Business Interruption Claims Arising From the Middle East Conflict

Why It Matters

The disruption threatens multi‑billion‑dollar insurance payouts, exposing gaps in war‑risk coverage and prompting tighter underwriting across the sector.

Key Takeaways

• Strait of Hormuz traffic fell from 138 vessels/day to near zero
• Middle East tourism loses at least $600 million in visitor spending each day
• Gross‑earnings and profits policies can produce markedly different claim amounts
• Real‑time documentation of losses and mitigation actions strengthens claim credibility

Pulse Analysis

The Middle East war has rippled far beyond geopolitics, choking a key artery of global energy logistics. The Strait of Hormuz, responsible for roughly a quarter of seaborne oil and significant LNG and fertilizer flows, saw daily transits plunge from 138 vessels to almost none. This abrupt halt not only spikes freight rates but also forces downstream manufacturers and retailers to confront sudden supply gaps. Insurers, already wary of war‑risk exposure, now face a surge of business‑interruption (BI) claims that test the limits of existing policies and the industry’s capacity to assess loss in real time.

At the heart of each claim lies a methodological choice: a gross‑earnings (top‑down) policy that measures lost revenue from the event date until operations resume, versus a profits (bottom‑up) policy that tracks lost gross profit until pre‑loss revenue levels are restored. The two approaches can diverge dramatically, especially when businesses were operating at record highs before the conflict. Claimants must construct a credible "but‑for" baseline, adjust for seasonality such as Ramadan, and isolate conflict‑related shortfalls from pre‑existing trends. Contemporary evidence—cancellation notices, travel advisories, supplier disruption letters, and third‑party market data—carries far more weight than reconstructed records, and mitigation expenses must be documented to justify recoverable costs while also reflecting any loss reduction.

For insurers, the influx of conflict‑related BI claims accelerates scrutiny of war‑and terrorism exclusions and forces a reevaluation of underwriting standards. Policyholders who proactively capture disruption costs, understand waiting periods, and align their loss calculations with the specific policy language stand a better chance of securing indemnity. The broader market implication is a likely tightening of war‑risk endorsements and higher premiums for firms operating in volatile regions. Companies should therefore embed real‑time loss tracking into risk‑management frameworks and engage qualified financial experts early, ensuring that any future claim can survive the rigorous evidentiary tests that insurers will inevitably apply.