We are pleased to share the Lockton H1 2024 London Market Insurance Update, intended to keep you abreast with underwriting and risk trends from a London Market perspective. This issue contains insights from 20 business segments across Lockton, along with a spotlight feature on our MENA operations and trends pertinent to that market. Our largest update to date, it is a testament to our continued growth as a business.
As ever, the direction of the economy has significant implications for insurers’ strategies and, in turn, the wider market and impact for insurance buyers. Inflationary pressure has remained broadly stable in 2024, following decreases in the latter part of 2023, reflective of a slowly improving global outlook. This translates to positive news for insurers, many of whom will have been affected by inflation-driven increases in claims costs. At the same time, high interest rates ensure that insurers’ investments continue to deliver a profitable return.
Many insurers have continued to report strong results as we close out the first quarter of 2024, with Lloyd’s of London having had its best year in a decade. These improved results have supported a transition towards more benign market conditions, characterised by increased competition, capacity, and a more positive outlook for buyers.
Nevertheless, these notes of optimism come against a background of uncertainty. Anecdotal evidence exists of longer reporting tails on certain casualty lines than anticipated at the time of underwriting. This is impacting profitability for some insurers and has led to a more restrictive and disciplined approach to terms, conditions, and deployment of capital for those insurers operating within this environment.
Social inflation remains a challenge for many insurers with significant US casualty exposures. Many insurers are reporting adverse development in their historic accident years.
Global macro-economic uncertainty will still provide a cautious approach to the current rating cycle, with lack of new capital entrants, elevated levels of debt, worse than anticipated adverse loss development on casualty portfolios and economic and political uncertainty.
While geopolitical tensions in Europe and the Middle East threaten to renew disruption to global trade, any further deterioration in international relations is almost certain to introduce negative ripple effects for the wider economy, with consequences for a diverse set of sectors, from Fine Art to Marine Cargo. 2024 is also a year of elections, most notably in the US. Here too, it is hard to understate the implications.
Elsewhere, natural catastrophe risks continue to figure among insurers’ key concerns and remain a major topic at renewals for property risks. Many of our specialists in insurance lines such as Directors’ and Officers’ Insurance, Professional Indemnity Insurance, and Cyber have also noted an increasingly tight regulatory environment, with areas under scrutiny including environmental, social, governance (ESG) disclosures and the use of artificial intelligence (AI). As awareness grows around these topics among both consumers and governments, there is an increasing likelihood of claims for businesses including financial institutions, solicitors, and other professional services.
Lockton is here to support the mitigation of businesses’ risks to create a risk profile with strong underwriter appeal. Our Risk Control Services team can help identify weaknesses and create a tailored strategy that meets your risk management needs.
Starting the preparations for renewal early and gathering detailed information around the risks of most concern to insurers, remain key to achieving the best possible outcome at renewal.
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