Soaring insurance costs are one indicator of the new burdens on AI building in the Gulf

Insurance costs are one clear window into the challenges facing Gulf AI infrastructure since the war kicked off.

• Back in the day: Before the war, the regional limit per policy for political violence insurance — which covers missile and drone strikes — was USD 1 bn and customers were paying between 0.1% and 0.3% of their policy limit in annual premiums, Omar Gemei (LinkedIn), a top executive in Marsh’s Dubai office in charge of numerous types of coverage, including political violence, tells EnterpriseAM.
• Lower policy limits, higher premiums: Now, market capacity for political violence has dropped to between USD 100 mn and 300 mn and customers are paying from 2% up to 10% of their policy limit in annual premiums, Gemei says.
• Details: Premiums were at the top of that scale early in the war but have dropped closer to the bottom six months later, Gemei says. Rates for critical infrastructure, including big data center projects, are on the higher end of the scale, he says.

Despite that sharp price increase, the market is booming: “This product used to be seen as an easy, ‘nice to have,’” Gemei says. “I think it’s now become a product that’s essential to the business.”

Premium costs will likely drop if and when there’s a lasting ceasefire, Gemei says, but it will take a while: “Say there’s peace today — my own estimation is it would probably take another two years to get back to something close to where we were before the conflict… And, arguably, it may never fully get back to where it was.”

Insurance companies may also be hesitant to lower premiums because they took such a beating early in the conflict. Insurance companies received about USD 2 bn in political violence claims after early rounds of missile and drone strikes compared with about USD 1.5 bn globally in annual premium payments for that type of coverage, Gemei says.