Philippine insurers urged to tighten war risk rules amid Middle East tensions

The Philippine Insurers and Reinsurers Association (PIRA) is calling on insurers to overhaul war-risk underwriting, strengthen investment and currency hedging strategies, and introduce relief measures for policyholders as oil prices surge and geopolitical risks intensify following the Middle East conflict.

The Philippines is one of the economies most vulnerable to conflict in the Middle East, as it imports 98% of its oil from the region, prompting it to be the first country in the world to declare a state of national energy emergency and pass a law allowing the President to suspend or reduce fuel excise taxes.

According to findings from a position paper by the Philippine Insurers and Reinsurers Association (PIRA), submitted to Manila’s Insurance Commission, crude oil by mid-March 2026 soared to nearly $115 per barrel from $72 before the war.

Reviewing policies

In light of this, the trade association has suggested policies insurers can implement to protect their bottom line. The paper stated that “war-risk endorsements need to be rewritten, policies covering vessels and cargo in newly designated high-risk zones require urgent amendments, sanctions and restricted-jurisdiction checks must be run against thousands of counterparties, and reinsurance exposure aggregations must be recalculated and reported.”

Strict application of war exclusions going forward is also seen as warranted. PIRA said new and renewing policies, especially marine cargo and hull, should have their war risk clauses reviewed and tightened. “Additional premium endorsements should be required for any such risks accepted,” the group added.

PIRA also recommended voyage-by-voyage underwriting for marine cargo, replacing blanket annual policies for importers operating Middle East supply chains. Instead of relying on fixed, long-term coverage, insurers are shifting towards route-specific assessments for high-risk shipments. While cargo war risk cover remains available, premiums are rising and are now being reassessed on a voyage-by-voyage basis, particularly for energy and bulk commodity trades. This approach ensures pricing is aligned with real-time geopolitical and security risks rather than pre-crisis assumptions.

PIRA also urged motor claims severity management. “With pump prices jumping by PHP43.50 ($0.71) per litre for gasoline and PHP67.35 per litre for diesel since the war began, repair and parts costs are escalating. Insurers should negotiate volume agreements with repair shops to lock in labour rates, accelerate adoption of cash settlement options, and review total loss thresholds to reflect new vehicle replacement values in a high-inflation environment.”

Defending the investment portfolio

Insurers should also adopt a more defensive investment strategy. PIRA said this could be achieved by shortening the duration of fixed-income portfolios and shifting allocations towards shorter-term government securities and money market instruments to reduce exposure to mark-to-market volatility, especially as rising yields—such as the 10-year bond reaching 4.46%, its highest since July 2025—signal pressure on long-dated assets.

With the peso at a record low, insurers with significant dollar-denominated reinsurance premiums payable or dollar-benchmarked claims should hedge their foreign exchange exposure through BSP-approved forward contracts or natural hedges where possible, PIRA added.

Reinsurance and risk transfer

PIRA called for early reinsurance treaty renewal engagement before renewal dates, “to lock in capacity and rates before the market hardens further”, and the exploration of parametric and political risk products. “Philippine non-life insurers should explore ceding their geopolitical tail risk through parametric reinsurance treaties triggered by defined events (e.g., Brent crude exceeding $100/bbl for more than 30 consecutive days), protecting against systemic correlated losses.”

It also noted that the industry should consider a temporary war-risk pool—similar to the PCIC for agriculture or PAGCOR-related pooling mechanisms—where participating non-life insurers collectively underwrite and share Philippine-originated war-risk exposures, reducing single-company concentration risk.

Operational efficiency

To improve operational efficiency, PIRA advised insurers to accelerate digital claims processing, capitalising on AI-assisted document review and remote loss assessment tools to ensure faster settlements, improved accuracy, and lower operational costs amid rising claims volumes.

At the same time, insurers should enhance scalability by engaging third-party service providers for claims handling and policy administration, allowing them to manage potential surges in war-related claims and policy adjustments without permanently increasing staffing.

Relief for policyholders

PIRA also outlined measures to help policyholders cope with the ongoing conflict. These include structured premium deferral programmes offered to qualified policyholders—particularly operators, small businesses, and agriculture-dependent clients affected by rising fuel prices—allowing premium payments to be deferred by up to 90 days without policy lapse.

It also suggested that insurers temporarily suspend policy cancellations for non-payment and allow clients to switch annual payment terms to quarterly or monthly instalments without penalty.

Insurers are also encouraged to identify and offer rate concessions to sectors most directly affected, including inter-island shipping, public utility vehicles, agricultural cooperatives, and OFW families. These segments are also the most likely to lapse without support, potentially worsening loss ratios through adverse selection.

PIRA further recommended establishing a dedicated war-crisis claims desk with expedited turnaround times of 15 to 30 days. “Digital submission of claims documentation should be maximised to reduce in-person requirements,” the position paper said.

The study added that the applicability of war exclusion clauses is highly dependent on policy wording and the connection of losses to armed operations. Insurers are urged to proactively issue clear written advisories outlining what is and is not covered, including how indirect losses such as fuel shortages, supply chain disruptions, and economic impacts will be treated. This will help reduce disputes and improve transparency for policyholders.

Source: www.asiainsurancereview.com