Lloyd's of London reported a 16.7 per cent drop in pre‑tax profit for the first half of 2026 after the United States‑Iran conflict drove up marine war premiums, a shock that echoes across Canada's reinsurance market.
Chief executive Patrick Tiernan said the war has turned the Strait of Hormuz into a high‑risk zone, prompting the London Joint War Committee, run by the Lloyd's Market Association and the International Underwriting Association, to expand its designated danger areas to the coasts of Bahrain, Qatar and Oman. The move forced insurers to raise rates sharply to cover the heightened threat of attacks.
In June, Lloyd's injected a $400 million war‑risk facility to keep vessels covered while navigating the strait, a step that underscores the market's role as a global backstop for shipping insurers, including many Canadian firms that rely on Lloyd's capacity.
Tiernan warned that risk is now "disorderly at the same time" and that the industry must shift from trying to predict specific events to preparing for any eventuality. He noted that traditional probability models are less useful when man‑made catastrophes dominate the risk landscape.
Financial chief Jim Bichard highlighted Lloyd's capital advantage, arguing that the market can shoulder more risk per dollar of capital than most competitors. He said this attracts new entrants from Europe, the United States and elsewhere, adding pressure on pricing in a softening market cycle.
The soft market, driven by abundant capital and previous hard‑market profits, is compressing margins. Tiernan said the board is monitoring underlying business closely to stay on target, while noting that existing participants are increasing their business with Lloyd's and new high‑profile insurers are joining the platform.