S&P has reported that Israel’s government-backed insurance scheme is expected to absorb the majority of losses linked to the ongoing conflict with Iran.
The agency currently does not plan to downgrade ratings for Israel’s insurance or banking sectors.
The conflict has escalated in recent days, raising concerns about regional security, economic impact, and global market reactions.
According to S&P, missile strikes and military operations have caused property damage and casualties within Israel, while the broader geopolitical context includes ongoing activity in Gaza, Lebanon, and general economic uncertainty.
Despite the instability, S&P stated that it does not foresee immediate rating downgrades for Israeli insurance or banking companies.
The agency noted that while gross premium growth in Israel’s insurance market remained flat in 2024, insurers achieved solid net results. Strong technical profitability and investment income from favorable financial markets contributed to these outcomes.
S&P noted the strength and relative stability of Israel’s macroeconomic indicators and private consumption, along with the capital market’s performance, which outpaced major global indices.
The agency attributes part of this resilience to a government-backed scheme covering war-related property losses and military life insurance claims. This coverage allows domestic insurers to avoid assuming these specific risks directly.
S&P stated that Israeli insurers also benefit from extensive catastrophe reinsurance programs, although current projections suggest that loss levels will remain within manageable ranges.
However, the rating agency warned that insurers may still face short-term pressure through their investment portfolios due to market volatility.
In its regional outlook, S&P expects credit conditions for insurers in the Gulf Cooperation Council (GCC) countries to stay stable through 2025, supported by adequate capital and growth prospects.
However, the agency cautioned that a wider or prolonged conflict in the Middle East could disrupt trade, financial activity, and tourism, leading to weaker earnings and economic pressure for insurers across the region.
S&P also warned that insurers in the GCC with lower capital or high-risk asset exposure could face rating pressure if asset prices fluctuate significantly due to prolonged regional conflict.
Morningstar DBRS has warned that insurers with strong reinsurance protection, conservative investment portfolios, and active enterprise risk management (ERM) frameworks are better positioned to manage the ongoing volatility triggered by the escalating conflict between Iran and Israel.
The rating agency noted that Israel’s airstrikes on Iranian military and nuclear infrastructure, followed by Iran’s missile and drone retaliation, represent one of the most serious regional escalations in recent history.
Morningstar DBRS stated that this conflict presents broad implications for the global insurance sector, affecting nearly all property and casualty lines, as well as major asset classes.
The agency emphasized that the effects extend far beyond the combat zone. Key areas of disruption include marine shipping routes, aviation traffic, cybersecurity infrastructure, capital markets, and global supply chains.
