Pricing, Risk Conditions Prompt Best to Revise London Market Outlook

AM Best is revising its outlook for the London market insurance segment to stable from positive, citing market softening and exposure challenges. 

In a new Best's Market Segment Report, "Market Segment Outlook: London Market Insurance," Best notes that while the pricing environment for most business lines remains adequate and supports favorable underwriting profitability, that price environment is showing signs of softening. 

The report notes that at the same time that prices are showing signs of softening, changing climate trends and unmodeled risks pose exposure management challenges to London market participants. In addition, social inflation is a concern in certain coverage lines. 

Still, positive momentum in US excess and surplus lines continues to offer opportunities to London market insurers, Best said. In addition, a higher interest rate environment compared to that of recent years is likely to support healthy investment yields for insurers. Both of those factors support the stable outlook, Best said. 

"Overall, the London market has remained an attractive insurance hub among global markets," Kanika Thukral, associate director of analytics at AM Best, said in a statement. "In recent years, there has been an influx of new syndicates at Lloyd's and growing deployment of third-party capital. London market companies continue to demonstrate their underwriting expertise by developing new product concepts and providing bespoke coverages."