Insight 4:Strategic Questions for Insurers and Risk Leaders
Strategic Questions for Insurers in a More Contested World
Periods of geopolitical tension rarely produce a single risk event. More often they introduce a series of shifts that gradually alter how risk is priced, transferred and governed across the global economy.
For insurers, the challenge is therefore not simply understanding individual conflicts. The more important task is recognising how geopolitical instability changes the environment in which underwriting, capital allocation and portfolio management take place.
Energy supply chains, maritime corridors, sanctions regimes, cyber operations and strategic industrial policy now intersect in ways that create a more complex risk landscape. In this environment, insurers must continually reassess not only where risk sits, but how that risk behaves across portfolios.
The practical question becomes: what should insurance leaders be asking now?
Is our understanding of war risk still fit for purpose?
Traditional insurance policy frameworks were largely designed around conventional armed conflict between states. In today’s environment, conflict frequently occurs through a mix of military, economic and cyber actions.
These include:
cyber operations linked to state actors
proxy militia activity
sanctions and trade restrictions
sabotage of infrastructure
disruption of shipping routes or digital systems
Such hybrid forms of conflict make it increasingly difficult to determine where the boundary sits between war, terrorism, cyber risk and political violence.
This has already prompted adjustments in policy wording. In 2023, the Lloyd’s market introduced new requirements requiring many cyber policies to exclude losses arising from state-backed cyber warfare, reflecting concern about systemic cyber conflict.
For insurers, this raises an important governance question: do existing policy definitions and exclusions adequately reflect the way modern conflict actually occurs?
Where might portfolio aggregation risk emerge?
Geopolitical conflict can generate losses across several insurance classes simultaneously.
For example, disruption to a major maritime corridor could affect:
marine hull and cargo insurance
energy infrastructure insurance
trade credit insurance
political violence coverage
business interruption insurance
Cyber attacks linked to geopolitical conflict may also affect financial institutions, logistics systems or utilities, potentially triggering claims across cyber, property and liability policies.
Reinsurers pay particular attention to these scenarios because they represent systemic events rather than isolated losses.
Research from Lloyd’s of London has modelled geopolitical conflict scenarios that could generate global economic losses of more than US$14 trillion over five years, illustrating the potential scale of interconnected risk.
Understanding where aggregation may occur across portfolios is therefore a central question for insurers operating in a more volatile geopolitical environment.
How exposed are we to geopolitical chokepoints?
A relatively small number of geographic locations play a disproportionate role in global trade.
Among the most significant are:
the Strait of Hormuz
the Suez Canal
the Bab el-Mandeb Strait
the South China Sea
These corridors function as critical arteries of the global economy. According to UNCTAD, more than 80 percent of global trade by volume moves by sea, meaning disruptions in these locations can affect energy markets, manufacturing supply chains and food distribution simultaneously.
For insurers, the question is not only where clients operate, but how their supply chains intersect with these strategic chokepoints.
Understanding these dependencies can help insurers anticipate where geopolitical disruption may generate concentrated exposures.
Are sanctions and compliance risks fully understood?
Sanctions regimes and trade restrictions are now among the most immediate operational consequences of geopolitical conflict.
When governments impose sanctions on specific countries, industries or entities, insurers must quickly assess whether they can continue underwriting certain risks or paying claims.
Compliance obligations may require insurers to evaluate:
beneficial ownership structures
supply chains and cargo ownership
financial counterparties
shipping routes and vessels
These due diligence requirements fall under know-your-customer (KYC) and know-your-business (KYB) frameworks.
For global insurers, sanctions compliance can quickly become one of the most complex operational aspects of geopolitical risk.
How might geopolitical risk affect sector portfolios?
Geopolitical conflict does not affect every industry in the same way.
Some sectors often become strategically more important during periods of geopolitical tension, including:
defence manufacturing and security services
energy production and transport
logistics and maritime infrastructure
cybersecurity and digital resilience
These sectors may experience stronger demand for insurance coverage.
At the same time, other industries tend to face greater volatility, particularly those reliant on global mobility or discretionary spending. These include:
aviation and airline operations
tourism and hospitality
international education
conference and events sectors
In Australia, the international education sector alone generated more than A$53 billion in export earnings in 2023, making it one of the country’s most significant service industries.
For insurers, sector dynamics therefore influence not only exposure but also demand for coverage.
Are geopolitical signals integrated into risk governance?
In many organisations, geopolitical risk is still treated primarily as a macroeconomic issue rather than an operational one.
However, the way geopolitical shocks propagate through supply chains, financial markets and regulatory frameworks means that geopolitical developments increasingly affect day-to-day business operations.
Integrating geopolitical monitoring into enterprise risk management can help insurers identify early signals such as:
rapid increases in marine war-risk premiums
tightening of sanctions regimes
sudden changes in shipping routes
cyber attacks linked to geopolitical actors
These signals often appear before broader economic effects become visible.
For risk leaders, the challenge is ensuring that such information is integrated into underwriting, capital allocation and portfolio management decisions.
Looking ahead
Geopolitical competition between major powers, strategic resource pressures and technological rivalry are likely to remain defining features of the global economy for some time.
For insurers, this does not simply represent a source of additional risk. It also changes the way risk should be understood.
Insurance markets have always played a role in enabling global commerce by transferring and pricing uncertainty. In a more contested geopolitical environment, that role becomes even more important.
Insurers that are able to recognise early signals of geopolitical change — and incorporate them into underwriting strategy, portfolio management and governance frameworks — will be better positioned to navigate the evolving risk landscape.
The question is therefore not whether geopolitical risk will shape insurance markets.
It already does.
The more relevant question is how effectively insurers are prepared to respond when the signals appear.
