AM Best revises London Market insurance segment outlook to stable

AM Best has revised its outlook for the London Market insurance segment from positive to stable, citing emerging signs of a softening pricing environment.

“Although the pricing environment for most business lines remains adequate and supportive of favourable underwriting profitability, it is showing signs of softening,” the rating agency said in its latest London Market insurance outlook report.

With this in mind, AM Best has observed that underwriting cycle management will be a key focus of London Market participants over 2025 and 2026, particularly if rates continue to fall over the near term.

At the same time, the rating agency’s report suggested that changing climate trends and unmodelled risks present exposure management challenges to London Market participants.

“Nevertheless, positive momentum of U.S. excess and surplus (E&S) lines continues to offer opportunities, and the higher interest rate environment compared with recent years is likely to support healthy investment yields,” AM Best added.

E&S lines insurance in the US is reportedly a notable contributor to the topline of many London Market companies and, as mentioned, is expected to continue to provide profitable growth opportunities over the near term.

AM Best said it currently has a positive outlook on the E&S segment owing to its significant growth and efficient capacity deployment against the backdrop of declining capacity of admitted carriers.

Kanika Thukral, associate director, analytics, AM Best, and one of the report authors, commented, “Overall, the London Market has remained an attractive insurance hub among global markets.

“In recent years, there has been an influx of new syndicates at Lloyd’s and a growing deployment of third-party capital.

“London Market companies continue to demonstrate their underwriting expertise by developing new product concepts and providing bespoke coverages.

“The stable and sophisticated regulatory regimes continue to support the attractiveness of the market.

In recent years, modernisation and cost management have been key priorities for the market, and efforts made in this regard are likely to help maintain its appeal.”

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