A.M. Best Maintains Stable London Insurance Market Outlook

A.M. Best is maintaining its stable outlook for the London insurance market, noting that a strong pricing environment is expected to support further improvement in underlying underwriting profitability.

In a Best's Market Segment Report, Market Segment Outlook: London Market Insurance, Best suggested that other positive factors included higher interest rates that are likely to increase investment yields, improved access for third-party capital to support growth opportunities, and market modernization initiatives that should reduce costs.

"London market (re)insurers have enjoyed several consecutive years of rate increases, with every major class of business showing positive momentum," the Best report said. "This, along with continued scrutiny of the syndicates' performance by Lloyd's, has supported improvements in attritional loss ratios in each year since 2017."

The rating agency cited several moderating factors affecting the London insurance market outlook, including the increased reserve risk resulting from social and economic inflation, exposure management challenges due to changing climate trends and systemic risks, potential threats from volatile economic conditions, and high reinsurance costs that could affect the business strategies of those with higher levels of reinsurance use.

In addition, the ultimate cost of claims associated with the Russia-Ukraine war remains uncertain, Best said. "The ongoing military conflict in Ukraine is likely to be a major, albeit manageable, loss for the London market, with aviation, political risk, political violence, and marine lines expected to be most affected," the March 27, 2023, Best report said.

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