Benefits of investing at Lloyd’s

The primary focus of Lloyd’s today is the sustainable profitability of the market, which means strict constraints for some underwriters and opportunities for others.

Strong Leadership

When announcing the 2025 Lloyd’s market annual results, Patrick Tiernan presented the new five year strategic plan with four clear aims:

• To deliver leading underwriting performance with a combined ratio (claims and expenses as a percentage of premiums received) under 95% across the cycle. The market aims to continue attracting the world’s best risk takers and support innovation across risk structuring, capital and products.
• To manage an efficient and flexible market place which reduces frictional costs and enables capital and talent to move efficiently, with a target to reduce the incremental cost of operating at Lloyd’s by 1%.
• To maximise Lloyd’s capital advantage, enhancing the market’s ability to take risk efficiently and deliver superior returns. As a result of its unique structure the Chief Executive believes the market “can shoulder more insurance risk for each unit of capital than any other organisation in the world.”
• To create a Lloyd’s to be proud of with a focus on people, innovation and culture to support future competitiveness.

Strong Underwriting Discipline

Good levels of profitability depend upon premium rate adequacy across the classes of business underwritten at Lloyd’s. The recent reduction in the frequency of major losses has driven three very profitable years, which were preceded by six very active years for both natural and man-made catastrophes. Following the six very active years (2017-22), the premium rates required by underwriters to continue to provide cover for such events increased dramatically, driving 28 consecutive quarters of premium rate rises at Lloyd’s along with tightened terms and conditions.

At the same time underwriters have used much greater climatic data to select the geographic areas that they are prepared to cover and at what level of exposure. Major losses continued in 2024 with the Dali collision with the Baltimore bridge, causing it to collapse, being the most expensive marine insurance loss ever, and Hurricanes Helene and Milton estimated to cost $40bn to the global (re)insurance industry. These were followed by the LA Wildfires in January 2025 currently forecast at a further $40bn. The premium base of Lloyd’s has grown considerably over the past five years, at the same time, the risk selection has improved, resulting in these major losses having less of a bottom line impact. Lloyd’s typically expects cross cycle major losses to add 10 percentage points to the overall loss ratio, but currently they seem to be running at half that.

Strong Demand

The third driver towards sustainable future profitability is the demand for Lloyd’s products. It is probably true to say that there has never been so much economic and geopolitical uncertainty as today. This includes the wars in Ukraine and the Middle East, China’s position with Taiwan and the threat to energy and other supplies through the straits of Hormuz, with all the ensuing consequences for the airlines.

If we add global inflation, the potential effects on the global economy of Artificial Intelligence (AI) and continuing climate change, it all adds to the uncertainty. In such circumstances businesses tend to want to try to buy more insurance and are prepared to pay a premium.