War risk insurance markets are tightening as the Middle East conflict escalates, increasing risks for aviation financing and leasing structures.
In a 23 March note, Morgan Lewis said insurers are raising premiums, narrowing geographic coverage and issuing short-notice cancellations—sometimes within seven days—as geopolitical risk intensifies.
The shift has direct implications for lessors and lenders, as continuous war risk cover is typically required in leases and debt agreements. Any reduction or withdrawal of coverage could trigger technical breaches, even without a loss event.
The firm also warned of rising risks around asset seizure and repossession in affected regions, alongside stricter sanctions compliance.
Operators are increasingly reviewing asset deployment and routing decisions to maintain insurability, while insurers are expected to impose tighter limits and exclusions at renewal.
“War insurance does not provide static protection,” the note said, highlighting the speed at which coverage can change relative to financing structures.