Michael Burle, head of London specialty & global line leader, Liberty Specialty Markets examines what the next 12 months will bring for the war and terror markets.

While relatively stable and predictable a decade ago, loss patterns in the war, terrorism, and political violence market have shifted dramatically. Events in September 2025 illustrated this, with the Israeli air strike on Doha, unrest in Nepal triggering the government’s collapse, rioting in France, the assassination of Charlie Kirk and UK migrant hotel protests – all in a single week.

With perils increasingly varied and interconnected, the modus operandi of losses is no longer linear, posing a challenge re/insurers will continue to contend with in 2026. Yet this confluence of perils, while extremely difficult to predict, price and manage, is also a potential catalyst for innovation, with heightened client risk awareness affording insurers the opportunity to deepen client engagement and close protection gaps.

An abundance of competing capacity

In addition to the high-profile and fast-changing nature of risk, carriers must also contend with an abundance of competing capacity willing to lead, follow or facilitise in the war and terrorism market. While competition produces rate softening welcomed by insureds, discipline and risk selection become increasingly critical for carriers. Locally based experts providing ‘ground truth’ and insight into risk selection can materially influence decisions and portfolio performance.

Given these challenges, insurers are also increasingly viewing client risk from a multi-peril perspective. Historically the focus has primarily been on terrorism but there is now a need in many territories to assess the threat of civil unrest, including strikes, riots and civil commotion. As that momentous week in September showed, a minor skirmish in a regional town can result in business interruption losses comparable to those from a major blast in a city centre.

The increased prevalence of civil unrest is one reason why underwriters are viewing clients through a wider lens, with more riots and instances of civil unrest occurring globally year on year. Yet this is also due to the fact that insurance penetration is increasing, with the market reaching clients previously uninsured, heightening overall exposure and visibility. Taking a broader view allows underwriters to price more accurately, offer solutions that address client-specific exposures and further increase market penetration.

Sustained elevation of geopolitical hazard

The World Economic Forum’s 2025 Global Risk Report ranked state-based armed conflict as the number one global risk, followed by extreme weather and geopolitical confrontation. We believe this will continue to be the case in 2026.

The Middle East has been monitored closely, particularly from a contagion perspective. The peace deal between Hamas and Israel has brought a measure of relief, yet the situation remains extremely fragile. Similarly, Iran’s influence is considerably weaker at the end of 2025 compared to the start but could seek to rebuild its influence over time.

Uncertainties surrounding China–Taiwan dynamics – including potential military action, coercive measures, or trade restrictions – remain a significant concern, reinforcing the market’s expectation of a sustained elevation in geopolitical hazard.

Systemic exposure: supply chain fragility

A 2024 scenario developed by the Cambridge Centre for Risk Studies and Lloyd’s suggested that geopolitical conflict could expose the global economy to USD 14.5 trillion in losses over five years, with supply chain disruption the main driver.

Events such as Russia-Ukraine illustrate how quickly regional instability can ripple worldwide, curtailing the flow of key commodities such as grain exports essential to food security across North Africa. A China-Taiwan crisis could have far broader systemic impact than the Russia-Ukraine conflict, potentially crippling microchip and technology supply chains and restricting minerals critical to production across numerous sectors.

Beyond direct damage, recent examples of civil unrest, domestic extremism and localised incidents, such as London’s Borough Market attack, illustrate how small-scale disruptions can trigger significant business interruption and denial-of-access losses.

Given the scale and severity of risks without, change is needed within. Breaking down traditional silos to achieve closer organisational integration is a further measure that can fortify insurers. Those insurers where underwriting, actuarial, claims, risk engineers and others sit together report numerous benefits, including greater knowledge sharing and sharper risk selection, enhancing the overall view and management of risk.

2026 will be characterised by abundant capacity, widening political violence scenarios and a global economic system increasingly vulnerable to geopolitical shocks. Despite these challenges, for those insurers that can adapt quickly, clear opportunities exist to deliver more insightful products to previously underserved markets.