Hard markets and remediation pay off: London Market put to positive

A long-running hard market and intensified supervision by Lloyd's have paid off with an upgrade to the London Market segment outlook from stable to positive, analysts at AM Best have declared. 

“London Market (re)insurers have enjoyed several consecutive years of rate increases, with most major classes of business having shown positive momentum,” analysts said in announcing the change. “This, along with Lloyd’s scrutiny of Syndicates’ performance, has supported continued improved attritional loss ratios since 2017.”

A “strong pricing environment” is expected to continue to support “good underwriting profitability,” analysts say, with a special call-out for positive momentum in US excess and surplus lines (E&S).

AM Best sees select “signs of rate softening” in a handful of lines, most notably some professional lines, overall rate adequacy remains “strong.”

Continued strong business flow in select US states from the admitted market into E&S can be a strong business driver for the London Market.

Those E&S flows are enjoying “positive rate momentum” with a promise of “strong” technical profits, AM Best says, citing a likelihood that London Market firms and syndicates will “continue to deploy capacity in E&S lines over the near term.”

Elsewhere on the list of drivers:  the new interest rate environment in place since the 2022 central bank resets is still sufficiently in place to drive investment earnings. 

Headwinds include changing climate trends and unmodelled risks given the heavy exposure to nat cat amongst London Market names. Social and economic inflation remain of concern. 

Modernisation and related cost management issues are both a promise and a challenge with a lot to be lost if the London Market fails to be a pace setter in innovation, AM Best warns. 

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