A.M. Best Assigns Stable Market Segment Outlook to London Market
April 01, 2021
A.M. Best has assigned a stable market segment outlook to the London insurance and reinsurance market. Key factors supporting the outlook included upward premium rate momentum, which is expected to support better underlying performance, greater consistency and clarity of policy wordings, and the ongoing modernization of the market, which should reduce costs and make it easier to place business, Best said.
The rating agency did cite several factors it said moderate those positives, including the continuing impact of the COVID-19 pandemic, uncertainty associated with the adequacy of US casualty reserves due to adverse claims inflation trends, and an uptick in catastrophe losses, including from secondary perils and changing climate trends.
In a Best's Market Segment Report, Best noted that the London market is a hub for internationally traded insurance and reinsurance business and includes Lloyd's syndicates and non-Lloyd's specialty insurers and reinsurers operating in London.
London market insurers and reinsurers have enjoyed several consecutive years of rate increases, the Best report said, with every class of business showing positive momentum. Rate increases have varied by the line of business, with the US excess and surplus segment seeing double-digit increases in the second half of 2020 and the first quarter of 2021. Still, uncertainty remains over whether the rate increases are sufficient to offset claims inflation, particularly in some casualty lines, Best said.
Improving market conditions drew new capital to the market in 2020, Best said, though the impact of that additional capital on premiums has been "muted" thus far as some of that new capital has gone to larger-than-expected COVID-19-related losses and reserve strengthening for prior-year business.
"A material portion" of London market premiums are related to reinsurance, Best noted. Rate increases at January reinsurance renewals weren't as large as anticipated, the rating agency said, although loss-affected programs did see meaningful increases. Increases are also expected in April and midyear renewals, Best said, when programs in such loss-affected regions as Japan and Florida tend to come to market.
April 01, 2021