Despite increasing noise about one-off “horror story” renewals, London market rating in Q4 is broadly keeping pace with the mid-single-digit reductions seen throughout the year, sources told Insurance Insider.
Senior underwriting sources said that speculation of a “feeding frenzy” in the closing months of the year was at this early stage overblown, although a quiet wind season and appetite to grow continued to tilt pricing conditions increasingly in favour of clients.
So far this year, the pace of softening has been slightly ahead of expectations with an acceleration of change in the spring, but given the strong levels of adequacy at the start of the year, this has not prompted widespread alarm.
The faster-than-expected pace of softening was first flagged by Lloyd’s in its Q1 market message, as rates fell by 3.3% on average. By the time of its H1 results disclosure, the Corporation pegged risk adjusted rate change at –3.5%.
The Corporation has been vocal in its prioritisation of underwriting results over top line, which appears to be feeding into underwriting discipline, preventing market participants from cannibalising rival portfolios to win new business and hit top-line targets.
“There is a prevailing feeling that you are going to have to do something pretty serious to win new business,” an active underwriter source said.
Nonetheless, renewals taking place on 1 November and 1 December are being watched closely.
The number of instances where business is aggressively remarketed and achieves substantial double-digit reductions is increasing, an ominous trend underwriting executives are monitoring.
Property was repeatedly mentioned as the class where this was most evident – although sources noted that the class was coming off a level of adequacy unsurpassed by other lines of business.
This publication first reported in the run-up to the July renewals that rates in the London property D&F market were dropping off quickly in a highly competitive renewal season.
Meanwhile, the inexorable march of both cross-class and monoline facilities continues to add to rating pressure for underwriters, squeezing out the level of open market business available to compete over.
Brokers which are active in the facility space continue to prioritise funnelling as much business as possible through the structures.
Looking ahead to next year, some sources observed that near-universal growth ambitions suggested that the pace of softening is only set to mount, although this may be partially offset by limited growth aspirations among some of the largest players in Lloyd’s.
“It does not excite me for next year in terms of the rating environment,” one active underwriter said.
Broadly speaking, it is expected that 2025 will prove another highly profitable year for the London market, with results bolstered by a quiet wind season, notwithstanding the carnage Hurricane Melissa is currently wreaking on Jamaica.
While the ~$40bn California wildfire event pushed nat cat losses in the first half to at least $100bn, the second highest H1 claims load on record, severe weather activity has been notably quiet during the third quarter.
In particular, the absence of a major landfalling US hurricane is expected to contribute to healthy underwriting margins.
“The results this year will be very good, which will only fuel softening next year,” a senior underwriting source said.
Patchy conditions by class
Beyond the top-level view of the overall portfolio, there are naturally varying dynamics at play across different classes of business.
Property continues to generate the most noise and attract the most attention, not least because it remains the biggest class of business in Lloyd’s (accounting for almost £16bn of premium in 2024, just under 30% of Lloyd’s income).
The class of business has been one of the key beneficiaries of the recent hard market, with substantial pricing increases and strong inflows into London combining to deliver strong returns in recent years.
As such, the sector has become amongst the most competitive, as carriers look to maximise their market share whilst there is still adequacy in the portfolio.
While overall, the downwards property pricing momentum is coalescing in the high single to low double digits, sources pointed to one-off deals in the third quarter, where aggressive remarketing led to pricing being gouged by close to 50%.
Similarly in cargo, another class that has achieved a strong level of adequacy, sources identified one-off deals with major double-digit slashes in rating.
The concern in such instances is whether these isolated incidents spiral into broader market trends.
The casualty market has defied the wider market trajectory this year and registered pricing increases, most pronounced on an excess basis.
Sources said that single-digit rate increases were continuing to feed through on the casualty book, although the uplift was down slightly compared to the beginning of the year.
The travails of the aviation market this year have been well documented, with high-profile losses such as American Airlines and Air India.
As such, there is widespread consensus that the market needs to push for rate rises, but high levels of capacity are making this challenging.
As recently explored by Insurance Insider, the airline market is in the midst of its busiest renewal season of the year, and all-risks insurers are targeting 15%-20% rate rises, although abundant capacity means this is proving difficult.
Other specialty classes such as hull and upstream energy are dogged by excess capacity, sparking concerns around profitability.
The financial lines market has been a problem child of the wider portfolio for several years, registering steep pricing reductions after an earlier period of hardening.
Sources said there are now signs that pricing is beginning to flatten in the class, reflecting a domestic trend in the US filtering over to London.
Client behaviour
High level broking sources stressed that the let-up clients are experiencing in property pricing – normally the largest insurance spend for major clients – could create opportunity to redeploy insurance spend into other lines to boost protection.
In particular, sources stressed that there was an opportunity to push for increased cyber insurance buying.
Since hardening dramatically between 2020-2022, cyber rating has been falling consistently, making buying conditions more attractive for clients.
Meanwhile a string of high-profile incidents in the UK this year have served to demonstrate widespread underinsurance for cyber risks.
For instance, cyberattacks against UK retailers M&S and Co-op in May proved an illustrative case study in cyber buying.
The Co-op had no cyber insurance in place to respond to the ransomware attack, while M&S’s £100mn tower was dwarfed by the £300mn of losses it expects from the event. Insurance Insider explored how this could drive uptake of the product here.
Brokers said they would be advocating to clients that the timing was ripe to strengthen their cyber protection, given the wider savings they are achieving in other classes, but while it is believed this trend may emerge next year, there are currently limited signs of it appearing.
Sentiment for 2026
Underwriting executives were broadly satisfied with trading conditions and accepting of the inevitable softening following several highly profitable years.
With the market expected to deliver impressive results again in 2025 – successfully absorbing the largest ever wildfire loss – carriers are eager to defend market share.
An overwhelming theme of the September conference season was that virtually all insurers and reinsurers are targeting growth, and it is questionable whether inflation and new products will be adequate to fulfil these top-line ambitions.
Given these factors, ongoing softening seems inevitable. The task ahead is to keep these rate decreases within the bounds of pricing adequacy.
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