Lloyd's of London has announced that it is expecting a £1.25bn ($1.44bn) hit from the war in Ukraine as the impact of the conflict takes its toll.
Most of the losses are set to come from the aviation industry as planes were grounded, with stranded cargo ships and bad debts also adding to its woes.
John Neal, chief executive of the exchange, said the number was an estimate of potential claims and might not be needed, but that the group had calculated a “very firm financial reserve”.
“Our view has always been — get your arms around what you think the loss could be and reserve it,” he said.
After warning of a “challenging year”, the world’s oldest insurance market has also had to cope with a growing list of sanctions arising from the invasion of Ukraine, where restricting access to the global insurance market is being used as a key policy tool against Russia.
“There are points in time in history when insurance matters, and uncertainty is really critical to that way of thinking,” Neal said.
“When you think of financial crises, when you think of systemic risk and the issues from COVID-19, or dare I say it appallingly Russia invading Ukraine, that creates a crisis of confidence for customers and businesses and that’s when as insurers we’ve got to lean in.”
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Despite this, Lloyd’s posted a £1.2bn underwriting profit in the first half of the year, up from just shy of £1bn in the first half of 2021.
The firm also saw a fall in the combined ratio, where a drop is a measure of increased profitability for insurers.
It is also set to give staff earning less than £75,000 per year a £2,500 one-off payment later this month to help with surging inflation.
The group’s third annual culture survey also showed progress towards its target of 35% of leadership positions filled by women, and a third of new hires coming from ethnic minority backgrounds.
Neal said: “Yet we need to move much further and faster in the years ahead to build the kind of culture our employees — both current and prospective — expect of us.”