In a statement accompanying Lloyd’s H1 2026 results, Chief Executive Patrick Tiernan suggested that addressing challenges such as the protection and perception gaps will require the full power of the Lloyd’s market to be harnessed to manage risks that others cannot, moving beyond isolated innovations in products, capital or structures to make innovation the market’s natural operating rhythm.
According to Tiernan, the insurance industry is continually challenged about the protection gap, which is the widening difference between economic losses and insured losses.
“Data shows that countries with deeper insurance penetration tend to allocate capital more efficiently, recover from shocks faster and enjoy longer periods of growth. There is a direct correlation between insurance take up and economic performance,” the executive explained.
Tiernan continued, “The picture varies in different parts of the world. In developing countries, lower incomes, less mature insurance markets and different economic structures can make it very difficult for private insurance alone to provide sufficient protection.
“State intervention is often necessary to make risks insurable or coverage affordable. Even in advanced economies, some risks have become too expensive for many households and businesses to reasonably bear.”
Tiernan said government or state-backed schemes had played an important role in cushioning the impact of extreme-tail and systemic events, pointing to TRIA and Pool Re for terrorism, and NFIP and Flood Re for flood risk.
He also noted that governments had intervened on an exceptional scale during the financial crisis and the pandemic. However, he cautioned that previous intervention should not be taken as a guarantee of future government capacity, particularly as public finances come under increasing strain while the scale and range of systemic risks continue to expand.
The executive went on, “Yet across many advanced economies, some companies are deciding not to take out insurance where it is available. And not every decision to go uninsured or underinsured is necessarily the product of an affordability calculation.
“There is also an assumption that failure to protect the company’s assets will go unpunished, or worse, that poor risk management decisions, wilful or otherwise, will be rewarded with protection from public funds. Alongside the protection gap, we therefore need to consider a ‘perception gap’: the difference between who believes they will bear a risk and who will actually shoulder it when the loss occurs. Closing that gap requires greater clarity about who is responsible for what.”
Tiernan observed that governments have an essential role to play, particularly where extreme tail risks exceed reasonable commercial capacity, but the guiding principle should surely be that the state provides protection for those who cannot afford it, rather than those who simply choose not to pay.
He added, “Providing clarity about this would help in two ways. First, it would mean that public resources are more likely to be directed towards those who cannot protect themselves (rather than to risk takers who are inclined to privatise any upside and socialise any downside).
“Second, it would make sure that those risks that can be insured are covered by private capital, thereby spreading risk across a larger pool of policyholders and a broader base of capital, helping improve affordability over time.”
According to the executive, there is a huge opportunity, as the market softens, profits reach record levels and capital flows into the industry, to make the economic case for greater use of insurance, not simply as protection when things go wrong, but as a means of preventing losses, strengthening resilience and supporting stronger economic performance.
Tiernan continued, “I believe Lloyd’s has a central role to play around the world to make the economic argument for growth driven by more informed allocation of insurable risk to private capital.
“Another avenue for structural growth for the industry must be in following the investment of private and public capital in the areas of defence, energy and infrastructure.
“The growing concentration of capacity in core markets suggests we are in danger of missing this opportunity, with competition driving capital towards familiar risks – weakening terms and pricing – rather than towards the new risks emerging around us.”
The executive concluded, “Meeting these challenges will require us to harness the full power of the Lloyd’s market to help manage the risks others cannot. That will require us to move beyond isolated innovations in products, capital or structures.
“Instead, we must work towards total innovation with the whole system operating in concert to expand the boundaries of the possible. The aim is to make innovation the natural operating rhythm of the market, so that Lloyd’s reflexively embraces emerging and complex risks as potential opportunities.
“We are working to demonstrably expand our appetite, making it easier for syndicates and members to pursue opportunities where they see a clear economic case for growth, innovation or reimagining risk to close both the protection and perception gaps.”
The specialist insurance and reinsurance marketplace recorded a 6.9% rise in gross written premium to £34.7 billion for H1 2026, up from £32.5 billion in H1 2025, driven by strong volume growth of 15.8% from new and existing syndicates, despite a more competitive pricing environment.
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