Conflict Premium: Insurance and Supply Chains During the Iran War (Part 2)

Is this a property damage event? A denial-of-access problem? A seizure/detention scenario? A contract frustration loss? Or a “pure delay” disruption where nothing is physically damaged—but everything is late? The answer usually dictates which policy you look to first.

Property and Business Interruption (BI), Including Contingent BI (CBI)
Many property/BI programs respond best to traditional perils and often require direct physical loss or damage to trigger BI. Supply chain losses are frequently “contingent”—tied to a supplier, customer or logistics node. Some programs add contingent BI, ingress/egress, civil authority or supplier extensions, but the trigger language and the list of covered locations (named vs. unnamed suppliers) can be decisive, and the loss must typically arise from something that is covered by the base policy.

Watch for common friction points: (i) Whether delay alone is covered, (ii) whether the disrupted supplier/location is within the policy’s definition of a dependent property, and (iii) whether exclusions such as war, terrorism or sanctions remove the very peril you’re worried about.

Why “Pure Delay” Is the Repeat Offender
One of the most common fact patterns in a Middle East escalation is also one of the hardest to insure under standard forms: a shipment diverts or waits, a delivery window slips and costs rise—but there is no physical damage.

If the policy requires direct physical loss or damage as a trigger, or if “delay” is excluded unless tied to an insured peril, you may be staring at a coverage gap. That’s why it’s critical to read the contingent BI and extra expense extensions as closely as the base BI grant.

A Practical Checklist
If you’re in the middle of disruption, the best time to build the record is now. Practical steps that tend to matter:

• Pull the actual wordings (not just certificates) for property/BI, CBI, extra expense, cargo/inland marine and any political risk/war-risk placements.
• Identify the trigger language and the definitions that matter most (e.g., “dependent property,” “covered cause of loss,” “period of restoration,” “civil authority,” “ingress/egress”).
• Document causation contemporaneously (carrier advisories, port updates, supplier notices, routing decisions, inventory impacts).
• Check notice requirements early. In fast-moving conflicts, timing can decide coverage—especially where war-risk cancellation or high-risk zone provisions exist.
• Track costs separately (spot freight, war-risk surcharges, alternative sourcing, expediting, storage). Clean cost records are often the difference between settlement leverage and settlement frustration.

Conclusion
If your BI/CBI grant still hinges on “direct physical loss or damage,” a perfectly documented delay can still be uninsured. The quickest win is to pull the endorsements now and map your dependent locations before a claim forces the issue.

(This article is the second installment in a four-part series examining insurance considerations brought to the forefront by recent and ongoing events in Iran. Part 3 will examine political risk insurance and political violence products that are designed for the edge cases that standard property programs often exclude.)

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Pillsbury is helping clients navigate the shifting geopolitical, regulatory and economic landscape in Iran with informed insight and global perspective. Our experienced team of legal specialists, policy analysts, and former U.S. and UK government officials are actively monitoring the situation and providing integrated risk and response advice in connection with the immediate and long-term impacts of developments in the region.