The ongoing wars in the Middle East and Ukraine are set to push the global war and political violence sector into the red for the first time in over two decades.

Broking giant Marsh Re has issued its Global Specialties 2026 Market Update which warned the rising costs of conflict has not only seen clients running for cover but has also seen claims spiral.

The report added: “War, terrorism, and political violence (WTPV) market has entered a materially more complex phase: Middle East losses are being discussed at north of $2 billion against an annual gross premium base of approximately $2.5 billion, making this likely the first loss-making year for the class since 9/11.

“The market response has been selective rather than uniform. Pricing has tightened where losses are concentrated, but elsewhere the softening trend has paused rather than reversed, reflecting capacity meeting geographically concentrated loss.”

“Demand is outpacing pricing, with submissions surging as Middle East-based insureds seek war-on land cover not previously purchased, and insureds globally respond to a heightened risk environment with requests for broader protection,” It added. “The value of stand-alone WTPV reinsurance has been clearly demonstrated. Clients relying solely on composite programmes risk significant net exposures across remaining marine and energy classes once war losses erode shared limits.”

Richard Morgan, CEO Marsh Re Bermuda, Global Specialties, and co-head of Property, said : “The war and political violence market has not made a loss since 9/11. The market size is around $2.5 billion with the costs from the Middle East conflict estimated at around $2 billion. It has left the market facing its first loss for a very long time.”

James Boyce CEO, Global Specialties Marsh Re added: “The global specialty insurance and reinsurance market is navigating a period of genuine complexity. Geopolitical uncertainty, emerging technology risk and sustained claims pressure are all shaping conditions and doing so unevenly across classes, geographies, and client segments.

“Despite that, the market remains healthy. Dedicated reinsurer capital has continued to grow, supporting meaningful expansion of the majority of the global specialties market throughout 2026.

“Amid the recent rate reductions, reinsurers’ results have remained strong across Property, Construction, and Credit, with mixed results in Marine & Energy composite. Aviation is seeing a reduction of rate despite a run of major airline losses, whilst War, Terrorism, and Political Violence faces mixed conditions driven by escalating conflict in the Middle East.

“Cyber demand is growing and evolving, as AI-driven concerns prompt cedants to reassess their cession levels and explore more sophisticated structures. Rather than moving in one direction, the specialties market is pulling in several directions at once.

“What clients are asking for has also shifted. Closer collaboration, more thoughtful structuring, and a genuine understanding of clients’ risk have become key differentiators — not just price. Attachment points, coverage breadth and the balance between flexibility and cost are all under closer scrutiny than before. The reinsurers best placed to grow are those willing to move beyond the standard product set and engage with what clients actually need.”

On cyber the report said the cyber reinsurance market is offering buyers materially more choice, having moved away from off-the-shelf solutions. This year saw the first placed property/cyber combined catastrophe protection and three new Risk XL covers.

“With AI accelerating threat timelines and accumulation risk looking more plausible, buyers are reassessing their net risk posture and reinsurance strategies,” It added. “Many are questioning whether current programmes provide adequate protection, with some seeking increased cession and others layering more event-specific coverage.

“AI is compressing threat timelines. The mean time-to-exploit has fallen from 745 days in 2020 to hours in 2026. The primary impact is one of speed and frequency, not a fundamentally different loss profile. Organisations adopting AI defensively are gaining clear advantage.”