Jamil Elbahou, CEO & CUO, Connect Underwriting explains while insurers are playing a key role in a volatile Middle East, pricing is still struggling to keep pace with rising risks.

While 2024 was an exceptionally tumultuous year for the Middle East, in 2025 the region suffered even greater levels of violence and instability. Despite the Israel-Hamas war ending with the Qatar-Egypt-and-US-brokered peace deal, the region experienced a higher number of conflict events, fatalities and people displaced across broader geographies. The Middle East therefore remains highly unstable, with several situations being monitored closely by PVT underwriters heading into 2026.

The downfall of Bashar al-Assad’s government in 2024 was an historic moment in Middle Eastern geopolitics. This stripped Iran of a vital strategic foothold in Syria, severing supply lines to regional proxies and significantly weakening Iran’s influence across the Levant. Iran is trying to rearm and rebuild its regional influence but, with the regime change in Syria, the continued siege on Iran-backed Hezbollah in Lebanon and sustained Israeli and Western pressure, these efforts have so far proved futile. Although Israel has degraded Hezbollah’s capabilities in Lebanon, Iran’s influence in Iraq remains potent, supplying weapons to Iraqi militias to attack Israel. Should those assaults intensify, the likelihood that Israel will strike to prevent a new front emerging is very high. The extent to which Baghdad will tolerate conflict escalation and run the risk of becoming the next theatre of war for Israel remains to be seen.

Following the Israel-Hamas peace deal, while some capacity withdrew, few markets that remained priced in the possibility of hostilities resuming and the potential for regional contagion risk.

With conflicts in the Middle East also being fought at sea, this further influenced demand and pricing for PVT cover. In particular, the Houthi attacks on Red Sea shipping prompted a noticeable uptick in marine war pricing in mid-2025, which also affected pricing for cover on land. However, as Houthi attacks have greatly reduced, the market is now softening. Yet the situation in Yemen, with the ongoing Houthi insurgency and fragmented governance, is still extremely volatile. The potential for renewed conflict and regional escalation therefore remains very high, with the market unlikely to have seen the end of Houthi-initiated conflicts.

Greatly reduced Houthi activity plus the resolution of the Israel-Hamas war has prompted a market over-correction with pricing, which has now fallen below the true cost of capital deployment for most markets in the region. With escalation almost certainly inevitable, current rates are not reflective of the potential risks but the fact that the market is replete with capital. As such, depending on how these various situations develop, PVT underwriters are highly vulnerable to material losses in 2026.

To illustrate this, the following scenarios are ranked in order, from most to least likely:

• A second escalated confrontation between Israel and Hezbollah – near certain
• Additional conflict between Israel and the Houthis in Yemen
• Another round of bombardment of Iran
• Civil conflict in Syria if Assad replacement Al Sharra’s presidency is jeopardised
• The inadvertent entry of Iraq into war with Israel due to the actions of Iraqi Hezbollah
• SRCC-turned attempted coup d’état in Jordan – unlikely

In addition, the potential for large losses remains high in Africa, particularly the Sahel region. Stretching roughly 3,000 miles from Senegal to Sudan just south of the Sahara, the territory has experienced a dramatic rise in violent extremist activity. Groups linked to al‑Qaeda and Islamic State have and continue to expand, causing high levels of civilian deaths and instability. The PVT market also faces losses from mushrooming tensions and conflicts elsewhere in the world, such as the ongoing war in Ukraine, which threatens to spill over into Europe.

The re/insurance market continues to play a critical role in conflict zones by eliminating economic uncertainty for businesses. Yet heading into 2026, current pricing does not adequately reflect the material loss potential arising from the Middle East and other regions. A sharper understanding of risk is needed, grounded in robust intelligence to assess and model exposures accurately. Only then can risks be priced correctly and in a way that protects the resilience of our clients and our market for the future.