INDIA Law and Practice Contributed by: Neeraj Tuli, Rajat Taimni, Amrit Singh and Anuj Bahukhandi, Tuli & Co
7. Geopolitical Factors 7.1 Geopolitical Drivers of Insurance Disputes Recent geopolitical developments have had a direct impact on the Indian insurance and reinsurance mar- ket, most notably the US–Iran conflict and the result- ing disruption in the Strait of Hormuz. The conflict has materially affected marine and war-risk insurance, with insurers and reinsurers reassessing capacity, pricing and territorial coverage for vessels operating in the Persian Gulf and surrounding waters. The impact has been particularly significant for marine hull, cargo, protection and indemnity (P&I) and war-risk insurance, given India’s dependence on maritime trade through the region. The response has extended beyond individual policies as, in May 2026, India established the Bharat Maritime Insurance Pool, backed by a USD1.4 billion sovereign guaran- tee, to provide continued maritime insurance capac- ity in the context of the Middle East conflict. These developments are also likely to generate coverage disputes concerning the application of war, terrorism and sanctions exclusions, territorial and geographical exclusions, aggregation of losses and the availability and scope of reinsurance. The interaction between sanctions imposed by different jurisdictions can cre- ate additional difficulties where an insured, vessel, cargo, counterparty or payment channel has a con- nection with a sanctioned entity or territory. The recent expansion of US sanctions concerning Iranian ship- ping and maritime insurance illustrates the increasing overlap between sanctions compliance and insurance arrangements. The effect is not confined to the Middle East. The con- tinuing Russia–Ukraine conflict and broader trade ten- sions have similarly encouraged more cautious under- writing and tighter scrutiny of geopolitical exposures. The Indian market has therefore seen greater attention to war-risk pricing, exclusions, sanctions clauses and reinsurance capacity, particularly for marine, aviation, trade credit, property and business interruption risks. 7.2 Sanctions and Payment Challenges Cross-border payment requirements, coupled with fre- quent exchange rate fluctuations, mean that insurers often seek to agree and fix the applicable exchange
Outside motor third-party insurance, direct actions remain comparatively limited. A third party will gen- erally need to establish an independent legal basis for proceeding against the insurer, such as a statu- tory right, an assignment or a specific contractual arrangement. Ordinary liability policies do not, merely by providing indemnity to the insured, generally confer upon third parties a direct contractual right against the insurer. This distinction is particularly relevant in liability insur- ance, including PI, D&O and other financial lines poli- cies. Although third-party claims may be the underly- ing claims for which the insured seeks indemnification, the third party does not thereby acquire a general direct right against the insurer. Additionally, financial and liability products, including PI and D&O insurance, have seen increasing claims activity, but this does not alter the underlying privity position. 6.2 Emerging Liability and Defence Trends The defence of claims against insureds is becoming increasingly complex, particularly where the underly- ing claim is accompanied by regulatory or investiga- tory proceedings, reputational concerns or multiple related claims. This is particularly relevant in D&O, professional liability, employment and cyber matters, where the same underlying circumstances may give rise to civil proceedings, regulatory scrutiny and claims involving several insureds or claimants. These devel- opments can require greater coordination of defence strategy across related proceedings and careful man- agement of potentially competing interests. Insurers are responding through earlier and closer involvement in the defence of significant claims, including the appointment and coordination of coun- sel and experts, monitoring of defence costs and consideration of settlement strategy. Where several insureds, claimants or proceedings are involved, par- ticular attention is also being given to potential con- flicts between insureds, allocation of defence costs and ensuring that the defence of the underlying pro- ceedings is appropriately coordinated with the insur- er’s coverage position.
159 I NSURANCE L I T IGATI O N 2026
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