The Iran war has implications for Australian insurers underwriting airlines, airports and aviation risks, according to law firm Kennedys. 

It says the conflict is seen as the biggest aviation insurance stress test since the Russia-Ukraine war began and raises questions for Australian underwriters about geographical accumulation, reinsurer capacity and war exclusion structures. 

“Australian aviation insurers, airlines and lessors face significant exposure despite the conflict’s distance, primarily through international underwriting, leasing and disrupted Asia-Pacific routes now shifting to US paths, plus rising passenger claims,” partner Peter Craney said.

The conflict has caused damage to airports and aircraft in the Middle East, raising the potential for major hull losses, airport infrastructure claims and subrogation and war risk recovery issues.

Asia-Pacific carriers operating Europe-Asia routes via the Middle East are looking to fly through the US for the first time as the “route of choice”, while other exposures include travel and aviation liability claims involving Australian passengers.

Kennedys warns of disputes over policy scope and exclusions, litigation around policy interpretation and pressure to develop new wordings or extensions, and says insurers should audit war risk accumulations across fleets and routes and stress test portfolios for non-damage business interruptions.

“Amid the Iran war, insurers face imminent disputes over coverage gaps where war risks exclude flight delays, cancellations and non-damage revenue losses; standard hull, liability, and travel policies typically omit these, leaving airlines and passengers exposed,” partner Chris Finn said.