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Gulf Takaful Faces a Longer-War Risk: Investments, Growth and Consolidation
Gulf takaful operators are likely to face limited immediate claims pressure under the baseline scenario, but a prolonged Middle East conflict could damage investment values, raise claims inflation and slow premium gro... Marine war risk cover has shifted from routine annual protection toward selective, heavily repri...
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Key takeaways
- Gulf takaful operators are likely to face limited immediate claims pressure under the baseline scenario, but a prolonged Middle East conflict could damage investment values, raise claims inflation and slow premium gro...
- Marine war risk cover has shifted from routine annual protection toward selective, heavily repriced voyage by voyage capacity; reported Hormuz hull war risk quotations rose from roughly 0.15%–0.25% of vessel value bef...
- Moody’s still expects moderate takaful growth over the next two to three years, supported by compulsory coverage, healthcare demand and financial inclusion, even as regulation and technology costs encourage consolidat...
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openai.comCreate a landscape editorial hero image for this Studio Global article: How are Gulf takaful (Islamic insurance) operators managing the ongoing Middle East conflict and Strait of Hormuz disruption—with war losses. Article summary: Gulf takaful operators appear insulated from large immediate underwriting losses, but not from a long conflict’s economic and market effects. Their main vulnerability is shifting from claims to investment losses, weaker . Topic tags: general, news, general web, user generated. Style: premium digital editorial illustration, source-backed research mood, clean composition, high detail, modern web publication hero. Use reference image context only for broad subject, composition, and topical grounding; do not copy the exact image. Avoid: logos, brand marks, copyrighted characters, real person likenesses, fake screenshots, UI text, readable text, watermarks, charts w
Gulf takaful operators are not necessarily insulated from the economic consequences of a prolonged Middle East conflict—but their first-order risk is not likely to be ordinary policy claims. The more consequential threat is a sustained shock to investment income, asset values, inflation and regional activity, at a time when smaller insurers are already confronting competitive, regulatory and technology pressures. 20
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Why direct war claims may be contained
Takaful is a Shariah-compliant insurance model in which policyholders pool risk rather than transferring it in the conventional insurer-owned model. 19 In practice, ordinary policies generally do not function as open-ended cover for war or political violence. Specialist exposures—particularly marine war risk, aviation and political-violence business—are handled through specialist insurance and reinsurance markets.
That structure helps explain why Moody’s baseline view has been that the near-term credit effect on Gulf insurers should be limited, provided disruption is relatively short-lived and transport links resume at scale. Larger, more diversified firms are better placed to absorb volatility than smaller peers. 36
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This is a baseline assessment, not a guarantee. Specialty insurers and reinsurers carrying concentrated marine, aviation or political-violence exposures face a higher chance of severe, low-frequency losses if hostilities persist or broaden. 37
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The longer-war problem: portfolios, inflation and weaker demand
A drawn-out conflict would shift the pressure from underwriting to balance sheets and the wider economy. Investment income became a more important contributor to takaful earnings during 2025 and the first half of 2026, according to reporting on Moody’s analysis. That makes operators more sensitive to weaker investment returns and falling asset values. 20
The same disruption could also affect the insurance business indirectly:
- Slower premium growth: weaker trade, tourism, construction and consumer activity can reduce demand for new cover.
- Higher claims costs: supply-chain disruption and broader inflation can make repairs, healthcare and other claims more expensive.
- Greater capital pressure: market losses and volatile earnings can be harder to absorb for small, narrowly focused operators.
Moody’s has specifically identified weaker economic activity, lower asset values, higher claims inflation and slower premium growth as the central risks if the conflict lasts. 20
Hormuz has made marine war cover costlier and more selective
The Strait of Hormuz disruption has exposed a separate layer of risk: the availability and price of marine war-risk cover. Early in the conflict, several marine insurers cancelled war-risk extensions for vessels operating in Iranian waters, the Gulf and adjacent waters. Reuters reported that the cancellations followed damage to tankers, a seafarer death and vessels stranded around the strait. 1
The market did not disappear altogether. The Lloyd’s Market Association later said war insurance remained available through the Lloyd’s and London company market, while noting that a small number of fixed-premium P&I covers for charterers had been cancelled. 7 The practical change is that cover has become more selective, more expensive and more dependent on specialist capacity.
Reported hull war-risk rates illustrate the repricing: before the conflict, Hormuz transit rates were around 0.15%–0.25% of vessel value; subsequent quotations were reported in a 3%–10% range. 3 Howden Re said annual war cover had been removed for Gulf marine hull and cargo business, with cover instead being written voyage by voyage.
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For shipping companies and cargo owners, that means higher voyage costs, shorter decision windows and less certainty that a quotation will be available on acceptable terms. For local takaful operators, it reinforces the importance of tight exposure management and of access to international reinsurance rather than creating a broad new ordinary-policy loss category.
Why takaful growth can continue despite the conflict
Moody’s expectation of moderate global takaful growth over the next two to three years rests on structural demand drivers, not on a benign geopolitical outlook. Reporting on its analysis points to economic expansion, compulsory insurance, healthcare spending and financial inclusion as the main supports. 20
These drivers matter because they broaden the insured base:
- compulsory motor, health and other mandated covers create recurring demand;
- healthcare needs support medical and family takaful demand;
- low insurance penetration leaves room for wider access through digital distribution and microtakaful;
- policy agendas in major markets can help deepen participation.
Malaysia provides a concrete example. Bank Negara Malaysia’s Financial Sector Blueprint 2022–2026 set a 2026 target for insurance and takaful penetration of 4.8%–5.0% of GDP and aimed to double the number of people subscribed to microinsurance and microtakaful. 17
Those structural supports do not eliminate near-term pressure. Malaysia’s sector, for example, still faces medical inflation, weaker investment returns and softer consumer spending. 22 The investment case is therefore resilience, not immunity.
Why smaller operators face consolidation pressure
The conflict adds to challenges that existed before it: intense price competition, rising claims, medical-cost inflation, compliance demands and the fixed cost of data, cybersecurity and digital distribution. Larger operators can spread these costs across a broader customer base, negotiate more effectively for reinsurance and build more diversified portfolios.
In Saudi Arabia, the transition to a risk-based capital and economic-solvency framework beginning in January 2027 is expected to increase solvency pressure and reinforce consolidation. 21 Moody’s has also linked sustainable improvement in the market to underwriting discipline, diversification beyond motor and medical lines, and further consolidation.
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What to watch next
The key issue is duration. A short disruption may leave Gulf takaful operators with manageable direct claims exposure. A longer or wider conflict would test investment portfolios, economic activity, claims costs and capital buffers at the same time. 20
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For operators, investors and policyholders, the clearest signals will be the availability and price of specialist marine cover, the direction of asset values and investment income, claims inflation, and whether smaller insurers can meet rising regulatory and technology demands without merging or raising capital.
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Gulf takaful operators are likely to face limited immediate claims pressure under the baseline scenario, but a prolonged Middle East conflict could damage investment values, raise claims inflation and slow premium gro...
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Gulf takaful operators are likely to face limited immediate claims pressure under the baseline scenario, but a prolonged Middle East conflict could damage investment values, raise claims inflation and slow premium gro... Marine war risk cover has shifted from routine annual protection toward selective, heavily repriced voyage by voyage capacity; reported Hormuz hull war risk quotations rose from roughly 0.15%–0.25% of vessel value bef...
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Moody’s still expects moderate takaful growth over the next two to three years, supported by compulsory coverage, healthcare demand and financial inclusion, even as regulation and technology costs encourage consolidat...