Lloyd’s Q2 2026 Market Message

Rachel Turk, Chief of Performance & Strategy, and Mirjam Spies, Chief Actuary, delivered the Q2 market message on 14^th May.

Rachel started by advising that the current performance against plan for 2026 still looks on track, but first quarter renewals saw rates coming off faster than anticipated with the increased pace of decline needing to be recognised. She reminded that top line growth pressures can lead to discipline starting to slip and as the market softens, Lloyd’s oversight will adjust commensurately. She said that ten years ago, as conditions softened, discipline across the market was not consistent. The apathy towards cycle management by the many could not be outweighed by the responsible actions of the few and she is determined to avoid history repeating itself. As we head into the business planning phase for 2027, she urged syndicates to ensure their business plans continue to be appropriate and realistic, grounded in current market conditions and able to deliver sustainable profitability as rate adequacy for 2027 comes under threat.

She urged focus on four key areas:

• margin – review of rate adequacy and early action when needed
• expense – no attempt to grow into a weaker market to dilute the expense ratio and increased rigour
• cycle management – adjustment of the portfolio as conditions change
• profitable growth – any growth needs to be selective and sustainably profitable.

For syndicates who have proven they are advanced at managing the cycle, Lloyd’s wants confirmation that appropriate action is being taken. For those ‘where this is more of an emerging skill’, Lloyd’s will be more focused and directive on business plans.

If syndicates are not demonstrably good at portfolio optimisation and managing the cycle, Rachel said they will find their growth ambitions curtailed. However, this still leaves opportunities for profitable growth and the expectation is that overall planned premium may increase for 2027. She believes growth will come from a number of areas, including new products, new structured or portfolio solutions, or existing risks using the Lloyd’s balance sheet for the first time.

Rachel then mentioned the recent strategy launch with the aim of providing genuine solutions to clients such that London and Lloyd’s remains an essential part of any placement strategy. Opportunities in defence, energy and infrastructure were given as examples coming from ‘the price makers, not price takers’, being the real leaders in the business who set the terms and conditions, attract business to the market and genuinely innovate. She reiterated the goal above all else is sustainable profitability for the market, not growth at any cost.

She finished with some thoughts on the classes of business currently under rapidly weakening pressure.

Property

Drifts in attritional loss ratio happen quickly and when normal catastrophe loss activity returns, performance could be marginal. The impact of a sustained high oil price are yet to be truly seen but the price of building materials will increase, which will impact the attritional loss ratio.

Marine

The huge recent Baltimore Bridge collision reserve increase (as reported in our May Market Analysis) is a useful reminder of the potential impact of large US liability judgments. All underwriters with exposure to US liability classes should ensure the most up-to-date analysis and forward-looking views on claims inflation are being applied in their pricing decisions.

Cyber

The risk vectors for cyber continue to evolve and AI adds another dimension and further uncertainty, both by being used by threat actors and raising the question of potential coverage. There needs to be greater clarity across the market if underwriters intend to cover or exclude the liability risks in their cyber policies. Rate adequacy remains under pressure and the absence of historical catastrophe loss data could lead to uncertainty around severity and aggregation. Lloyd’s will be refreshing the cyber RDS definitions to reflect the ever-changing threat landscape.

We then heard from Mirjam the expectations around capital setting for 2027. She reported that planned loss ratios since 2015 have stayed fairly flat over the cycle whilst actual loss ratios far exceeded these planned levels in several years. Syndicates must adjust their risk-adjusted rate change assumptions, as well as new business expectations, to reflect soft market conditions. They must also consider a weakening of terms and conditions and how could this affect the volatility of losses. For syndicates writing material exposures in classes affected by geopolitical events, Lloyd’s will seek additional information on the scenarios, model changes and the back testing of emerging losses. Mirjam ended with reference to a proposal to introduce the option for syndicates to set capital with a partial internal model (PIM) which will be trialled this year in a limited way.

Rachel finished off with a review of the current situation in the Middle East. Lloyd’s is continually assessing the insurance implications against three broad routes, de-escalation, elongation or escalation. Insurance demand is currently being met in the normal course of open market underwriting. She advised that Lloyd’s does not expect this to be a capital event for the market, based on the exposures in the region and the damage observed to date. The first estimated market loss will be reported in the 2026 half year result in September.