As the U.S.-Israeli air campaign against Iran intensified on Monday with no clear end in sight, attention quickly turned to a new frontline: the airline industry.
For the third straight day, flight operations have been thrown into disarray, forcing carriers to reroute, cancel, and absorb mounting costs. Even more alarming, the revenue losses tied to these disruptions aren’t covered by insurance, according to analysts and industry insiders — leaving airlines to shoulder the financial hit just as uncertainty continues to spread.
Travel stocks from Asia to New York plunged, erasing billions of dollars in market value as the escalating conflict rippled through the global aviation industry. Thousands of flights were disrupted, major Middle Eastern hubs were forced to shut down, and surging oil prices added fresh pressure — delivering a powerful shock to markets already on edge and raising fears that the turbulence is far from over.
Here’s how insurance industry experts and market analysts are sizing up the unfolding crisis — and what they believe it could mean for airlines, insurers, and investors in the days ahead.
- Analysts at Jefferies noted that commercial property policies “almost always” exclude war-related risks — and unlike marine or aviation coverage, that protection isn’t easily purchased as a standalone policy. In other words, when conflict erupts, many businesses may find there’s little financial safety net in place, exposing a gap that only becomes visible when it’s already too late.
- The brokerage warned that major commercial property losses — including potential damage to Dubai’s iconic Palm Jumeirah — could fall outside the scope of insurance coverage. Such a scenario would leave owners and investors facing staggering repair costs on their own, underscoring just how exposed high-profile assets can be when conflict escalates.
- Jefferies also pointed out that aviation war-risk policies often give insurers the right to cancel coverage at short notice. Meanwhile, standard non-war aviation policies typically exclude war-related losses altogether — either explicitly or through force majeure clauses. The result is a narrow and fragile safety net, one that can quickly unravel just when airlines need protection the most.
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Still, an industry source told Reuters that aviation insurers are no strangers to geopolitical shocks and have systems in place to manage them. So far, no carrier has received a formal notice of cancellation — a sign that, despite rising tensions, insurers are holding steady for now. Whether that calm endures, however, may depend on how the conflict unfolds in the days ahead.
- Airlines do carry aviation war-risk insurance for their fleets, covering physical damage to aircraft and certain liability claims. But when it comes to lost revenue from grounded planes, canceled routes, and widespread operational chaos, that protection often stops short. Those losses typically fall under broader business interruption policies — many of which contain explicit war exclusions — effectively leaving airlines to absorb the financial blow themselves, a second industry source said.
- Morningstar DBRS warned that the unfolding events pose serious underwriting and investment challenges across multiple insurance lines — from marine and aviation to commercial property, travel, and even supply chain coverage. The ripple effects could test insurers’ risk models, strain capital reserves, and reshape pricing strategies at a time when the industry is already navigating heightened global uncertainty.
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Morningstar DBRS added that if the conflict spreads further across the Gulf, insurers could respond swiftly — raising premiums and pulling back capacity in the terrorism and political violence insurance markets. Such a shift would tighten coverage just as demand surges, potentially driving up costs for businesses operating in already high-risk regions and reshaping the market almost overnight.
- Insurance costs for shipping goods through the Middle East Gulf have skyrocketed — jumping as much as fivefold in just 48 hours. Most underwriters are now declining to offer coverage for vessels transiting the Strait of Hormuz, according to industry sources cited by Reuters on Monday. The sudden spike underscores how quickly risk perceptions can shift, threatening to choke off one of the world’s most critical energy and trade corridors.
- “From an aviation-hull perspective, insurers must consider the risk that missiles or air-defense interceptors could result in large hull and liability claims,” it wrote in a note.
