Lloyd’s reinsurance market has seen a strong surge in recent years, with a compound annual growth rate of 9% over the past five years, according to a new report from global credit rating agency AM Best. The report, “Lloyd’s Market Delivers Robust Underwriting Results Amid Strong Pricing Conditions,” was released as part of AM Best’s annual analysis of the global reinsurance industry during the prestigious Rendez-Vous de September conference in Monte Carlo.
Lloyd’s, a key player in the global reinsurance landscape, experienced a 12.8% growth in reinsurance premiums during 2023. This increase was driven by robust growth in property and specialty lines, supported by favourable risk-adjusted rate changes. However, the real standout performer in recent years has been the casualty reinsurance sector, which recorded the fastest growth among Lloyd’s reinsurance lines with a compound annual growth rate of 15% over the past five years.
The report highlights the resilience of the Lloyd’s market, which accounted for 33% of its gross written premium (GWP) in 2023. As Lloyd’s largest segment, reinsurance is critical to the market’s ongoing success. Despite the inherent volatility of the business due to the nature of reinsurance risks, Lloyd’s continues to outperform its competitors in the U.S. and Bermuda, particularly in terms of loss experience, according to AM Best.
Strong Performance Amid a Challenging Market
The past year saw a significant hardening of reinsurance rates, particularly in 2023, as the market adapted to various pressures, including natural catastrophes and global economic conditions. However, AM Best’s analysis suggests that while some lines may see moderating rate pressures in 2024, overall rate adequacy will remain strong. This means that Lloyd’s can expect another year of stable and healthy underwriting results, though these will depend heavily on the natural catastrophe claims experience in the remainder of the year.
“After an exceptional year for reinsurance rate strengthening in 2023, there are signs that some pressures may ease in certain lines in 2024,” said Tim Prince, director of analytics at AM Best. “However, the market is expected to maintain good rate adequacy overall, with a continued focus on prudent risk selection. This should help Lloyd’s deliver another year of strong performance, especially with higher interest rates providing a supportive backdrop.”
One of the key factors influencing Lloyd’s performance is its ability to manage catastrophe risks. While these risks can cause volatility in underwriting results, the overall loss experience at Lloyd’s remains more favourable compared to its counterparts in the U.S. and Bermuda. This strong track record in risk management has helped the market maintain its competitive edge in the global reinsurance sector.
A Broader Look at the Global Reinsurance Market
The AM Best report forms part of a wider analysis of the global reinsurance industry, which includes a detailed examination of the world’s largest reinsurance groups. The analysis also explores key areas such as insurance-linked securities (ILS), life and annuity reinsurance, health, and regional reinsurance markets. These additional reports have been published over the course of August and September, offering a comprehensive overview of the current state of the reinsurance market ahead of the Rendez-Vous de Septembre.
AM Best’s findings suggest that Lloyd’s is well-positioned to capitalise on its strong market performance, despite the challenges that may lie ahead. In particular, the market’s continued focus on risk management and rate adequacy will be key to sustaining its current trajectory of growth. As the reinsurance market evolves, Lloyd’s ability to adapt to changing conditions and deliver robust underwriting results will remain central to its future success.
The Impact of Higher Interest Rates
One of the key economic factors shaping the global reinsurance market has been the persistence of higher interest rates. According to AM Best, these elevated rates are expected to continue throughout 2024, providing an additional tailwind for Lloyd’s. Higher interest rates generally translate into improved investment returns for insurers, which can bolster overall earnings, especially when underwriting results are already strong.
Lloyd’s is optimistic about its prospects for the year ahead, particularly as it continues to refine its approach to risk management and underwriting. While natural catastrophe claims remain a significant variable, the market’s ability to navigate these challenges will be critical in maintaining its upward trajectory.
Looking Ahead
As the world’s leading insurance market, Lloyd’s has built a reputation for resilience and adaptability. The strong growth in its reinsurance segment, particularly in casualty reinsurance, underscores the market’s ability to respond to changing industry dynamics. While the global reinsurance market faces ongoing challenges, including moderating rate pressures and the ever-present threat of natural disasters, Lloyd’s remains well-positioned to continue its strong performance.
For a full copy of the Best’s Market Segment Report, “Lloyd’s Market Delivers Robust Underwriting Results Amid Strong Pricing Conditions,” interested parties can visit AM Best’s website. The company has also published additional reports on various reinsurance sectors, providing a comprehensive view of the global market.
AM Best’s Role
AM Best, a global credit rating agency, news publisher, and data analytics provider, is headquartered in the United States, with offices in London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City. The agency specialises in the insurance industry and operates in over 100 countries worldwide. During the Rendez-Vous de Septembre, AM BestTV will be conducting interviews and providing in-depth insights from the conference, which can be accessed via their event playlist.
For more information on the global reinsurance industry and AM Best’s latest reports, visit their website at www.ambest.com.
