Data centres: biggest new opportunity for reinsurers

Robert Hull says insurers and reinsurers have kept Gulf cover available despite facing huge losses.

KEY POINTS:
Marine reinsurers’ overcapacity
Gulf cover remains available
Dali increase falls on reinsurers

Despite the ongoing fallout from the biggest single marine loss the market has ever faced, as a result of the Dali striking Baltimore’s Francis Scott Key Bridge, and continued geopolitical turmoil, marine reinsurers entered 2026 with significant overcapacity. This has meant continued appetite for even some of the market’s most difficult risks.

That is according to Robert Hull (pictured), head of international marine and energy at Gallagher Re. He noted that many reinsurers continue to offer coverage in volatile regions despite still-unquantified losses from the Middle East conflict – though he stressed that appetite for Middle East risk varied significantly across the market.

“Some clients have sought to reduce their exposure to the absolute minimum and are relatively averse to marine war risk exposure. Others have sought opportunities to write highly rated business, take on the risk and play a more active role in the region,” Hull said.

“Similarly, some reinsurers prefer to avoid the exposure or minimise their net exposure. Others are seeking opportunities to support markets taking on the extra risk and provide them with additional capacity.”

Unlike many other classes, marine war risk is difficult to model reliably because losses are too random, Hull said. Underwriters instead use regional intelligence, information from major market participants and their own judgement, helping to explain why views of Gulf risk differ so widely.

Redistributing war exposure

The global marine war risk insurance market is between $1 billion and $2.9 billion in gross written premiums, operating as a specialized segment within the broader global marine insurance industry It is hard to quantify insurance losses as a result of the conflict in the Middle East but Lloyd’s of London has estimated a £1.4 billion financial impact from the Middle East conflict due to war and shipping disruptions in the region though this figure will cover a number of lines.

Hull also explained that marine war risk insurance is unique in other ways. By definition, carriers must react to circumstances on the ground.

“It is perhaps a little counterintuitive that capacity often increases after an event begins, as companies seek to take advantage of the opportunities,” Hull said. “We went into 2026 with significant overcapacity in the marine insurance and marine reinsurance markets. There is no sign of that diminishing.”

But while some insurers and reinsurers have cut their exposure, others are writing the business at higher rates, leaving overall supply unchanged.

“In fact, what we have seen since the beginning of the conflict is that the insurance market has always been open,” Hull said. “It has consistently offered cover for vessels inside the Persian Gulf, vessels transiting the Strait of Hormuz and vessels at any of the other hotspots in the world where trouble has been brewing.”

Gallagher Re has offered solutions that transfer exposure from clients with less risk appetite to insurers and reinsurers with more, Hull said. The broker has also created bespoke coverage for P&I insurers, for which the effect of war on marine liabilities is less obvious.

“It’s pretty black and white that we won’t touch anything where there is a sanction exposure,” Hull said. That would include cover for a vessel whose owner paid Iran for passage through the Strait of Hormuz. Some insurers considered requiring a safe-passage warranty, but could not cover the voyage if the owner made a payment that breached sanctions, he explained.

“All of the increase from $1.5 billion to $2.8 billion really falls on the reinsurance market because the retentions are generally on a first-loss basis.”

The surprise bridge claim

While appetite and sanctions determine who writes Gulf risk, the Dali claim raises a different question: how much reinsurers will pay once direct insurers have exhausted their retentions.

After the Dali struck Baltimore’s Francis Scott Key Bridge in March 2024, reinsurers priced renewals using a $1.5 billion consensus estimate. A settlement with the state raised the agreed claim to $2.8 billion in April 2026.

“All of the increase from $1.5 billion to $2.8 billion really falls on the reinsurance market because the retentions are generally on a first-loss basis,” Hull said. “That increase will have been budgeted for by some who were very cautious about reserving for the claim in the first place, but by no means all. This is the biggest single marine loss event that has ever hit the market.”

At $1.5 billion, Hull said the direct market would have retained about half. Its retention covers the first part of the claim and stays fixed; reinsurers pay the balance.

At $2.8 billion, the loss now consumes close to 93% of the International Group of P&I Clubs' $3.1 billion GXL reinsurance tower. At that level, the incident surpasses the roughly $1.6 billion insured loss from the 2012 Costa Concordia grounding.

But several issues remain unresolved. Hull said he would not be surprised if the final settlement approached the limit.

“This was the result of a collision involving a not especially large vessel and a not especially large bridge. It begs the question of what would have happened if the bridge had been busier at the time and there had been a large number of fatalities.

“There are scenarios that could be significantly worse than what happened with the Baltimore bridge. The question of limit and capacity on P&I has been debated through 2026 and will continue to be debated.”

Robert Hull is head of international marine and energy at Gallagher Re. He can be reached at: Robert_Hull@gallagherre.com.

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