War in Iraq could see profits for Lloyd's, but the market fears revenge terrorist attacks and global economic gloom.
Equity analysts and insurers are pinning their hopes on a short, sharp conflict with limited direct losses.
Commerzbank analysis gives a 50% likelihood of a swift end to war and a positive effect on markets.
The bank said there were more differences than similarities between the current situation and the last Gulf War, but research showed the insurance sector fell 25.6% between August 1990 and January 1991 before rallying 13.5% on the success of Western action.
Market insiders say another short, successful conflict with low losses could produce significant profits for Lloyd's.
But Trenwick chief executive Michael Watson warned of knock-on effects.
He said it was dangerously difficult to quantify risks like revenge attacks, damage to the global economy and legislation like the US terrorism risk insurance act (TRIA) that requires insurers to offer war cover. "From a business point of view I don't want a war.
"You should underwrite where you understand the risk rather than unwittingly become exposed to things you don't understand."