Fitch Ratings says risks to the global insurance sector from the US war on Iran hinge on its duration.

If the conflict is short and major damage to shipment facilities and oil production is avoided, the threat will be limited.

“We believe the earnings impact for insurers will be manageable at current rating levels, as war risk is generally excluded, apart from for some very specialised markets, unless the duration and scope of the conflict widen,” the ratings agency said.

A prolonged period of economic and financial market volatility may indirectly affect insurers through loss cost inflation, falling asset values and rising defaults.

The London market and global specialty insurers are most directly exposed to the conflict through marine or aviation war, political violence, trade credit and energy lines, Fitch says.

“We do not expect significant claims from property damage, business interruption or cyber insurance policies because they typically exclude acts of war.

“Recent developments have tightened capacity, driven by a sharp repricing, and have created a correlated loss risk across war risk insurance markets.”

Fitch expects claims booked in the first quarter will give an insight on earnings impact, but it expects this to be limited for most insurers, as was the case in 2022 with the start of the Russia-Ukraine war.

It says the Iran conflict’s second-order losses are more likely to affect ratings. Direct (re)insurance losses are likely to be lower.

If the conflict is more protracted or damaging, rating effects could flow from potential changes to sovereign or bank ratings.