Reinsurers drop some Middle East restrictions, sources say

By Carolyn Cohn

LONDON (Reuters) - Reinsurers, including Swiss Re, have become more willing to provide cover for the Middle East in the industry's January policy renewal season, removing a clause which allowed them to pull out if the Gaza conflict escalated, industry sources told Reuters.

The removal of the restrictive property reinsurance clause predates the emergence this week of a complex ceasefire accord between Israel and militant group Hamas.

It reflects greater competition in the market rather than an improved outlook for the region, one insurance source said.

The reinsurance market has become more competitive after years of a so-called hard market of rising rates and stricter policy terms and conditions, following losses due to wars, a global pandemic and natural catastrophes.

Reinsurance rates fell 5-15% at Jan 1 for less risky property catastrophe business, broker Guy Carpenter said last month.

Reinsurers, which insure the insurers, typically cover a batch of their insurance clients' policies through so-called treaty reinsurance.

After the war in Gaza started, reinsurers inserted a clause in January 2024 to exclude claims arising from the outbreak of war in Israel and other named territories, including Egypt and Iran, Thomson Reuters publication The Insurer reported last year.

"There was a clause which was inserted by several of the major reinsurers around the Middle East, the escalation clause effectively allowed the reinsurers to cancel cover for the region if they felt that a conflict had escalated," said Hamish Greenwood, head of crisis management at broker McGill and Partners.

"I don't think anyone was really happy with that. That's been removed from quite a few reinsurance policies, so that should provide some comfort in the region to insurers."

Greenwood did not name any reinsurers.

Three other industry sources also told Reuters that some reinsurers introduced such clauses last year, and removed them earlier this month.

Global reinsurer Swiss Re was one of the reinsurers to do so, two of the sources said.

Swiss Re declined to comment.

Property reinsurers have continued to restrict the amount of cover they will provide in countries such as Israel, Lebanon and Yemen, one of the sources said.

The Israeli cabinet will meet to give final approval to a deal with Hamas for a ceasefire in Gaza and a release of hostages, Prime Minister Benjamin Netanyahu's office said on Friday, amidst concern the accord may be delayed.

Marcos Alvarez, a managing director at Morningstar DBRS, said a ceasefire "would be a positive step in the right direction to bring more stability to the region but there are still concerns about the commitment of both sides to a more permanent peace deal, which is being considered by reinsurers before loosening some of their current underwriting restrictions".

(Reporting by Carolyn Cohn. Editing by Jane Merriman)