Pangea-Risk CEO: Israel-Hamas conflict economic losses pegged at $6.8bn+
The devastating conflict unfolding in the Middle East after Hamas attacked Israel earlier this month will have multiple impacts on the (re)insurance industry, Pangea-Risk founder and CEO Robert Besseling has told The Insurer TV.
Though the total bill is still being calculated, economic losses are expected to be higher than those from previous conflicts in the region.
“Some of the earliest estimates that have come in are looking at a total bill of $6.8bn for the Israel-Hamas war,” said Besseling.
The chief executive emphasised that the calculation is based on prior Middle East conflicts that were far smaller in scale and duration.
The simmering tensions in the region exploded on 7 October after a coordinated attack carried out by Hamas, defined as a terrorist organisation by Israel, the US and the UK. The group has controlled Gaza since 2007.
The war is already impacting Israel’s credit rating, with Moody’s placing some of the nation’s debt under review. And it also poses risks of property damage, service interruptions and partial closures at Israeli ports.
According to Besseling, the risk to the (re)insurance industry will grow exponentially if the conflict spreads.
“ If we see an escalation of the conflict between Hezbollah based in southern Lebanon and the Israeli security forces in northern Israel, then various different ports and manufacturing hubs could face commercial disruption and property damage.
Even if the conflict remains somewhat contained, the risk of long-term damage remains a concern for numerous regional economic sectors.
“We focus a lot on marine and aviation and property damage, but it's the tourism sector, which even if the conflict dissipates from Israeli territory in the next few weeks, will not recover for the next few years, because of the lack of trust in the safety and security of hotels, of tourism locations,” said Besseling.
How high the insured losses will get depends on the conflict’s duration and containment, according to Besseling, who couldn’t yet put a number on them.
“It really depends on … whether the conflict is contained within the Palestinian territories over the next few weeks and months, or whether we see further airstrikes, rocket strikes, incursions into Israel, that in fact start to impact offshore and foreign interests of Israel as well.”
Besseling expects regional mediators, like Saudi Arabia and the UAE, to press for what he calls a “proportional response” to the attack. And while the situation is fluid, Besseling considers escalation a low-probability scenario.
“At the moment we are at, Pangea-Risk are certainly forecasting that the conflict will remain mostly contained within the Palestinian territories with some contagion into other parts of Israeli territory.”
No one was counting on this
Though risk assessors had taken note of the uptick in political tensions in Israel and the gradual erosion of security and intelligence capabilities over the last few years, the Hamas attack was apparently not on the overall business community’s radar.
“Even though it is normal to see a certain amount of rocket strikes hitting Israel, even with the Iron Dome having been set up over the past few years, and even with a possibility of ground incursions into Israel, no one was counting on this type of scenario,” said Besseling.
But firms have been quick to respond, he added, with major IT and pharmaceutical companies initiating work-from-home directives or telling some employees to seek shelter in embassies. Other sectors have just pushed through the chaos.
“The marine sector has been operational. Only the ports nearest to Gaza have been closed or put under restrictions. The biggest port of Haifa has remained open. Some aviation is still allowed to continue in and out of Israel,” said Besseling.
He expects air travel to resume over the next weeks or months, so long as the conflict remains contained.
The ongoing conflict could result in stricter underwriting rules for the credit or fiscal risk insurance markets. Sources told The Insurer that they expected “increased underwriting conservatism” after the attack. But Besseling said that question remains impossible for him to calculate.
“It is way too early to start talking about the so-called axis of resistance, the Iranian-sponsored axis of resistance, which crisscrosses the whole of the Middle East and beyond, and therefore look at regional war scenarios.
“At the moment that seems highly improbable,” he added.
That said, Besseling is closely watching events in the Strait of Hormuz. Sizewise, it’s a seemingly insignificant channel between Oman, the UAE and Iran. But Besseling says much of the global oil supply is ferried through that waterway.
“If we see a blockade there or in fact, a potential targeting of Israeli or Western shipping, that could certainly spike oil prices and give a regional implication to this conflict.”
“So within Israel, the biggest problem is not disruption from the conflict. It's probably the mass mobilisation,” stressed Besseling.
Watch this 17-minute video to learn more about:
- Estimated economic and insured losses from Hamas attack on Israel
- Potential fallout to tourism, manufacturing, marine and aviation sectors
- The role of social media and disinformation on SRCC
- How containing the conflict and assuring a proportional response will limit fallout
- Key body of water to watch to gauge the loss tally