Lloyd's £1.4bn estimate for losses from the Iran conflict remains heavily based on exposures and incurred-but-not-reported reserves rather than hard claims data, chief financial officer Jim Bichard has told Insurance Business UK.

Lloyd's put a figure on the Middle East conflict for the first time on Thursday, confirming £1.4bn of losses tied to the war. But speaking to Insurance Business UK following the results, Bichard provided further detail on both the uncertainty surrounding that estimate and where losses are emerging.

£1.4bn remains an early estimate

Bichard cautioned against treating the figure as settled at this stage.

"It's a very initial estimate that's not going to be based on a lot of hard reporting because there's still not a lot of really detailed information coming out of that region, so a lot of it would be IBNR ... it's still heavily based on exposures and estimates as opposed to really hard numbers," he said.

That leaves scope for the £1.4bn estimate to move as claims develop and more detailed information emerges from the region. The losses are also broader than the marine exposures that have dominated attention around the Strait of Hormuz.

"It's not all marine business," Bichard said. "It's a mix of marine war, and because it's some physical damage on land, that would be more political violence and terrorism losses. It would be easy to assume, because it's a lot of it, Straits of Hormuz related, that it's marine, but actually it's probably more of a balance of PVT as well."

Despite the heightened risk, Bichard said Lloyd's continues to see appetite for business in the region.

"The market has been and always is, always was open to trade in that part of the world, even though it's obviously a stressed period," he said.

While the immediate risk environment has deteriorated, continued investment across the region means the longer-term opportunity remains. Bichard said "the Middle East is still seen as an attractive growth market for insurance", although sanctions and international law continue to restrict where insurers can provide cover.

Softer pricing is only half the problem

Lloyd's chief executive Patrick Tiernan described current performance as a "high point" and said the outlook was "weighted to the downside". Bichard said that warning reflects two separate pressures that could increasingly converge.

"The high point he's talking about is we've still got the benefit coming through in the results of much better pricing in 2025," he said, adding that Lloyd's has also benefited from "a below-average loss experience".

The concern is that neither advantage can be assumed to persist. Bichard pointed to "reducing prices, but also the likelihood of probably more major losses" as the two pressures facing the market.

That combination puts Lloyd's warning about the downside into sharper focus. The market is moving away from the stronger pricing that supported recent performance at the same time as several years of relatively benign major-loss experience cannot be assumed to continue. If both shift together, the pressure on underwriting performance becomes considerably harder to absorb.