Iran War: Insurance companies invoke war clause that restricts payouts

Monday, 2 March 2026

Travellers who have had their plans thrown into disarray by the conflict in the Middle East may have to fend for themselves, as insurers invoke the war clauses in their travel policies.

The strikes by the United States and Israel on Iran at the weekend resulted in major hub airports closing in the Gulf region, including Dubai, Abu Dhabi and Doha, stranding passengers and diverting flights. The hubs provide significant air services to and from New Zealand.

Watchdog Consumer NZ said that under the Montreal Convention, if a flight was cancelled or delayed due to an event within the airline’s control, it is liable for any costs passengers incurred as a result of the cancellation or delay ‒ up to about $15,000.

But military action and airspace closures, as has happened in the Middle East, were outside the airline’s control, and as a result passenger rights would depend on their ticket conditions.

Read more:

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• Over 1700 Kiwis registered in countries involved in conflict, including 26 in Iran

• Helen Clark says NZ must resist ‘slippery slope’ to involvement in Iran conflict

“If you booked a fully refundable fare, you can ask the airline for a refund. If your fare wasn’t refundable, you may just be given a credit. Check with the airline to see what you’re entitled to,” head of research and advocacy Gemma Rasmussen said.

Flying to and from the EU or the United States could provide additional rights.

“In those situations, you may also be entitled to a refund. That’s because the consumer protection laws in the EU and US are better than New Zealand’s consumer protections,” she said.

“If you purchased travel insurance after travel warnings have been issued, it's most likely you won't be able to get coverage. Even if you purchased travel insurance prior to the current situation that is unfolding, it's highly likely that your travel insurance wouldn't cover you for cancellations and delays related to civil unrest.”

Rasmussen said it was possible in some scenarios travel insurance would cover claims in a war zone. “Claims arising as a result of war, hostilities or military action are often excluded but they may cover cancellation due to airspace closure.”

But it was important for travellers to read their policies and understand what they were covered for, before making a dispute. “Travel insurance covers many unforeseen circumstances but force majeure is a common clause in contracts that removes liability for unforeseen events beyond the control of the airline, and this typically includes war and civil unrest, as well as natural disasters like fires, storms and floods.”

An Insurance Council of New Zealand spokesperson said travel insurance could help with many unforeseen situations, but it did not respond to every type of global disruption.

“Where travel disruption such as airline cancellations, delays or rerouting is linked directly or indirectly to war or armed conflict, policy exclusions are likely to apply. This can be the case even if travellers are not heading to the conflict zone itself but are affected while travelling through the region,” the spokesperson said.

One of New Zealand’s biggest travel insurance providers, Southern Cross, was among a number of insurers that did not provide cover for war under a war and violence policy exclusion.

In a post on its website the insurer said that for “policy holders currently on their journey, whose travel has been affected by the Middle East airspace closures, there was no cover for this event for any travel interruption costs or losses incurred under the travel interruption clause in its travel insurance policy”.

“We are unable to cover any claims, costs or losses or liabilities directly or indirectly arising from, related to or associated with war and violence.”

These general exclusions applied to the whole policy before and during the journey, the insurer said.

House of Travel chief executive David Coombes said the travel agency had about 650 customers either travelling or due to depart in the next 10 days and had itineraries that involved transit through hubs in the Middle East affected by airspace restrictions or closures.

“The safety and well-being of our customers is our top priority as the situation in the Middle East continues to unfold,” Coombes said.

The company was contacting affected travellers and monitoring developments closely, while working with airlines and suppliers, and following guidance from the Ministry of Foreign Affairs and Trade, he said.

“While airspace restrictions are creating operational disruption, airlines are rerouting services and adjusting schedules in line with safety requirements.”

Global aviation has well-established protocols for geopolitical events, and carriers are experienced in adapting to disruption,” he said.

“Where services are cancelled, airlines and suppliers are offering flexibility, including rebooking options and, in some cases, refunds.”

Insurance coverage could vary, so people travelling within the next seven to 10 days should contact their travel agent or airline for the latest information, Coombes said.