The global insurance market exhibited a phenomenon in March 2026 that the financial sector comprehends well, but the broader economy frequently disregards:
Global trade occurs only when insurers let it.
The disruption in the Strait of Hormuz, one of the world’s most crucial energy chokepoints, soon made geopolitical headlines. However, shipping via the strait was halted not primarily due to naval conflict, but because insurance capacity vanished.
These developments were more than just a geopolitical event for Solvency II-compliant insurers and reinsurers. Instead, they became a case study of how global events affect capital requirements, risk modelling assumptions and regulatory reporting duties.
What happened: insurance capacity disappeared
Following growing tensions and attacks on ships in late February 2026, insurers quickly reviewed the risk of underwriting voyages across the Persian Gulf.
Several developments occurred within days:
- Tankers were targeted and damaged in the region.
- Shipping operators started avoiding the Strait of Hormuz.
- Marine insurers and P&I clubs discontinued or limited war-risk coverage.
- Ships could not legally sail without insurance coverage.
Reports indicate that over 150 vessels were stranded near the strait, waiting for insurance clarity before continuing their voyages. The result was a sharp decline in traffic through a corridor that normally carries around one-fifth of global oil shipments. The sequence illustrates a fundamental reality of maritime commerce: insurance availability is often the deciding factor in whether ships sail at all.
| Development | Market Effect |
| Escalation of regional conflict | Increased perceived maritime risk |
| Attacks on vessels | Reassessment of underwriting exposure |
| Withdrawal of war-risk insurance | Ships unable to obtain coverage |
| Shipping slowdown | Disruption to global oil trade |
For the insurance sector, however, the real implications begin after the ships stop moving.
Why this matters under Solvency II
Events like the Hormuz disruption do not remain operational issues within marine underwriting. They quickly propagate into Solvency II metrics and regulatory reporting.
Three areas of the framework are particularly affected:
- Solvency Capital Requirement (SCR)
- Own Risk and Solvency Assessment (ORSA)
- Pillar III disclosures and supervisory reporting
Each of these areas is vulnerable to geopolitical risk incidents, which can result in significant, connected insurance losses.
SCR impact: underwriting and catastrophe aggregation
Under Solvency II, insurers must have enough capital to withstand extreme loss events with 99.5% confidence for a one-year period.
A crisis in a large shipping route, such as the Strait of Hormuz, stresses numerous SCR components at the same time.
Marine insurers may face elevated risk across multiple coverage lines, including:
- Hull and machinery insurance
- Cargo insurance
- Protection and indemnity (P&I) liability
- War-risk cover
These risks are particularly tough from a solvency standpoint since they may become inextricably linked within a single geographical corridor.
For example, a single war escalation or missile attack might affect a large number of tankers traveling along the same constrained maritime route.
| Marine Insurance Exposure | Example Loss Scenario |
| Hull & Machinery | Vessel damage or total loss |
| Cargo | Loss of high-value oil cargo |
| P&I Liability | Pollution or third-party damage |
| War Risk | Conflict-related losses |
This geographic concentration can significantly increase the underwriting catastrophe component within SCR models.
Reinsurance implications: correlated claims risk
Geopolitical disturbances add another layer of risk to reinsurers’ portfolios, namely concurrent claims against multiple cedants.
If numerous insurers suffer losses in the same shipping corridor, reinsurers may face significant aggregated claims across multiple portfolios.
This causes stress in three places:
- Risk accumulation throughout maritime treaties.
- Volatility in reinsurance recoverables
- Potential impact on retrocession capacity.
In terms of Solvency II, these risks affect counterparty default modules and reinsurance exposure calculations in capital models.
ORSA: geopolitical risk moves from theoretical to real
For many insurers, the Own Risk and Solvency Assessment (ORSA) has the most urgent regulatory repercussions.
ORSA requires insurers to assess solvency using forward-looking stress scenarios that are appropriate for their risk profile.
Historically, many ORSA frameworks have included geopolitical scenarios such as:
| Stress Scenario | Potential Impact |
| Disruption of major shipping routes | Marine underwriting losses |
| Energy supply shocks | Commodity price volatility |
| Regional military escalation | War-risk insurance claims |
| Global supply chain disruption | Inflation and investment volatility |
The Hormuz crisis demonstrates that these scenarios are not purely hypothetical.
A prolonged shutdown of the strait could affect:
- Marine underwriting exposures
- Energy markets and commodity prices
- Financial markets and investment portfolios.
This creates a multi-risk scenario impacting both sides of an insurer’s balance sheet.
Investment portfolio impacts
Even insurers with no maritime underwriting exposure can face solvency issues through their investment portfolios.
Energy supply disruptions frequently lead to:
- Oil price increases
- Freight rate volatility
- Inflation pressures
These changes affect the market risk component of SCR, which may have an impact on solvency ratios by modifying asset prices.
Geopolitical energy shocks might thus become capital management difficulties for large European insurers with diverse investment portfolios, rather than just underwriting concerns.
Supervisory and reporting considerations
Large geopolitical events can also have an impact on Solvency II Pillar III reporting obligations, specifically:
• SFCR: Solvency and Financial Condition Report.
• Regular Supervisory Report (RSR).
Supervisors may ask insurers to explain changes in their risk profile, such as exposure to:
- Marine underwriting concentration
- Geopolitical risk scenarios
- Supply-chain disruptions affecting insured sectors.
Events such as the Hormuz disaster can consequently lead to a closer examination of risk management assumptions and stress-testing methodologies.
The broader lesson
The Strait of Hormuz disruption highlights a key truth for insurers under Solvency II: geopolitical turmoil can lead to solvency issues.
When insurance capacity vanishes in a key trade corridor:
• Underwriting risk rises.
• Capital requirements may fluctuate.
• Investment portfolios become volatile.
• Supervisory monitoring increases.
For insurance finance and risk teams, the lesson is clear: geopolitical risk is no longer a minor concern.
It is increasingly important in solvency management and regulatory reporting.
To learn more about how we can assist you with these changes, please reach out to us at contact@datatracks.com
