Moody’s sees limited GCC insurance fallout from Iran conflict

Moody's Ratings expects the short-term credit impact of the Iran conflict on insurance companies in the Gulf Cooperation Council (GCC) region to be limited, although risks would increase if the disruption persists.

In a recent report, the agency said its base-case scenario assumes the conflict will be relatively short-lived, likely lasting several weeks, after which shipping through the Strait of Hormuz and air traffic would largely resume.

Under this scenario, GCC insurers are unlikely to face material or immediate pressure on their credit profiles.

Moody’s noted that larger and more diversified insurers, with relatively low exposure to real estate and equities, are less vulnerable than smaller companies. Within its rated portfolio — which is skewed toward larger insurers — around 40% of capital risk charges stem from asset risk under capital adequacy metrics, with real estate and equity exposures accounting for roughly one-third of total capital risk charges.

The agency estimated that a 20% decline in real estate and equity valuations would reduce total equity of its rated insurers by about 7%. However, this impact would likely be largely absorbable, as most rated insurers maintain adequate capital buffers.

By contrast, smaller GCC insurers typically have thinner capital margins and higher exposure to equities and real estate.

Moody’s also expects the direct impact of conflict-related claims to be minimal for all GCC insurers, as war risks are generally excluded from standard insurance policies in the region.

However, risks would rise if the disruption continues, with second-round pressures intensifying should the conflict be prolonged or attacks escalate to GCC countries.

In such a scenario, sharper asset price declines, weaker investor sentiment, and deteriorating macroeconomic conditions would weigh on insurers’ balance sheets.

A weaker economic environment would also dampen premium growth — a key factor underpinning Moody’s current stable outlook for the GCC insurance sector. Slower premium growth could exacerbate competitive pricing pressures as insurers compete for a smaller pool of business, putting pressure on underwriting margins.

If combined with larger asset valuation losses, these developments could erode capital buffers and, if sustained, negatively affect the sector’s overall credit outlook.