attributed to their strategies of geographical and sectoral diversification, strict limits on risk exposure, and reliance on robust reinsurance programs that provide additional protection.

The importance of the event and its expected impact locally, regionally, and internationally

This report has extremely important implications on several economic and strategic levels:

• Local impact: This stability enhances investor confidence in the strength and resilience of the Gulf economies, and confirms the success of economic visions in building a non-oil financial sector capable of withstanding crises and providing a safe investment environment.
• Regional impact: It highlights the need for regional markets to adapt to geopolitical changes, and pushes for enhanced financial and economic cooperation among the countries of the region to ensure the continuity of intra-regional trade and secure supply chains.
• International impact: The report sends a reassuring message to global financial markets and the international reinsurance sector, that the Gulf region has a solid financial infrastructure capable of managing complex risks, which contributes to the long-term stability of global insurance prices and ensures the smooth flow of energy supplies.