Lloyd's of London has incurred a £1.4 billion loss attributed to the Iran war and associated global financial market volatility, leading the insurance market to warn of a new era of "disorderly" global events. The company reported a 17 percent drop in profits for the first half of the year, falling to £3.5 billion.
Chief executive Patrick Tiernan stated that recent events provide "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 insurance for a wide range of global risks including shipping, terrorism, and fine art, have seen an increase in claims stemming from the conflict, particularly due to attacks on shipping in the Strait of Hormuz and on Gulf states. The majority of the £1.4 billion in losses arose from damage to land-based infrastructure, according to Tiernan.
In addition to conflict-related claims, investment returns for Lloyd's fell by £3.2 billion to £1.8 billion due to fluctuations in the value of bond holdings. This financial market turbulence was fueled by concerns over inflation, fiscal policy, and geopolitical developments.
Tiernan noted that the foundational assumptions for the insurance industry, which have been in place for approximately 80 years, are becoming less stable. He pointed to a confluence of escalating threats, including climate change-induced extreme weather events, terrorism, cyber-attacks, sanctions, tariffs, and the erosion of the established international order that underpins global trade. The possibility of further fragmentation of the international order, leading to increased geopolitical instability and more rapid, less predictable conflicts, was also highlighted. Lloyd's has extensive experience managing individual threats but less familiarity with managing such a wide array of simultaneous risks.