Business Insurance Amidst the Threat of War
Global geopolitical uncertainty in recent years has had a significant impact on the business world. The Russia-Ukraine conflict since 2022, tensions in the Red Sea, and conflicts in the Middle East in 2026 demonstrate that war is no longer merely an issue for the nations directly involved. The impact spreads worldwide through supply chain disruptions, rising energy prices, exchange rate fluctuations, and increased logistics costs.
For Indonesia, an open economy dependent on international trade, these conditions have the potential to exert great pressure on the industrial, export-import, and investment sectors. Indonesian trade data shows that national export and import activities are worth hundreds of billions of US dollars annually. A reliance on imported raw materials and international trade routes makes Indonesian businesses highly sensitive to global geopolitical disruptions.
When conflicts disrupt shipping lanes or increase global energy prices, domestic production and distribution costs are affected. Therefore, geopolitical risk can no longer be viewed as a matter distant from national business interests. This issue was highlighted in the article ‘Will Insurance Protect Your Company in Times of War?’ by Tom Johansmeyer in HBR (4/5/2026). In his article, the global risk management and insurance industry expert warns that companies need to understand more deeply the extent to which insurance can provide protection when war or international conflict causes economic loss.
Global risks, local vulnerabilities: Indonesia is not directly involved in current global conflicts. However, its position as part of the global economic network means various international upheavals can affect domestic business activities. When war disrupts global oil distribution, energy prices in Indonesia may face pressure. When international shipping lanes are disrupted, shipping costs for Indonesian exporters and importers can increase significantly.
The problem is that many Indonesian companies still view war risk as something distant and irrelevant to daily operations. Risk management focus generally remains on fire, floods, earthquakes, work accidents, or other operational risks. In reality, current geopolitical conflicts have a much broader economic impact than in previous decades.
Most companies also assume that their insurance policies cover all major potential risks. In reality, many commercial policies include ‘war exclusion’ clauses. This means that when a company’s loss can be directly linked to war or military action, insurance companies may potentially reject claims.
For Indonesia, this issue is critical as more national companies are involved in international trade, hold cross-border investments, or rely on foreign raw material supplies. Geopolitical risks, once considered distant, have now become part of everyday business risk.
The importance of understanding insurance protection: The existence of war exclusion clauses does not mean all risks arising from conflict cannot be managed through insurance mechanisms. Conversely, companies need to understand in detail the scope of protection provided in their policies. For Indonesian companies, this step is often overlooked. Many business owners purchase insurance merely to meet contractual obligations or financing requirements without deeply understanding the coverage. Consequently, when a crisis occurs, companies only realise that some of the risks they face are not included in the policy protection.
In the Indonesian context, the role of insurance brokers and risk management consultants is becoming vital. They can assist companies in understanding various clauses that often contain complex technical terminology. With proper understanding, companies can identify coverage gaps and seek appropriate solutions before a crisis occurs. Furthermore, Indonesian companies should begin incorporating geopolitical factors into their strategic decision-making processes. International conflict risks should be a consideration in selecting suppliers, investment locations, and supply chain management. Thus, companies should not only rely on insurance protection but also build more comprehensive risk mitigation systems.
Parametric insurance as a new opportunity: One innovation gaining attention in the insurance industry is parametric insurance. This concept could present a relevant opportunity for Indonesia in facing various risks arising from global uncertainty. Unlike conventional insurance, which pays claims based on actual loss value, parametric insurance provides payment when a specific indicator or parameter is met. In other words, payment is made based on the occurrence of a predefined event in the contract.
For Indonesia, as an archipelagic nation heavily dependent on international shipping lanes, parametric insurance could be developed to protect against the risk of goods distribution disruptions caused by global conflicts. For example, if a strategic shipping lane is closed, causing delivery delays within a certain period, companies could receive payments according to the agreed parameters. This approach can provide liquidity certainty for companies when facing emergency situations. In a fast-moving business environment, the ability to obtain funds promptly…