The US Iran war and the impact of the conflict on the global economy highlights unquantified risk accumulation and the potential consequences for underwriting portfolios; and sectors that rely on critical supplies such as crude oil, LNG, aluminium, helium and fertiliser.
These commodities play a vital role in the global economy, and their disruption is being felt. A shortage of fertiliser exports would have massive ripple effects on farmers, retailers, consumers, (re)insurers, risk managers and eventually policy makers.
Aluminum, of course, affects auto and aerospace manufacturers while helium is a critical component of superconducting magnets used in MRI scanners. The shortage of LNG, particularly jet fuel, has had a significant impact on the aerospace industry.
A recent survey by Reuters of 279 companies highlighted that the war has created $25 billion in additional costs. Aviation was identified as the industry with the largest costs ($15 billion), followed by auto and supply chain ($5.5 billion) and consumer goods ($2.4 billion),
Therefore, it is no surprise that underwriters and corporates are concerned about the war as highlighted by attendees of a recent webinar. 73% of respondents agreed that that the war has highlighted key unquantified areas of risk accumulation such as ports and airports. 55% were somewhat concerned about the impact of the Iran War on their underwriting portfolio, while 88% of respondents confirmed that they are monitoring geopolitical volatility.
This is why most corporates, (re)insurers and governments increasingly agree that there is a need for specialty risk intelligence to convert their supply chain and trade route complexity into clarity. The ripple effects of the US-Iran War on the specialty classes require the outlines of a framework solution that go beyond the traditional approaches that (re)insurers and corporates have always relied on.
