The recent conflict in the Middle East is causing concerns for insurance companies, especially those offering cyber insurance. S&P Global Ratings has pointed out that cyber attacks linked to the ongoing fighting are raising questions about how insurers handle risks tied to war and cyber threats. These attacks have already included things like distributed denial-of-service (DDoS) attacks, phishing attempts, and efforts to breach both corporate networks and vital infrastructure.
While there haven’t been any major insured losses reported yet that can be directly linked to the conflict, experts warn that cyber attacks could become more severe after the physical fighting dies down. The situation is unpredictable, with no clear timeline for how long the conflict will last or how far its effects might spread, says S&P.
Hackers connected to pro-Iranian groups have been particularly active, targeting critical infrastructure, government agencies, and data centers not only in the Middle East but also in places like North America. This activity has included probing industrial systems and networks, raising alarms among cybersecurity professionals.
The market for cyber insurance in the Middle East is still relatively small but growing quickly. On a global level, cyber insurance premiums are currently in the tens of billions of dollars and are expected to more than double by 2030. Because many companies rely on shared services, software, and cloud providers, a single cyber event can lead to big losses spread across many insurers and regions.
One big issue for insurers is deciding if a cyber attack linked to the conflict counts as an act of war or a criminal act. Many insurance policies now exclude coverage for war-related cyber operations, especially in the London market. But it can be hard to tell who is behind an attack, particularly when hackers use proxies or loosely connected groups. This uncertainty can lead to disputes over claims.
There are also worries about the possibility of widespread losses hitting many companies at once, which could overwhelm reinsurers who provide backup insurance to insurers. On top of that, insurance companies themselves are possible targets since they hold sensitive customer data and rely heavily on digital systems.
In the background of all this is a larger debate about how cyber war risks are covered in policies. Some insurers have added strict clauses excluding state-backed cyber attacks. However, brokers and regulators are pushing for some insurance to remain, especially for indirect damage caused during conflicts but not clearly part of them.
Despite these concerns, S&P and others believe the overall outlook for the cyber insurance market is stable. Underwriting has improved thanks to stricter rules, higher thresholds before coverage kicks in, and better risk selection. Prices have flattened or even softened in some areas, while more companies are offering coverage.
Still, many organizations remain underinsured or uninsured against potential cyber losses, leaving a big protection gap. S&P says it will keep watching how insurers manage risks, control exposures, and handle the tricky issue of policy wording in the face of uncertain cyber threats.
The bottom line is that while recent events haven’t hit insurers hard yet, a major cyber assault or a long-term campaign blurring the line between war and crime could shake things up and test insurance coverage like never before.