Strong underwriting discipline and rate adequacy will drive the London market’s performance, with added support expected from better investment yields, AM Best says.

Although there are signs of rate softening in certain lines, particularly professional lines, overall rate adequacy remains strong, the ratings agency says in a market segment outlook.

“London market (re)insurers have enjoyed several consecutive years of rate increases, with most major classes of business having shown positive momentum. This, along with Lloyd’s scrutiny of syndicates’ performance, has supported continued improved attritional loss ratios since 2017.

“Underwriting discipline and rate adequacy remained strong throughout 2023 and into 2024, which is likely to support continued strong underlying underwriting results.”

The report says excess and surplus insurance in the US is a notable contributor to the top line of many London market companies. US-admitted insurance carriers have continued to tighten their underwriting criteria, driving insureds to seek coverage in the excess and surplus market.

“Given the positive rate momentum in these lines, and the resulting prospects of strong technical profitability, London market companies are expected to continue to deploy capacity in [excess and surplus] lines over the near term.”

Inflation is among the risks that could slow the London market, AM Best says.

Concerns around social inflation – the rising cost of claims due to changing societal behaviour – persist despite London market (re)insurers having been increasingly conservative and explicit in pricing and reserving assumptions for several years.

“The unpredictable nature of this risk means that only time will show whether the current level of prudence has been sufficient.”

The report says economic inflation appears to be easing on both sides of the Atlantic, but the industry remains vigilant.