Lloyd’s market message Q4 2025

Lloyd’s presented the Q4 Market Message last week. The briefing was opened by Rachel Turk (Chief of Market Performance) with an overview of current market conditions. Mirijam Spies (Chief Actuary) outlined Lloyd’s thinking around capital strength and reserving approach. Finally, Caroline Sandeman‑Allen (Chief of Market Oversight) presented the “Market Oversight Plan”, summarising the key priorities and themes for the period ahead.

Turk reported that the market remains “broadly in good shape heading into 2026”. However, she warned that “rate alone cannot be relied on” meaning that with pricing/rates under pressure, the market will need more than just volume or top-line growth to deliver sustainable returns. She reported that the market is entering a “softening phase”: rates, especially on property lines, are falling and competitive pressures (capacity, new entrants, broker structures) are intensifying. The full year forecast for 2025 at Q3 showed a further 1.5% decline in premium for the market.

All but the casualty classes are in a negative rating environment, yet despite increases, casualty pricing can still be seen as “inadequate”, suggesting that rates no longer sufficiently reflect underlying risk and loss potential with social inflation still presenting a potential concern. The cyber market is suffering from a supply and demand imbalance and views of price adequacy appear to be optimistic and out-of-date. Property rates are “softening rapidly,” especially following a relatively light North Atlantic hurricane season, which Lloyd’s sees as problematic for sustaining long-term return thresholds. Underwriters were urged not to give away hard-earned margin despite competitive pressures. Overall, the combination of these pressures suggests a more challenging backdrop than previous years; not dire but requiring discipline and close management.

Turk moved on to talk about the battle for distribution.  She mentioned cross class facilities, structured solutions and pure follow market models and urged underwriters only to write in areas where they add value and to “not let ambition cloud reality”.

The outlook for 2026 is for the market to write £67.4bn of premium at a target combined ratio of 91.2%. This compares with the latest premium of £59.8bn for 2025 at a combined ratio of 88.7%. This is over £2bn less premium than was originally targeted but at a slightly lower combined ratio. The growth for 2026 is 2.3% on a like for like basis with over 10% from new entrants and new structured solutions. Growth will be supported by the market if it is “thoughtful, deliberate and reflects the attractiveness of the Lloyd’s platform”. There is expectation that trading conditions will be tougher in 2027 but the market was urged not to chase down rates and margin during 2026.

Spies advised that the market capital has increased by 7.5% or £2.5bn up to £36.1bn. This is the largest year on year increase in capital seen over the last four years and capital strength has improved relative to exposure (now above 50%).  Growth, risk, volatility and a reduction in forecast profitability are driving this increase in capital as well as some reduced reinsurance purchase and reserve deteriorations. There will be increased oversight on modelled loss ratios as not achieving plan will lead to higher capital requirements. This one of the consequences of trying to keep the top credit rating for the market.

Sandeman‑Allen addressed market oversight. Principles-based oversight has been in place for the last three years and has been working well delivering risk-based, proportionate oversight to protect the Lloyd’s market’s performance and brand. The plan for 2026 is focussed on sustainable market performance which includes increased oversight on delegated business. A new metric will be introduced taking a longer term view of profitability (increased from 3 years to 5 years) for ‘outperforming’ syndicates which we fully support. Oversight of investment strategy and reinsurance will also move to more outcomes-based (rather than rules-based) principles.

Turk summarised that the current trading “outlook it robust”, albeit a little weaker than this time last year. The message is that focus must remain to ensure that the market delivers top quartile returns. Capital adequacy is strong but volatility is increasing. Sustainable profitability needs claims management to be integrated into strategic thinking to help maintain discipline. 2025 looks to be another good year but as we look ahead to 2026 as a market, we must be determined to manage the cycle, optimise portfolios and continue targeting outperformance.

Finally a tribute was given to Tom Bolt who had died earlier in the week who was a much loved and respected previous head of Performance Management at Lloyd’s.