War risk insurance market surges as global conflicts drive demand

Global conflicts in Ukraine and the Middle East have pushed the war risk insurance market to a new level of demand, as companies and individuals alike seek coverage against damage from war, terrorism and related perils. The sector, once seen as a niche, has grown into a sizable global business. A Kyiv resident, Natalia Grishko, learned that lesson the hard way last November when a Russian missile damaged her apartment in a tower block on the city’s outskirts. Her daughter, Alina Kalcheva, had taken out specialist war risk insurance for the flat; the insurer paid out $1,000 to help cover repairs. Kalcheva, 33, says she did not hesitate to buy the policy, and it proved timely in a moment when standard household coverage does not cover such conflict damage.

With conflicts persisting in Ukraine and the Middle East, the market’s reach has broadened—from households to multinational companies—driving a global spend estimated at about $1 billion per year. A separate Ukrainian case underscores how coverage can extend to personal assets: Ekaterina Vasylieva extended her car’s comprehensive policy in April 2024 and promptly benefited when the vehicle was damaged by Russian shrapnel in Odesa the following day. The car looked like a sieve after the attack, she recalled, and the policy helped defray the losses.

Industry executives say the market’s growth mirrors a broader shift in risk management since the September 11, 2001 attacks, when war risk coverage first became a mainstream option for protecting global operations, facilities and staff in volatile regions. Today, most policies are purchased by corporations, though individuals can and do buy coverage for personal assets in high-risk areas. A trade publication this year estimated that the global spend on war risk insurance runs about £800 million (roughly $1 billion) per year, with roughly £621 million (almost 80%) flowing to specialist insurers in London, the heart of this market.

Joanna Cousins, who heads a nine-person political violence and war team at Westfield Specialty in London, points to a real-world example: a Western-owned energy facility in Iraq that had suffered repeated attacks and ultimately bought more than £100 million of war risk coverage. Without that protection, the site’s operations could have ceased or been greatly reduced. Industry insiders say the cost of coverage is kept at a distance from the public eye, but a senior London underwriter who asked not to be named estimated that, for a British or American firm operating in Lebanon or Israel, premiums generally range between 0.5% and 2% of the total cover. By contrast, premiums in more stable Gulf states are significantly lower, typically 0.025% to 0.05% of the insured amount. A £100 million policy, for example, could cost between £500,000 and £2 million annually, depending on the country and the specific risks.

The market categorizes risk into seven “buckets” that reflect different severities of conflict. Sabotage and terrorism sit at the lower end, while civil and interstate war sit at the higher end. Many insurers aim to offer a full spectrum because it is sometimes unclear when a situation crosses from terrorism risk to civil or interstate war. Raveem Ismail, founder of Trigger Parametric in London, notes that the market has grown in both capacity and demand, with more perils available to customers—such as an expanding active shooter product—as well as coverage for strikes and riots.

The City of London’s prominence in war risk coverage is tied to the strength of Lloyd’s of London, a long-standing specialty insurance market since 1689. Lloyd’s also serves as a center for war risk reinsurers—firms that assume portions of risk from primary insurers—helping to spread exposure. Cousins explains that reinsurers cover varying percentages of a policy:

Each reinsurer covers a percentage of the risk, typically anywhere from one to ten percent. Constantin Gurdgiev, a finance professor at the University of Northern Colorado who studies risk and conflict finance, says pricing war risk coverage is a particular challenge. Wars and large-scale conflicts are often black swan events—rare and highly unpredictable—so historical data provide limited guidance for setting prices. Yet Ismail argues that war risk insurance can be highly profitable, unlike standard auto insurance, because payouts can be relatively small as a share of premiums and investment income can augment returns. He notes that car insurers, by contrast, historically pay out around 1.05 for every pound of premiums, whereas war risk insurers may pay out only a fraction of that, making the premium buffer attractive to insurers and reinsurers alike.

Looking ahead, market participants say capacity is expanding as more players enter the sector and as existing reinsurers adjust terms to reflect shifting risk landscapes. More perils are underwritten, and coverage can increasingly be tailored to corporate needs—covering kidnappings and ransoms, injuries, and costs associated with active assailant scenarios. Hiller, an underwriter and group head of terrorism and political violence at Munich Re Specialty, says: “The market is growing in capacity and demand. There are more perils customers can buy coverage for, especially around the active shooter product, but also strikes and riots.”

The industry remains cautious about pricing amid geographic volatility. Analysts say premiums drift with the level of political violence and the perceived likelihood of significant damage; however, the potential for profitability remains a draw for investors and insurers alike. As one underwriter notes, the economics of war risk are different from consumer auto insurance, but the combination of risk pooling, diversification through reinsurance, and the potential for investment income can yield favorable margins, especially when claims frequency remains limited relative to the insured exposure.

If recent turmoil continues to shape the risk landscape, market observers expect demand for war risk coverage to stay elevated in the near term, particularly for energy facilities, manufacturing sites and other critical infrastructure in volatile regions. In this environment, London — anchored by Lloyd’s and a cluster of specialist firms — is likely to remain the epicenter of global war risk insurance, even as capacity grows and new products emerge to address evolving threats.