Begin by killing the lobsters humanely. Place them in the freezer for 30 minutes to numb them. Quickly cut through the head with a sharp knife to dispatch them.
Separate the lobster tails and claws from the body. Crack the claws and remove the meat, setting it aside. Cut the tails into medallions, keeping the shell on for flavor.
In a large pot or Dutch oven, heat the olive oil over medium heat. Add the onion, garlic, and bell peppers, sautéing until the vegetables are soft but not browned, about 8 minutes.
Stir in the diced tomatoes and cook for an additional 5 minutes, allowing the flavors to meld.
Deglaze the pot with the white wine, scraping up any browned bits from the bottom. Allow the wine to reduce by half.
Pour in the fish stock, add the bay leaf, paprika, and saffron. Bring the mixture to a simmer.
Gently add the lobster pieces to the pot. Cover and simmer for 20 minutes, or until the lobster is cooked through.
Season the stew with salt and pepper to taste, and stir in the chopped parsley.
Serve the Menorcan Lobster Stew hot, accompanied by slices of toasted baguette to soak up the rich broth.