Lloyd’s boss Tiernan predicts ‘explosive’ growth in geopolitical risk insurance demand

Businesses could drive “explosive” growth in demand for geopolitical risk insurance as boards seek broader protection against an increasingly volatile risk landscape, according to Lloyd’s chief executive Patrick Tiernan.

Speaking at the Financial Times Global Insurance Summit yesterday (24 June), Tiernan said companies were facing a convergence of risks, from geopolitical instability and cyber threats to pressures on critical infrastructure and financial systems.

“For the first time, it feels that they are all in flux at the same time,” he said.

Tiernan argued that firms needed to distinguish between short-term disruption and longer-term structural threats when assessing their risk exposure.

“I think our job, particularly Lloyd’s, and I think in other institutions around the world, is, can you separate the noise from the signal?” he said.

The comments came during a discussion on protection gaps and the insurance market’s response to recent conflict in the Gulf region.

Defending the industry’s handling of the situation, Tiernan said insurers had continued to provide cover despite difficult trading conditions.

“I think the insurance industry, from my perspective, has done a very good job in pretty difficult times,” he said. “They did continue to trade, did continue to offer coverage, despite the difficult conditions.”

Growing demand

Asked whether increased geopolitical volatility could create a significant growth opportunity for the market, Tiernan suggested demand could rise sharply if businesses opted for broader insurance protection.

“If boards decide to protect themselves in that way, that they just want to spend more time growing their businesses, having this sort of steep, easy cover, and prepared to pay slightly higher premium for it, it could be explosive,” he said.

However, Hiscox group chief executive Aki Hussain cautioned that insurance alone was not the answer to supply chain resilience.

“The answer isn’t just to buy more insurance,” he said. “Insurance will not protect you from the destruction any business faces. They will pay an indemnity and they will get you back on your feet.”

“The objective, really, is to stay on your feet, not be on your knees.”