Lloyd's of London has reported a £1.4 billion loss stemming from the Iran war, attributing the financial hit and a broader decline in profits to a new era of "disorderly" global events. The insurance market also experienced a slump in investment returns due to turmoil in bond markets, a consequence of the conflict.
Profits for the first half of the year fell 17 percent to £3.5 billion, according to Lloyd's. Chief executive Patrick Tiernan stated that recent events "provided further evidence we are now operating in a world that is structurally disorderly rather than just passing through a period of heightened volatility."
Underwriters at Lloyd's, who provide cover for a wide range of global risks from shipping to terrorism, have faced an increase in claims related to the Iran conflict. These include attacks on shipping through the Strait of Hormuz and on Gulf states. The £1.4 billion in losses were primarily linked to damage to infrastructure on land.
Tiernan noted that underwriters worked through the initial weekend of the conflict, assessing and quoting maritime and other relevant risks. He added that while quotes were provided, some shipowners opted against them due to the excessive risks to crews and vessels.
Beyond the direct impact of the conflict, investment returns decreased by £3.2 billion to £1.8 billion. This decline was attributed to fluctuations in the value of bond holdings, exacerbated by volatility across financial markets driven by concerns over inflation, fiscal policy, and geopolitical developments.
Tiernan highlighted that the foundational assumptions upon which the insurance industry has operated for decades are becoming less stable. He pointed to a confluence of threats, including climate change-induced events like fire, floods, and drought, as well as terrorism, war, cyber-attacks, sanctions, tariffs, and the erosion of the rules-based international order that underpins global trade.
"There is every possibility the international order could fragment further, with less global consensus and more unilateral state action," Tiernan said. He warned that this could lead to heightened geopolitical instability, faster-moving conflicts, and reduced warning times as diplomatic channels become less effective. The industry, he concluded, has experience with many of these individual threats but far less experience managing them simultaneously.