Blurring the Lines: Risk, Insurance, and Hybrid Warfare
Cynthia Alkon[1], Adrin Borbély[2] & Sanda Kaufman[3]
Economic security relies heavily on the insurance sector, and the commercial insurance and reinsurance sector is central to Western economies. For example, the UK’s insurance premiums accounted for 2% of its GDP in 2022. Recent conflicts have underscored that insurance is not merely a mechanism for managing loss after the fact. It is a threshold condition for whether transactions occur at all. In both the Ukraine war and recent disruptions to maritime shipping linked to the war with Iran, insurance markets have not simply absorbed risk—they have reshaped the scope of economic activity in real time.
Consider two examples. In the wake of Russia’s invasion of Ukraine, aircraft-leasing companies faced billions of dollars in potential losses for planes stranded in Russia.[i] Whether those losses were covered turned not on the scale of harm, but on how the events were classified under insurance policies—specifically, whether they constituted “war risks.” Escalating threats to commercial shipping in the Red Sea and surrounding regions have led insurers to raise premiums sharply or withdraw coverage altogether.[ii] The result has been immediate: shipping routes have been rerouted, delayed, or abandoned, not because goods could not physically move, but because suddenly they could no longer be insured on commercially viable terms.
These examples highlight a basic but often overlooked point. Most commercial insurance policies exclude acts of war. Coverage is typically restored through specialized war risk policies, which are more expensive, narrowly drafted, and highly sensitive to definitions and triggers. As a result, coverage disputes frequently turn less on what happened than on how events are characterized within the policy language. Is it war? Is it something else? For practitioners, this distinction is no longer technical or remote: it is central to risk allocation.
One difficulty for both the insurers and the insured is that modern conflicts increasingly resist clear classification. The concept of Hybrid Warfare captures this shift. Hybrid warfare blends conventional military force with cyber operations, economic coercion, proxy actors, and disinformation campaigns. Cyber operations targeting energy systems, ports, and logistics networks—often attributed to state-backed actors—can cause significant disruption without crossing the threshold of declared war or permitting clear attribution. Similarly, reports of GPS spoofing and electronic interference affecting commercial vessels in contested maritime regions have introduced new forms of navigational risk without any direct physical attack. In both contexts, the classification of the event—rather than the scale of harm—may determine whether coverage applies and who ultimately bears the loss. These tactics are often purposely pursued below formal thresholds of war and obscure attribution. From a strategic perspective, the resulting ambiguity is a feature, not a flaw. From an insurance perspective, however, ambiguity is destabilizing. War exclusions, attribution requirements, and policy triggers all depend on categories that hybrid conflict deliberately blurs. Is a cyberattack on critical infrastructure an act of war, terrorism, or criminal conduct?
Thus, hybrid warfare operates, partly, as a form of risk allocation strategy. By avoiding clear labels, actors engaged in hybrid conflict can shift costs away from states and onto private entities, including businesses, insurers, and reinsurers. The result is not only legal uncertainty, but also a redistribution and disruption of financial exposure across the global economy.
Insurance markets, in turn, function as a kind of informal regulator. When insurers raise premiums or narrow coverage, the effects are immediate and concrete. Shipping routes become commercially impractical, as we have seen recently for ships wishing to pass through the Strait of Hormuz. Fuel transport becomes more expensive—or impossible. Smaller firms may find themselves priced out of markets altogether. Private and public resources shift from productive uses to risk control.
For lawyers and businesses, as well as for governments at all levels, these dynamics have several immediate implications. Lawyers need to devote careful attention to insurance policy language regarding war exclusions, attribution clauses, and cyber risk provisions, since disputes between insurers and their clients are likely to turn on classification of claims under factual and legal uncertainty. Insurance should become a core component of transaction structuring, rather than a secondary consideration. Insurers and insured alike must consider difficult tradeoffs between security and profitability.
Business leaders need to understand the availability and cost of insurance as threshold issues. The question is not only whether a risk can be managed, but whether it can be insured on viable terms. Contingency plans must consider that coverage may be withdrawn or repriced rapidly in response to geopolitical developments. In this sense, geographic exposure—a business’s vulnerability arising from where it operates or has assets—is as much about insurability as it is about political or operational risk.
Governments can play an important role too: they need to consider whether to shoulder some of the burdens of insurance, especially in key sectors of the economy, through either regulatory actions or financial assistance. In essence, this amounts to using taxpayer funds to relieve the pressure on economic sectors on which everyone depends.
Looking forward, the pressure that hybrid conflict places on traditional insurance frameworks is unlikely to diminish. War exclusions and related doctrines were developed in a context where the boundaries of conflict were comparatively clear. As those boundaries erode, insurers, reinsurers, and policymakers will need to consider whether new categories or approaches are required, particularly for cyber operations and proxy-driven disruptions.
What is clear is that insurance can no longer be treated as a passive mechanism for distributing loss. In an era of hybrid war, it is an active site of risk allocation, legal contestation, and strategic consequence. Stress in this sector introduces systemic uncertainty across the global economy.
[i] https://www.theguardian.com/business/2025/jun/11/aircraft-leasing-firms-win-high-court-case-planes-russia-insurers-ukraine
[ii] https://www.insurancebusinessmag.com/au/news/marine/why-hormuz-is-now-the-worlds-most-expensive-waterway-for-brokers-572275.aspx
[1] Professor of Law & Director of the Criminal Law, Justice, & Policy Program, Texas A&M University School of Law.
[2] Associate Professor, Department of Marketing, emlyon business school.
[3] Professor Emerita, College of Urban Affairs & Education, Cleveland State University.