When conflict erupts, it exposes businesses, infrastructure and personal property to a considerable risk of damage and destruction. During the early days of Russia’s full-scale invasion of Ukraine, the vast grain sector in Ukraine – responsible for 10-15% of globally traded wheat and corn and nearly half of the world’s sunflower oil – was suddenly unable to ship vital goods. Black Sea ports and civilian grain vessels were targeted by missile attacks, and despite continued global demand, farmers and exporters faced a situation in which maritime shipments were deemed effectively uninsurable by private insurance markets.
For households and small businesses, conflict can erase years of hard work and investment. War risks extend beyond physical damage to include asset seizures and other disruptions that can further undermine economic activity and investment.
The economic cost of current wars and conflicts are already substantial. Since 2022, Ukraine has suffered USD 195 billion in total damage, with recovery and reconstruction needs over the next 10 years projected at USD 588 billion. In the Middle East, early estimates place reconstruction costs for energy infrastructure alone at USD 58 billion. Without insurance to protect against at least part of these war-related risks and losses, safeguarding current and future investments and helping businesses maintain operations will be a significant challenge.
What types of insurance can protect against war-related risks?
Two types of insurance can provide financial protection when conflict and war create risks to investment and property.
Political risk insurance (PRI) is typically used by foreign investors and their creditors to protect assets and operations in countries exposed to political instability. It helps shield investors from financial losses that could arise from expropriation, breach of contract, currency transfer restrictions, and war-related property damage or disruption. As a result, it reduces uncertainty, lowers the cost of capital, and enables foreign and cross-border investors to continue financing projects. Coverage is offered by specialty market private insurers, as well as development finance institutions and export credit agencies (ECAs).
Property insurance with war-risk coverage can provide financial protection for households and firms. Typically, property insurance excludes coverage for property damage and loss resulting from war, and other types of conflict, given the potential catastrophic losses that are likely to be beyond the capacity of private insurance markets to absorb. Such coverage is usually only available through “political violence” insurance, which can be a standalone product or an "add-on” to existing property insurance, and is often provided by a limited number of insurers and acquired only by larger businesses. Coverage for war-related damage, and loss to ships and planes, is also available from specialty marine and aviation insurers.
What is the availability and demand for insurance coverage during active conflicts?
During active conflicts, an economic paradox emerges: demand for war-related insurance rises sharply, while private insurance capacity often contracts. Coverage may be withdrawn, exclusions applied and premiums rise to levels that become unaffordable for many businesses. To fill this gap, governments and multilateral organisations may need to intervene to support both public and private insurance solutions and help maintain needed coverage for domestic and, in particular, foreign businesses.
This dynamic has been observed in Ukraine. The prolonged war in Ukraine has created a heightened need to insure against war risk in order to sustain economic activity and create a more secure environment for investors as analysed in a forthcoming report by the OECD on infrastructure financing in Ukraine. At the outset of the invasion, a primary concern was ensuring exporters’ ability to transport goods through dangerous maritime corridors, which led to international support for war-risk coverage in marine insurance.
In the years that followed, PRI coverage in Ukraine reached a combined total of USD 3.5 billion in 2024 and 2025, according to the Berne Union. Between 2022 and 2025, PRI coverage focused primarily on infrastructure, manufacturing and transport sectors (see chart below). This period also marked a shift towards PRI being provided primarily by ECAs and multilateral institutions - accounting for 78% and 22% of total coverage respectively - with private-sector involvement almost disappearing, despite considerable activity in the decade before the invasion. The retreat of the private sector has highlighted the important role that multilateral support plays when political and war risks become too great for the private sector to absorb.
While PRI coverage primarily helped in responding to the concerns of foreign investors faced with war risks, domestic businesses and households in Ukraine are also highly exposed to damage to their residential and commercial properties, often with limited insurance protection. In response, development finance institutions, such as the European Bank for Reconstruction and Development (EBRD) and the US Development Finance Corporation (DFC), the Ukrainian Export Credit Agency (ECA) and international and domestic (re)insurance markets have collaborated to expand coverage availability in residential and commercial property insurance.
With this support, war-risk coverage is now being offered by private insurers as either an add-on to standard property insurance or a stand-alone product. Ukrainian public authorities continue to work on expanding war-risk coverage through various instruments via their ECA, have developed a partial compensation mechanism for war-related damages, and are drafting proposed legislation to mandate coverage and provide premium subsidies in certain sectors. These efforts, while showing the government's clear support for a more robust insurance market, will place additional fiscal pressures, as a contingent liability.
In the Middle East, heightened tensions have severely disrupted maritime transport routes that are critical to global energy and agriculture supply chains. This has led to a sharp increase in war-risk insurance premiums for marine transport in the region. Public bodies have stepped in to provide support, with the US DFC establishing a reinsurance arrangement in collaboration with US-based insurance companies to provide up to USD 40 billion in coverage for maritime reinsurance, while other countries, including India, are also reportedly considering providing similar support.
However, should the conflict lead to further damage to businesses and infrastructure in Gulf states, there may be a need to support the private insurance sector's capacity to provide war-risk coverage for property damage to the region's businesses and households.
How can governments support insurance coverage during conflicts?
Heightened geopolitical tensions and the spread of active conflicts in certain regions of the world have led to a renewed focus on how best to ensure access to war-risk insurance protection. In countries directly affected by conflict, adequate and affordable private coverage may be unavailable, requiring targeted public interventions to help support war-risk insurance coverage, and in turn help sustain long-term investment planning and reduce the economic costs of conflicts.
The OECD’s Financial Protection Against Catastrophic Risks: Floods, Fires and Other Major Risks provides a useful framework to guide when and how government-supported financial protection mechanisms can be employed to help address large-scale catastrophic risks, such as war risk. It provides key insights for responding to these risks, in particular where private sector insurance gaps threaten economic activity, recovery and reconstruction.
Ukraine provides a clear example. When international organisations and insurers put in place public guarantees and compensation mechanisms to support war-risk coverage, ships began sailing again, allowing millions of tonnes of grain to reach global markets and keeping Ukrainian farmers and exporters in business. While insurance itself cannot prevent conflict nor address its devastating human cost, it can, at a minimum, help businesses, investors and households manage the financial risks that accompany it. In turn, war-risk insurance can help play a critical role in sustaining economic activity during active conflict and help lay the groundwork to support recovery and reconstruction once fighting ends.
