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Data centres, energy projects, pipelines, ports and hotels across the Gulf are flooding insurers with requests for millions of dollars of cover against political violence, as asset owners move to limit their exposure to the escalating regional conflict.
Insurers and brokers said they have received hundreds of requests for political violence and terrorism insurance this week, to try to protect property against risks including war, terrorism and debris from intercepted missiles, as well as riots, strikes, protests and revolutions.
The trend underscores how investors in Gulf states such as Saudi Arabia and Oman are moving to limit potential losses as the regional war widens, with Iran and its allies launching drone and missile attacks on Israel and neighbouring countries in response to the US-Israeli bombing campaign.
Fergus Critchley, global head of terrorism and political violence at broker WTW said that the conflict was likely to trigger losses that could be “significantly larger and more catastrophic” than any other in the past decade.
Many of the requests for political violence cover have come from western businesses in Gulf countries, which are seen as more vulnerable to direct attack, said Raj Rana, head of war and terrorism at broker Bowring Marsh, which has received more than 50 inquiries about these products since last weekend.
Solar energy projects in Saudi Arabia and hotels in Bahrain and Qatar were also among those seeking political violence cover this week, one insurer said, as businesses looked to protect infrastructure from collateral damage such as falling shrapnel, as well as targeted attacks.
Drones have also targeted Amazon data centres in the United Arab Emirates and Bahrain this week. Experts say Amazon’s facilities were likely targeted by Iran. Microsoft said it had not experienced any outages in the region.
Before the war, some Gulf businesses already had insurance against terrorism.
But brokers said they were now telling clients to buy full political violence coverage, which includes “strikes, riots and civil commotion” as well as state-backed violence.
Prices for this type of cover rose sharply at the start of the week and are now several multiples of their prewar levels, one insurer said.
Before last weekend, cover against political violence for an energy project in Saudi Arabia or the UAE might have cost less than 1 per cent of the insured value of the asset, they said.
As of Thursday, the price had risen to as much as five times that level. For a $20mn development, this would mean that $10mn of political violence cover would cost $500,000, up from less than $100,000.