Insight 3:Historical Patterns: Winners and Losers in Wartime Economies
Wars do not reshape every part of the economy in the same way.
Some industries expand quickly as governments redirect capital, procurement and policy support toward security, energy, logistics and strategic production. Others come under pressure as mobility slows, costs rise, confidence weakens and cross-border activity becomes harder to sustain.
That pattern is not new. What is changing is the speed at which those effects now travel. In a more connected economy, geopolitical conflict moves through shipping routes, energy systems, capital markets, sanctions regimes and digital infrastructure at pace. For insurers, that means sector stress and sector opportunity can emerge well before the broader economic picture is settled.
Wartime economies tend to reprice strategic value
In peacetime, market value is often organised around efficiency, growth and consumer demand. In wartime or under sustained geopolitical stress, value is repriced around security, continuity, sovereignty and control.
This is one reason defence production, fuel supply, shipping resilience, cyber capability and critical inputs tend to attract more capital in contested periods. SIPRI reported that global military expenditure rose to US$2.718 trillion in 2024, up 9.4% year on year, the steepest annual increase since at least 1988. Over the decade from 2015 to 2024, global military spending increased 37%. Those figures are not simply about defence budgets; they are also signals about where procurement, industrial policy and risk appetite are moving.
The pattern is visible in arms trade as well. SIPRI’s 2026 arms transfers update found that European states accounted for 33% of global arms imports in 2021–25, up from 12% in 2016–20, while Europe’s arms imports increased 210% over those two periods. That is a contemporary example of how conflict and insecurity redirect industrial demand, manufacturing capacity and government spending.
For insurers, the implication is straightforward: wartime economies do not only increase risk. They also change where insurable demand grows, where underwriting capacity tightens, and where portfolios may become more exposed to correlated loss.
The sectors that typically strengthen
Defence, aerospace and security
The most obvious beneficiaries are defence and related security sectors. When governments increase military expenditure, demand rises not only for weapons systems and platforms, but also for maintenance, specialist manufacturing, testing, logistics, cyber capability and dual-use technologies. SIPRI’s data suggests this is not a short-lived adjustment but part of a broader upward trend in security spending.
Academic work also supports the idea that geopolitical risk can have a direct positive effect on defence firms. A 2024 study in Heliyon examining 75 global defence companies found that many experienced immediate market effects following major geopolitical shocks, particularly after Crimea in 2014.
For insurers, these sectors can mean more demand across property, liability, product recall, marine cargo, cyber and political violence classes. They can also introduce new exposure concentrations, particularly where supply chains are specialised or where clients sit close to government procurement.
Energy and strategic resources
Conflict consistently increases the strategic value of energy and resource security. The Strait of Hormuz remains one of the clearest examples: roughly 20% of global seaborne oil and LNG trade passes through it, so even the threat of disruption quickly affects pricing, shipping and confidence.
In wartime economies, it is not only oil and gas that matter. Critical minerals, industrial metals, fertiliser inputs and transport fuels all become more strategically significant because they sit upstream of manufacturing, mobility and food systems. OECD work on supply chain resilience notes that strategic manufacturing supply chains remain deeply internationalised, with 26% of inputs for strategic manufacturing industries in OECD economies sourced from abroad and 27% of output dependent on foreign final demand.
That helps explain why resource producers, transport fuel infrastructure, LNG, storage, ports and supporting logistics often see stronger demand or higher strategic relevance during geopolitical stress. For insurers, these sectors can produce attractive premium opportunities, but also larger accumulation risk through property, energy, engineering and business interruption lines.
Logistics, shipping and supply-chain infrastructure
The global economy still runs through physical movement. UNCTAD reported that global maritime trade reached 12.3 billion tons in 2023, with more than 80% of global trade by volume moving by sea.
That scale explains why wartime conditions often increase the strategic importance of ports, warehousing, coastal infrastructure, freight forwarding, shipping support and alternate trade routes. In the short term, these sectors may benefit from rerouting, stockpiling, resilience spending and higher freight revenues. In the medium term, they can also attract public and private investment aimed at reducing chokepoint dependency.
At the same time, they become more exposed to marine war-risk pricing, sanctions complexity, cyber disruption and political violence. For insurers, logistics can therefore move from a relatively stable commercial class to one carrying both premium opportunity and sharp volatility.
Cybersecurity and resilience services
Modern conflict does not sit neatly in the physical world. Cyber operations, disinformation, espionage and attacks on digital infrastructure increasingly sit alongside conventional military activity. Lloyd’s and other market participants have already responded by tightening cyber war wording in response to concerns about systemic, state-backed attacks.
The commercial consequence is that firms providing cyber defence, infrastructure resilience, incident response and secure communications may see stronger demand in periods of geopolitical tension. For insurers, this can increase demand for cyber cover while also intensifying questions around exclusions, aggregation and silent cyber exposure.
The sectors that usually come under pressure
Aviation, tourism and hospitality
Industries reliant on discretionary travel and international confidence are usually among the first to feel geopolitical strain. This is partly psychological and partly operational: travellers cancel, routes change, fuel costs rise, security concerns increase and destination risk is reassessed.
Academic evidence supports this. A 2021 paper in Current Issues in Tourism found that geopolitical risk has a negative and statistically significant effect on tourism service exports, with one standard deviation shock in geopolitical risk explaining 12.6% of the variation in tourism net service exports in the long run. More recent work published in 2024 also found that rising geopolitical tensions have a persistent negative effect on tourism demand across most countries studied.
That matters because tourism is not a niche sector. UN Tourism said international tourism exports reached a record US$1.9 trillion in 2024, while Australia’s Tourism Satellite Account shows tourism GDP at A$81.1 billion in 2024–25, accounting for 2.9% of the economy.
For insurers, this is where volatility tends to show up in aviation, travel, hospitality, event cancellation and business interruption. A risk environment that lifts demand for marine or energy cover can, at the same time, reduce appetite or worsen performance across travel-linked sectors.
International education and other mobility-dependent services
The same logic applies to international education, which relies on mobility, visas, safety perceptions and household confidence. Australia’s education-related travel exports were A$53.6 billion in 2024–25, according to the ABS, making the sector one of the country’s most significant service exports.
That means wartime conditions can affect Australia even when the conflict is geographically distant. Disruption can come through aviation costs, visa settings, exchange rate volatility, student confidence, sanctions, or shifts in diplomatic relations. The effects may not be as immediate as in shipping or energy, but they can still be material.
For insurers, the education sector can create exposures across travel, liability, property, professional indemnity, student mobility and overseas activity. During geopolitical stress, it may also generate more difficult duty-of-care and evacuation questions.
White-collar sectors tied to cross-border activity
Not all white-collar sectors decline in wartime conditions. Some advisory, legal, compliance, cyber and restructuring services may strengthen. But sectors heavily reliant on stable cross-border commerce can slow if sanctions widen, transactions become harder to settle, counterparties become riskier, or global clients defer investment.
This is especially relevant where businesses depend on trade finance, investment flows or multinational supply chains. Academic work has found that geopolitical risk affects trade costs and that reduced trade credit insurance activity is associated with weaker firm sales growth, particularly in insurance-dependent industries.
For insurers, these sectors matter because they influence D&O, professional indemnity, trade credit and cyber portfolios. The issue is less dramatic collapse and more creeping deterioration: slower revenues, weaker counterparties, higher disputes and rising compliance burden.
Wartime economies also create false signals
One of the difficulties in reading wartime economies is that expansion in one part of the system can be mistaken for broad economic strength.
History shows that wartime mobilisation can lift output, investment and employment in targeted sectors without producing broad-based resilience. Recent NBER work on World War II, for example, points to the way wartime infrastructure and mobilisation changed regional industry specialisation, energy access and management practice. These changes were real, but they were not evenly distributed.
That distinction matters now. A rise in defence budgets, resilience spending or reshoring incentives does not automatically mean lower systemic vulnerability. OECD modelling published in 2025 found that aggressive relocalisation of supply chains could reduce global trade by more than 18% and global real GDP by more than 5%, while increasing GDP volatility in more than half of the economies modelled.
In other words, wartime economies often reward sectors linked to security and continuity, but they can do so while making the broader system less efficient and, in some cases, less stable.
What this means for Australian insurers
For Australian insurers, the sector story is not theoretical. It cuts directly across portfolio mix, underwriting appetite and growth strategy.
Australia has meaningful exposure to the sectors that tend to strengthen in contested periods: defence capability, energy, critical minerals, logistics and infrastructure. The Australian Government says defence funding is set to reach A$764.6 billion over the decade in the 2024–25 Budget settings, with spending expected to exceed 2.3% of GDP by 2033–34. That does not just shape public policy. It shapes the risk landscape around contractors, suppliers, infrastructure and specialist service providers.
At the same time, Australia remains materially exposed through sectors that are more vulnerable to geopolitical friction, particularly tourism and international education. Those are two of the clearest examples of industries that can look strong in stable periods and become quickly fragile when mobility, confidence or diplomatic conditions deteriorate.
This means insurers may need to think less in terms of “war as a single peril” and more in terms of sectoral transmission:
how geopolitical stress changes client demand, claims patterns, exclusions, counterparty risk and accumulation across the book.
The practical question is not only who wins and who loses
The more useful question for insurers is where growth is durable, where volatility is temporary, and where apparent opportunity masks concentration risk.
A wartime economy may support premium growth in energy, marine, logistics, defence supply chains and cyber resilience. It may also produce tightening in travel, hospitality, education-linked mobility and certain trade-exposed commercial classes. But the most important task is not simply to label sectors as winners or losers.
It is to understand how strategic value is being repriced.
That means asking:
Which sectors are becoming more critical to continuity, sovereignty or supply security?
Which sectors depend on open borders, stable routes or discretionary confidence?
Where might sanctions, exclusion wording or counterparty issues matter more than physical damage?
Where is new premium genuinely attractive, and where is it simply a sign that systemic risk is rising?
Closing observation
Wartime economies do not create a uniform shift. They create a redistribution of economic relevance.
Security-linked sectors often attract more capital, stronger policy support and more demand for cover. Mobility-dependent and discretionary sectors often face a harder operating environment. Between those poles sits a wide middle: industries that may benefit in one way, weaken in another, and become more complex to insure.
For insurers, that is the real point. Sector analysis in a contested world is not an academic exercise. It is part of underwriting judgment.
Understanding which industries strengthen, which industries soften, and which industries become more volatile helps insurers allocate capacity with more clarity — and reduce the risk of reacting too late, or leaning in for the wrong reasons.
