South Africans are seeing some of the economic consequences of heightened tensions in the Middle East, most immediately through rising oil prices and the prospect of higher petrol costs. Beyond fuel prices geopolitical instability can also affect insurance cover, international trade, and travel arrangements.
Tensions involving Iran, Israel, and the United States have drawn attention to risks affecting shipping through the Strait of Hormuz. The strait normally carries roughly 20% of global oil supply, along with large volumes of liquefied natural gas and other commodities.
Although the route has not been formally closed, security concerns and higher insurance premiums on certain routes have prompted some vessels to avoid the area.
According to Ryno de Kock, the head of distribution at PSG Insure, geopolitical conflict can influence how insurers assess exposure, particularly where trade routes, sanctions, and war-related risks are involved.
War exclusions in insurance policies
De Kock says most insurance policies contain war-related exclusions.
“All insurers include war-clause exclusions in their policies for acts of war such as invasions, military action, insurrections, and terrorism,” he says. “These exclusions exist because war-related losses can be catastrophic in scale and threaten the long-term financial viability of insurers.”
Such clauses are standard in many commercial insurance policies and typically exclude losses arising directly or indirectly from acts of war or similar events.
These provisions may receive little attention during periods of relative stability but can become significant when conflicts escalate or affect international trade routes.
Potential impact on marine and trade cover
Businesses involved in importing or exporting goods may also face additional risk where shipping routes or logistics networks are affected.
Heightened military activity can disrupt shipping lanes, ports, airports, and logistics hubs. This can affect marine insurance arrangements linked to those routes.
De Kock says insurers may reassess exposure linked to affected regions, shipping corridors, and airspace.
“Once a conflict reaches a certain level of intensity or geographic spread, insurers may withdraw or restrict cover in those regions,” he says. “This can leave businesses exposed if they assume cover remains in place, particularly for cargo, marine and transit risks.”
Businesses operating in or near affected areas may also find that war cover is cancelled or restricted. Where war exclusions apply, losses linked to conflict-related events may fall outside the scope of cover.
Sanctions and insurance claims
International sanctions can further complicate insurance cover during geopolitical conflict.
Many insurance policies contain sanction limitation clauses that prevent insurers from providing cover or paying claims if doing so would breach sanctions imposed by international bodies such as the United Nations or other jurisdictions.
“In a conflict involving the US and Iran, sanctions are a key concern,” says De Kock. “If a claim payment or policy exposure places an insurer in contravention of international sanctions, they are legally prohibited from responding.”
This can create complications if sanctions are introduced after a shipment has already begun. In such cases, even otherwise valid claims may not be payable if settlement would breach sanction regulations.
Travel insurance considerations
Geopolitical conflict can also affect travel insurance cover.
Flight disruptions, airspace closures or travel restrictions linked to military activity may fall outside the scope of standard travel insurance policies.
“Most standard travel insurance policies contain broad war and conflict exclusions,” De Kock says. “This means cancellations, delays, rerouting, and additional accommodation costs arising directly or indirectly from acts of war or military action are generally not covered.”
Travellers may therefore find that expenses resulting from conflict-related disruptions – such as rebooked flights or extended accommodation – need to be covered personally.
Reviewing cover in uncertain conditions
De Kock says businesses and travellers with international exposure should review their insurance arrangements when geopolitical conditions change.
“Insurance should not be treated as a static product, especially in a rapidly changing geopolitical environment,” he says. “Understanding how war exclusions, sanctions clauses and territorial limitations apply is critical to managing risk.”
Although insurance remains an important tool for managing uncertainty, he says its effectiveness depends on policyholders understanding both the protection provided and the limits that apply under certain circumstances.
