As per a new report by Fitch Ratings, positive pricing trends in the London market are anticipated to continue into H2 2024, though at a slower rate than in 2023, following a period of high inflation, pandemic and natural disaster losses, and challenges in the cyber insurance sector.
According to the rating agency, insurers operating in the London market continued the strong momentum in H1 2024 after reporting record profits in 2023.
“Companies are still benefitting from a strong rating environment, which has supported underwriting profitability. Combined ratios also continued to improve due to underwriting discipline, averaging in the low-to-mid 80s, with Lloyd’s of London reporting the strongest results in over a decade,” Fitch’s report explained.
The rating agency noted that price increases in the London market have kept up with inflation, and in some cases outpaced it, especially in the property re/insurance lines, with average rises in the high single digits in H2 of 2023.
Following higher reinvestment yield, strong investment returns are also said to have significantly contributed to London market insurers’ bottom-line profitability.
“Beazley and Lloyd’s of London achieved very strong investment results in H1 2024 of $252 million and $2.1 billion, up from $144 million and $1.8 billion, respectively, in H1 2023. We expect London market insurers’ investment performance to remain strong in 2H24 as interest rates remain relatively high,” Fitch observed.
Meanwhile, London market insurers reportedly benefitted from “benign weather losses” between H1 2023 and H1 2024, recording lower natural catastrophe claims, which contributed towards underwriting profitability as well.
However, Fitch concluded the report with some uncertainty, stating, “Although London market insurers remain well capitalised and reinsured, profitability for the market could be significantly affected by further hurricane activity.
“In H2 2024, hurricanes Helene and Milton made landfall in Florida and further activity in the remainder of 2024 could pressure profitability.”
