Physical damage and business interruption
The threat to property
Property damage is among the most glaring consequences of geopolitical disruption. Interstate conflicts, acts of terror, revolutions, coup d’etat, or large-scale civil unrest may result in damage to physical assets, buildings, inventory, and equipment. These assets may need to be replaced or repaired before they can return to full operational use; where the damage is part of a wider attack or clustered loss event, material and labour constraints may escalate costs. In a worst case scenario, assets may need to be written off entirely.
Although much damage is collateral, certain types of property face greater risk. Energy and critical infrastructure have become a popular target for some state actors seeking to undermine their adversaries. In Ukraine, the Zaporizhzhia Nuclear Power Plant – the largest in Europe – has been repeatedly shelled since Russian forces first assumed control of the site in March 2022, despite international legal protections (under Article 56 of Additional Protocol I to the Geneva Conventions) that prohibit attacks to nuclear facilities. During the Nagorno-Karabakh conflict, energy infrastructure and pipeline corridors in Azerbaijan were exposed to missile and rocket threats. And, more recently, Iranian rocket and drone attacks have caused fires at key utilities in Abu Dhabi and Qatar.
Data centre facilities have also emerged as a new frontier in interstate warfare. On 1 March 2026, three facilities operated by Amazon Web Services (AWS) in the UAE and Bahrain were directly struck by Iranian drone strikes, sustaining severe structural and fire damage. One facility also incurred subsequent water damage following efforts to suppress flames with water. The attacks on property belonging to the US-owned company underline threat to organisations with a perceived link to the conflict. Later that same month, on 31 March, Iran’s Islamic Revolutionary Guard Corps (IRGC) officially published a list labelling 18 US technology companies (including Amazon, Microsoft, Google, and Apple) as legitimate military targets.
The direct costs of damage are not the only source of loss. Repairing or rebuilding property can take months, or even years, to complete – especially for complex infrastructure. In the interim, organisations likely face extended downtime, loss-of-use, and associated lost revenue. Such disruption can occur even where no damage has been caused to property. For example, missile strikes on a key transportation route may render a manufacturing facility inaccessible, or lead to lower footfall at a nearby retail premises. Similarly, physical damage to critical third-party suppliers or customers could leave them unable to fulfil their contractual obligations, creating knock-on disruption throughout the value chain. In the insurance market, these contingent losses have historically not been considered a major risk. But this has changed in the wake of the Russian invasion of Ukraine, specifically, where they were responsible for some of the most severe claims.
Both damage and interruption can also arise in locations that aren’t directly associated with instability. Acts of terrorism remain a persistent feature of the geopolitical risk landscape, and are frequently shaped by broader political tensions. Attacks often target commercial centres, transport hubs, or other high-profile assets, creating disruption in environments otherwise considered stable. For instance, political events in the Middle East could inspire lone-wolf actors to target western organisations. In this way, geopolitical risk is not constrained to any single geography, but can manifest across the globe in dispersed and less predictable forms.
Choosing the right cover
These risks are becoming more severe, reflecting a level of conflict on an unprecedented scale. Over the past five years, global conflict-related losses for property damage and business interruption have exceeded those of the previous decade. Since February 2026 alone, tensions in the Middle East have resulted in losses of approximately $2.1bn, with that figure expected to increase as longer-tail business interruption losses materialise.
Standard commercial property and liability policies typically exclude losses arising from terrorism, war, and war-like activity. As a result, organisations must rely on specialist cover, most commonly in the form of Sabotage & Terrorism (S&T) Insurance, War Risk Insurance, or broader Political Violence (PV) Insurance. In the US, buyers may also look to rely on coverage provided under the Terrorism Risk Insurance Act (TRIA), a federal programme that requires insurers to offer terrorism coverage in commercial property and casualty policies.
While these products all respond to physical damage and resulting business interruption, they are not equivalent in scope. S&T policies generally require a clear political, ideological, or religious motive, which can leave gaps where events do not meet that threshold or where attribution is uncertain. War Risk policies, by contrast, are typically limited to declared or traditional forms of conflict. TRIA cover is also restricted to certified acts of terrorism within the US, offering no protection for assets located overseas.
As a result, many organisations relying solely on S&T or TRIA may find that cover does not extend far enough in practice. To obtain the most comprehensive and affirmative protection, PV insurance is often required. PV policies are designed to respond across a broader range of perils, including civil unrest, insurrection, and war-like events, providing more consistent coverage where losses may not fall neatly within narrower definitions.
In addition, not all disruption arises from physical damage. Losses linked to denial of access, loss of utilities, or wider disruption to surrounding areas may not trigger a traditional property policy. These exposures can be addressed through Non-Damage Business Interruption (NDBI) extensions, which provide cover for income loss where operations are affected without direct physical damage.
KEY COVERAGES
Sabotage and Terrorism Insurance
Covers targeted acts of destruction specifically designed to cause fear or political/ideological disruption. It is often part of a broader Political Violence Insurance policy.
War Risk Insurance
Protects against physical damage and business interruption caused by declared or undeclared wars, insurrections, and major military conflicts.
Political Violence Insurance (PV)
A broader, tiered insurance product that also covers lower-level civil unrest, including strikes, riots, malicious damage, civil commotion, and standalone acts of terrorism.
Non-Damage Business Interruption (NDBI)
Covers income loss when business operations are suspended, without physical damage to property or assets.
Contingent Business Interruption (CBI)
Covers income loss and extra costs when business operations are interrupted due to a disruption at a third-party property or entity (such as suppliers or customers).