Patrick Tiernan: War risk is being rewritten

Summary

Podcast Summary: The Interview — Patrick Tiernan: War Risk Is Being Rewritten (BBC World Service, July 12, 2026)

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Episode Overview

This episode of The Interview features Patrick Tiernan, CEO of Lloyd’s of London. Host Felicity Hannah engages Tiernan in a dynamic discussion about how complex global risks—such as war, cyber threats, and climate change—are rapidly evolving, and how Lloyd’s is adapting its risk models to meet these challenges. The conversation explores the shifting nature of warfare, the increasing interdependence of global infrastructure, the impact of climate change, and Lloyd’s internal efforts to modernize its culture.

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Key Discussion Points & Insights

The Evolving Nature of War and Risk Insurance

• Lloyd’s Unique Role: Tiernan explains that Lloyd’s insures a vast range of risks, from celebrity body parts to the world’s most volatile situations—most notably, war, cyber, and complex catastrophes.
• War Risk Models Are Outdated:
  • Quote: “The way war is insured at the moment, it assumes that it'll build up, that there'll be breaks in there and that you can increase the cover. It's very possible that won't be the case as there is more drone warfare, [and] more artificial intelligence in the decision making. So we’re going to have to completely reimagine how we cover that.” — Patrick Tiernan [01:59]
• AI & Modern Warfare:
  • Increasingly autonomous decision-making in weapons could compress escalation times, removing traditional diplomatic signals or pauses and demanding new insurance frameworks.
    • Quote: “If you have the decision making in the munitions themselves...then we don’t have what we're used to having, which is smoke signals or diplomatic signals that maybe slow down the escalation.” — Patrick Tiernan [17:46]

Interconnected Global Infrastructure and Systemic Risk

• Multiple Systems in Flux: Tiernan identifies four critical infrastructures at risk:
  1. Physical assets (energy, buildings)
  2. Data/cyber infrastructure
  3. Financial services
  4. International order and rules
  • Today, all four are simultaneously under threat, making risk forecasting exceptionally difficult.
    • Quote: “What’s really unique at the moment is that all of the critical infrastructure that we rely on is actually in flux...my number one worry at the moment is the interconnectedness of all of those risks.” — Patrick Tiernan [04:38]
• Historical Uniqueness: Tiernan doubts there has ever been a period where so many core systems are so unstable and interdependent.
  • Quote: “I'm not sure there has. ...Now, because we have this reliance built in, I think we are very underprepared for the risk that we're facing.” — Patrick Tiernan [06:30]

Cyber Threats & Insurance Gaps

• Cyber Attacks on the Rise: Both state-backed and criminal cyber-attacks pose major risks.
  • State attacks can be crippling, while ransomware is rising in severity and frequency.
• Underinsurance Problem:
  • Quote: “The take up rate of cyber is nowhere near as high as it should be given that risk of cyber insurance.” — Patrick Tiernan [08:27]
  • North America leads in cyber insurance, likely due to its more litigious environment, but Europe lags behind.
• Why Cyber Insurance Matters:
  • Insurers not only pay out but also guide companies on prevention and recovery, increasing resilience.
  • Quote: “If you have cyber insurance...they're there with you to make sure you're back up and running. Your resilience is there.” — Patrick Tiernan [08:42]

Rapid Response to Geopolitical Events

• Case Study—Strait of Hormuz:
  • Lloyd’s relies on lessons from past shipping interruptions (e.g., in the Gulf and the Black Sea).
  • The main issue during crises is often safety/security for crew rather than just the insurance cost spike.
    • Quote: “There was confusion about why ships weren't moving. ...The dominant factor was that there wasn't the secure passage through..." — Patrick Tiernan [14:31]
  • Lloyd’s apolitical role: acting behind the scenes to facilitate solutions and keep markets functioning.

Defence Spending and the Economic Case for Insurance

• Rising Defence and Infrastructure Investment Needed:
  • Tiernan foresees increased defence and energy spending, particularly across NATO and Europe.
  • Insurance uptake is correlated with economic growth, offering a foundation for investment.
    • Quote: “Investment in infrastructure helps drive economies forward and actually take up of insurance helps drive economies forward as well.” — Patrick Tiernan [16:43]

Climate Change – Insurance at the Crossroads

• Escalating Catastrophe Risks:
  • Lloyd’s actively tracks floods, storms, wildfires, acknowledging their upward trend due to climate change.
    • Quote: “When you look at flood, fire and drought, they’re on an upward trajectory.” — Patrick Tiernan [19:31]
• Market vs. Morality Debate:
  • Lloyd’s faces criticism for insuring fossil fuel projects while talking up net zero. Tiernan clarifies that Lloyd’s, as a marketplace, cannot impose bans on legal, unsanctioned forms of energy.
    • Quote: “It has always been the case that Lloyd's cannot mandate bans on one form of energy that is legal and not sanctioned. ...Being really clear on what we can and can’t do helps transparency, it helps predictability, and that helps investment.” — Patrick Tiernan [21:05]

Lloyd’s Culture & Modernization

• Historic Issues:
  • The organization has faced scrutiny over issues like bullying, harassment, and “boys’ club” culture.
• Cultural Overhaul:
  • Commitment to the highest standards of governance and corporate culture.
    • Quote: “Culture is something that I think about every day. ...It’ll never be enough because we want to be the best.” — Patrick Tiernan [21:59]
  • Measurable actions: Surveys, leadership diversity, engagement metrics, increase in graduate/early career recruitment.
  • Lloyd’s set to double its graduate intake by 2027 to further diversify the industry.
    • Quote: “We are doubling down. We're actually in 2027 doubling our graduate intake...because actually when people come into insurance...they tend to stay for their entire careers and retire pretty late.” — Patrick Tiernan [24:17]

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Notable Quotes & Memorable Moments

• On Responsibility:
  • “We have from the boring to the pretty exciting. And that’s the beauty of it. We try and find a solution for everything.” — Patrick Tiernan on insuring everything from famous body parts to global disasters [02:54]
• On the Nature of Worry:
  • “So I think if Roger Hargreaves was writing me, it wouldn’t be Mr. Risk, it'd be more Mr. Worry.” — Patrick Tiernan [04:38]
• On Culture:
  • “It’ll never be enough because insurance is...a global family. ...When we let ourselves down on non-financial misconduct, it feels very personal for everybody.” — Patrick Tiernan [23:02]

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Key Timestamps

• 01:27 — Introduction to Patrick Tiernan, Lloyd’s CEO and discussion of Lloyd’s risk portfolio.
• 01:59 — How war risk modeling is changing in the era of drones/AI.
• 04:38 — The biggest current risk: interconnectedness of critical infrastructure.
• 08:27 — The growing risk of cyber attacks and underinsurance.
• 14:31 — How Lloyd’s responded to the Strait of Hormuz crisis.
• 16:43 — Defence and infrastructure investment, and insurance’s link to economic growth.
• 17:46 — The challenge of insuring against AI-driven, rapidly escalating war.
• 19:31 — Climate change risks and Lloyd’s response.
• 21:05 — Debate over Lloyd’s role in insuring fossil fuels vs. enabling net zero.
• 21:59 — Lloyd’s approach to culture and ongoing reforms.
• 24:17 — The push for more diverse and inclusive recruitment in the insurance sector.

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Tone and Language

Patrick Tiernan speaks with a blend of technical expertise and personal candor—balancing a sense of grave responsibility for risk with transparency and a touch of humor. Felicity Hannah guides the conversation with insight and direct questions, prompting Tiernan to address controversies and future challenges head-on while keeping the discussion accessible and engaging.

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Summary Takeaway:
Patrick Tiernan paints a picture of a world where risk is not only more complex but also more interconnected than ever before. Whether discussing the threats posed by cyber attacks, the pace of technological innovation in warfare, or the moral challenges of insuring fossil fuels, Tiernan underscores the necessity for insurance to evolve in response to rapidly changing realities—both within the marketplace and the culture of Lloyd’s itself.

Transcript

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[Felicity Hannah]

Hello, I'm Felicity Hannah, BBC business presenter and this is the interview from the BBC World Service. The best conversations coming out of the BBC. People shaping our world from all over the world.

[Patrick Tiernan]

I want to get freedom. I like that, freedom.

[Felicity Hannah]

A gender equal world would be a better world for men too.

[Patrick Tiernan]

We need to cease fire, we need

[Felicity Hannah]

healing, we need trusts.

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These companies don't really, they don't care what governments do.

[Patrick Tiernan]

This is a war. The first thing that we want is the war to end.

[Felicity Hannah]

For this interview I met Patrick Tiernan, CEO of Lloyds of London, the 337 year old insurance marketplace that operates in nearly all countries around the world. It can insure almost anything, including Mick Jagger's libs, but their main areas are complex risks. Such as such as aviation, cyber and war. Patrick Tiernan warns that huge changes are taking place when it comes to conflict, forcing a rethink on how risk is calculated and how it's insured.

[Patrick Tiernan]

The way war is insured at the moment, it assumes that it'll build up, that there'll be breaks in there and that you can increase the COVID It's very possible that won't be the case as there is more drone warfare, that there is more artificial intelligence in the decision making. So we're going to have to completely reimagine how we cover that.

[Felicity Hannah]

Welcome to the interview from the BBC World Service with Patrick Tiernan. We have so many important risks to talk to you about, but I just, when you're touching on how you can ensure pretty much anything, there are rumors, there are things reported in the press over the years that Lloyds has helped ensure and I just wonder if you know whether any of these are true. So I have read Charlie Chaplin's voice, David Beckham's legs, one of the Cadbury's taste taste buds, Tom Jones's chest hair. Any of that true?

[Patrick Tiernan]

Yes, yes.

[Felicity Hannah]

Tom Jones's chest hair?

[Patrick Tiernan]

Yeah, yeah. And there's more. There's Mick Jagger's lips. Yes, I think. Keith Moon's hands, you know. So it is. We have, from the boring to the pretty exciting. And that's the beauty of it. We try and find a solution for everything.

[Felicity Hannah]

It's a weighty responsibility. How do you go about deciding how and who will ensure Mick Jagger's lips?

[Patrick Tiernan]

So my job as running the society and the corporation of Lloyd's is actually to make the market work, to provide all the infrastructure for the market. The decisions on who's going to underwrite what are taken by the syndicates. And we are less directive. We have a set of principles that we operate by. And what Lloyds does uniquely to any other insurance market anywhere else in the world is we backstop it. Lloyds has this thing called a central fund. So we actually provide the backstop for. For all the risks that are taken around the world, which is boring, but important. And the important part is it's terrifying, not boring. It makes the Lloyds market incredibly capital efficient. So it means that we can insure things that really will be virtually impossible to insure elsewhere because the risk is syndicated, the risk is spread quite widely and then backstop by the central fund and the corporation. And the depth of that chain of security, as we call it, is over $150 billion. So it's a really deep pool of capital backing the most complex, the most volatile, the most unpredictable and some cases the most exciting risks in the world.

[Felicity Hannah]

So you are Mr. Risk. Let's get properly going with a nice big question. What's the biggest risk right now?

[Patrick Tiernan]

So I think if Roger Hargreaves was writing me, it wouldn't be Mr. Risk, it'd be more Mr. Worry. So I think my job is to be the professional worri, to sort of think ahead of the basket of risks, both individual and collective. Over the years, we've faced individual risks. There's been world wars, there's been trade wars, there's been cold wars. What's really unique at the moment is that all of the critical infrastructure that we rely on is actually in flux, is in risk at the same time. So we have this connectivity, this unique period where things are very interdependent, but they're all out of order. It's a very disorderly period. There's four key pieces of infrastructure that we think about, the physical assets, the physical infrastructure around the world, buildings, energy, plants, et cetera. The Data and cyber infrastructure to allow. So much of what we do today relies on data exchange, then the financial services, the clearing, the banking infrastructure, and then the international order of things. The rules that we rely on, be it the WTO or whatever, the international norms, all of them are in flux at the moment, all of them are under threat. And so my number one worry at the moment is the interconnectedness of all of those risks. And it is very, very difficult at the moment to decipher noise from signals. So what actually is most likely to happen next, and I think the way I think about it at the moment is to try not to be too specific about predicting what the next risk, the next choke point, the next area of conflict will be, but actually think a bit more broader and encourage folks around boardrooms, company tables, even kitchen tables to think about how to protect themselves from the uncertainty.

[Felicity Hannah]

Has there ever been a time like this before?

[Patrick Tiernan]

I'm not sure there has. I think there's been times where one of those four has been far more charged from a risk basis. There has been wider conflicts, there has been more international disorder. But what's unique at the moment is we've, you know, over the last 40 to 80 years, we've built an international system of reliance. We rely on these things as normal. We rely on the availability of data. 300 years ago for shipping, there was no data, but we did. We weren't relying on it. So now, because we have this reliance built in, I think we are very underprepared for the risk that we're facing because we rely on things that maybe won't be there tomorrow.

[Felicity Hannah]

Okay, I want to pick up on what you were saying about the world never being more interconnected and relying on data and cyber. Does that sort of suggest to me that you consider a major cyber attack potentially one of the biggest threats to the global economy?

[Patrick Tiernan]

Yes. I mean, I think the way we think about it at Lloyd's is we do think about the major risks, both in terms of the economic impact and the insurance impact. And cyber attacks are one of those what we call realistic disaster scenarios that we plan ahead for. The biggest risks are still natural catastrophe, but cyber is increasing in its severity. If we do have a major global cyber attack, and I would separate them into two different buckets, if it's a state backed cyber attack, if the state infrastructure involved, they can be incredibly severe. Or else you have the more ransomware attacks, which is much more criminal gangs actually trying to extort money from the global financial sector. So if you separate both of them the first could be deeply crippling, the second, the ransomware is increasing and it sort of comes in waves and we're in an increasing wave at the moment. But I'd say, Felicity, the thing to think about is the take up rate of cyber is nowhere near as high as it should be given that risk of cyber insurance. Correct. There's two reasons that it would be better for all of us if the take up rate was higher. If you have cyber insurance, one of the things that's really, that's a key part of the package is the insurance company is there to help you prevent the attacks, increase your patching. If you have an attack, they're there with you to make sure you're back up and running. Your resilience is there. So the damage, the economic damage to your company is limited. And so I think it's really important that we educate, you know, not mandate, but educate folks as to what those dangers are and help people understand how best to protect their businesses.

[Felicity Hannah]

How big do you think the gap is?

[Patrick Tiernan]

It's yawning. It depends on which country. North America has the biggest take up rate, probably because they're a more litigious society. The UK is probably in the second division, but SMEs beyond UK and the US into Europe. The take up rate is nowhere near as high as it needs to be.

[Felicity Hannah]

Do you feel like a major attack, a bigger attack than we've seen so far feels inevitable to you? Is it the thing you think about at 3:00am?

[Patrick Tiernan]

Well, the thing I think about at 3:00am is where my teenage daughters are at the moment. It's summertime and it's no insurance for that Isle of White concerts last weekend. Yeah, but when they're at home, the danger is trying to be too predictive about a single event. So it is one of the things that I think about, but it is the potential damage of a cyber impact is linked to geopolitical stability. It is linked to security of subsea cables. At the same time it is linked to that, to the financial services industry being resilient to movements of money as well. So all these things do have that critical linkage. So it isn't the one thing I'm thinking about, but it is one of them.

[Felicity Hannah]

It's not always easy being Mr. Worry.

[Patrick Tiernan]

Yeah, there's always a happy ending, isn't there, in those Mr. Man books? So it is a huge privilege to be honest, to have the worries of the world as part of your job because it means that you end up in the rooms that matter. I end up in rooms where these decisions are being made. And I think what my job is to make sure I bring the best available intel and insight to decision makers, whether they're in boardrooms, cabinet rooms or tea rooms. It is important that we give people those insights to act before the event, to react in the event, and then to sort of plan into the future. So with a worry comes privilege.

[Felicity Hannah]

You're listening to the interview from the BBC World Service.

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[Felicity Hannah]

One of the things that really stood out to me in this interview with Patrick Tiernan was his attention to detail. So the backdrop in the studio was green. He knew it was going to be green and he'd chosen proactively to wear a green tie to match. And I wonder if it's that focus on detail that you need. If you're going to manage risk across so many different sectors, you need to really absorb information like a sponge. Okay, let's return to my conversation with Patrick Tiernan. Events can overtake us very, very quickly, can't they? A lot of the businesses I talk to every day have been really affected by the conflict in Iran, the closing of the Strait of Hormuz. That is the kind of risk you have to literally price up. What has that conflict, what has that specific closure meant for ensuring shipping and businesses operating in the Middle East?

[Patrick Tiernan]

When an incident like this breaks out, the first thing we do is quickly think about the past, present, future. So has this happened in the past and do we know? Can that help inform us what's going to happen? And yes, there was shipping interruption in the Gulf in 88, 89 at the end of the second Gulf War. And Lloyd's and the international shipping industry did learn from that, did learn how pricing would move and how damaging a choke point like the Strait of Hormuz would be. We also learned through the Black Sea closure in Ukraine, how important it was to work across boundaries in order to open these shipping lanes. Back then again, it was about not just oil prices, but actually some of the nitrates, some of the fertilizers, to actually allow the food growth that really, really impacts the Southern hemisphere. So we quickly learned those lessons and then you move quickly into the present. Is this an event that's going to damage insurance companies such that they won't be able to provide quotes and capacity for the continuation of shipping in the region? And the answer was no. So quotes continued to be issued. Anybody who wanted to get insurance at that time could get it. What actually became quite difficult, and I think this was new to this particular crisis. There was confusion about why ships weren't moving. There was a conflagration of, is it because of the price of insurance which was going up because the risk was going up or was it because of the safety and security of ship owners, their captains, and wanting to keep their people out of harm's way? The dominant factor was that there wasn't the secure passage through and that was why ships were being held in place. That was why we had this choke point of nothing moving. It's not about allocating who's responsible, it's about quickly moving into solutions. And I think that's where Lloyds in particular, we are apolitical. We do operate in the rooms that matter, quietly and discreetly.

[Felicity Hannah]

You're managing risk. One of the ways that governments manage that risk is through their defence spending. Does the UK spend enough on defence? Does NATO?

[Patrick Tiernan]

I do think it will increase. I think spending on defence needs to increase across the NATO partners and in Europe in particular, I think spending on energy needs to increase. The amount of energy spending that is needed across the world over the next 25, 30 years is extraordinary. You see figures like 50 trillion of increased investment needed and that is just to keep up with the demand of electricity and power today. And then infrastructure, we have a lot of infrastructure that we need to improve. And as we talk about boosting growth, I think the one thing that you see correlation with is you see correlation with investment in infrastructure helps drive economies forward and actually take up of insurance helps drive economies forward as well. So making sure that we can make that economic case, make that link, I think that's what we've got to make sure we focus on.

[Felicity Hannah]

What about the challenge on the other side though? Are you looking at the risk of changing warfare, drone attacks, those kind of increased, smaller warfare risks?

[Patrick Tiernan]

Absolutely. So much of the conversation today is about AI and often we talk about it in terms of the impact on operations at Lloyds, I think about the impact of AI on the underlying risk itself. So you mentioned the theater of war. That is the area that we've probably looked at most, and this has been talked about by folks like Henry Kissinger for years, that if you have the decision making in the munitions themselves, in the delivery vehicles themselves, then we don't have what we're used to having, which is smoke signals or diplomatic signals that maybe slow down the escalation. So when we talk about the way war is insured at the moment, it assumes that it'll build up, that there'll be breaks in there and that you can increase the COVID It's very possible that won't be the case as there is more drone warfare, that there is more artificial intelligence in the decision making. So we're going to have to completely reimagine how we cover that. And that is both an opportunity, but a very big. A very big difference in how risk is going to be calculated and insured in the theater of war. If we go to the other end, it's not all doom and gloom. If you look at the other end, life sciences is a big area where insurance is to the fore because traditionally, new medicines, treatments, you know, there would be humans involved in the testing process. Increasingly, it's large language models that are being used to test medicine, which is great because the deployment of new medicines, new treatments is increasing much faster, which is, you know, great for getting people back to health or longer lives, et cetera. There's less risk there. So you've got to look at that in a different way.

[Felicity Hannah]

How big a risk is climate change?

[Patrick Tiernan]

It's a substantial risk. So I think when we talked earlier about those realistic disaster scenarios in Lloyds, and we talked about cyber, the biggest realistic disaster scenarios, the biggest risks to Lloyd's as a business continue to be natural catastrophe. So wind risks, earthquake, et cetera. But in the last couple of years, we added three more new categories of risks that are related to climate. US flood, US severe convective storm. So tornadoes, hail, et cetera, cyclones, et cetera, and fire. So if we look at the science, when you look at flood, fire and drought, they're on an upward trajectory. I think it's really important that we use the data and the science to make sure that we are informing decisions going forward because the risk is going up. When it comes to climate change risk,

[Felicity Hannah]

there's a tension, isn't there, in that Lloyds is an important marketplace for ensuring the net zero transition, but it's also a marketplace for ensuring fossil fuel expansion. And campaigners have criticized Lloyds. They say you're an enabler of fossil fuels. Can you credibly talk about climate risk while your market continues to ensure oil, gas, LNG expansion?

[Patrick Tiernan]

Yeah, well, I think the important thing is to remember that we are a market. So a market has to accommodate different choices and different voices.

[Felicity Hannah]

That's not what your predecessor thought because he had laid out plans to push the market towards net zero. And you scrapped that mandate, didn't you, that Lloyds members should stop ensuring heavy, polluting fossil fuel projects.

[Patrick Tiernan]

I was just unequivocal and basically told it as it was. So it has always been the case that Lloyds cannot mandate bans on one form of energy that is legal and not sanctioned. However, you've got to use the advantages that you have and that the lower capital consumption that you have in the Lloyds market can lead to taking risks that otherwise you wouldn't be able to take. And I think just being really clear on what we can, can and can't do is it helps transparency, it helps predictability, and that helps investment.

[Felicity Hannah]

Let's talk about culture then, because Lloyd's has had some historic and some recent challenges there, facing really serious scrutiny over bullying, harassment, sexual harassment, alcohol culture, essentially non financial misconduct. Have you come through that time now?

[Patrick Tiernan]

So I think as you know, as a leader of Lloyds, as a leader of the market, my view is I will never be through it. So culture is something that I think about every day. And it is a huge responsibility on Lloyds because we actually oversee culture and governance in the market. So we have to hold the highest standard. Sir Charles Roxburgh, who's the new chair, he started in May last year, I started in as CEO in June last year. We committed to holding the highest standards of corporate governance and culture throughout the organization. But we were really clear as well that we were going to, we wanted to be judged on actions, not just words. And when it comes to what we've done, we've put a huge amount of additional governance in place. We've raised the standard of culture for ourselves as Lloyds because we have to hold that position bar and that mirror to ourselves first and foremost. And even though when we look at the stats and the data, when we look at the surveys where insurance is above the benchmarks of financial services, where we have improving and very commendable data in terms of the balance of who's in the workforce, it'll never be enough. It'll never be enough because we want to be the best and it'll never be enough because insurance is, it's a global family. Everybody feels a very big part of the insurance family. And so when we let ourselves down on non financial misconduct, it feels very personal for everybody. So it's something that we'll continue to think about, continue to try and drive ourselves to be the very best. And in terms of how we measure it, we put out in the strategy for the next five years. We talk a lot about financial return, we talk an awful lot about capital and cost. But right at the center of it, we put a Lloyds to be proud of. And we said that our engagement survey, our people's view of us and our net promoter score, everybody who deals with us is going to be measured. And if it's anything short of excellent, it won't be good. Enough.

[Felicity Hannah]

Is the insurance sector generally still too much for Boys Club?

[Patrick Tiernan]

No, I don't think so. I think it is massively expanded to be inclusive over time. We have a good balance within. I talk about Lloyd's as a corporation itself, we have an excellent balance, sort of 50, 50 or slightly better balance of gender, both in terms of leadership and across the corporation. We are continuing to drive a good balance in terms of ethnic diversity, but we have to push to increase that inclusion because to have the best culture, you have to have the best talent as well. So we are actually trying to bring in the best of the best from the next generation. And in a world where we often see headlines about a lack of opportunity for early careers, graduates, et cetera, we are doubling down. We're actually in 2027 doubling our graduate intake, our early careers intake, both from schools graduates. We'll be looking to cast the net as wide as possible because actually when people come into insurance, and that's the key to bring them in, they tend to stay for their entire careers and retire pretty late, you know, so it's a great industry, but we need to make sure that we are open to all and inclusive to all and people can enjoy it and be themselves when they're in our industry.

[Felicity Hannah]

Thank you for listening to the interview. If you enjoyed this conversation, you can find many more episodes of the Interview wherever you get your BBC podcasts, including ones with chief EU Brexit negotiator Michelle Barnier, Head of the Commonwealth Games Katie Sudlea and Artemis astronaut Victor Glover. Until next time, bye for now.

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