Lloyd's Q2 market messages review

Authored by Argenta Research
Andrew Colcomb, Head of Research, and Alison Wood, Client Manager & Research Consultant

Lloyd’s noted that the market remains well-positioned following several years of improved underwriting performance, sustained pricing adequacy and stronger principle-based oversight and capital management. Comparisons were drawn, comparing today’s pace of rate decline with that of the market ten years ago, but balanced this by emphasising lessons learned since this phase in the underwriting cycle, and the remediation since then (namely Decile 10 and several Syndicate closures).

A strong rating environment across the market has largely been replaced by one where the majority of lines are little better than marginal. Just two high level classes (Property Treaty and Specialty Other) are considered to still be strongly profitable. More concern though is given to a number of classes where the rating environment is changing rapidly for the worse.

Lloyd’s focus, therefore, is on disciplined underwriting rather than top-line growth. While rating momentum is moderating in some classes, market conditions remain broadly supportive – there is an expectation that business plans will be realistic and aligned to achievable outcomes. 

Key themes touched on were: 

• Expense management: Appropriate and proportionate management of expenses is required as the ‘core’ naturally shrinks when rate(s) moderate. 
• Evolving Risk Landscape: Plans must adapt to new challenges including geopolitical uncertainty, economic pressures such as inflation, and emerging risks, like cyber and climate-related exposures. Limited loss experience in these areas can leave ‘rate adequacy’ open to interpretation.
• Strong Cycle Management: whilst maintaining underwriting standards.
• Robust Exposure Management: While recent natural catastrophe activity has been benign, medium-term experience has been more severe. Syndicates cannot assume low major loss costs will subsidise under-pricing. Recent deterioration in the loss estimates of the Baltimore Bridge loss were noted.  
• Protecting Distribution: This follows some early concerns expressed around dislocation by brokers in the US excess & surplus lines market. Lloyd’s wants to ensure business continues to come to the market through innovative solutions and new product development, described as “innovation at scale”.
• Middle East:
  • Based on current information, Lloyd’s does not expect the conflict to be a capital event for the market, based on exposure for the region and the damage observed to date. No major loss return has been requested, and syndicates are not expected to produce any ‘out of cycle’ reports at this stage.
  • Insurance is being met in the normal course of open market underwriting
  • Facilities and Consortia are welcome additions to address the future surge of capacity as and when vehicle traffic increases within the Strait of Hormuz. 

Lloyd’s also outlined ongoing strategic initiatives to improve market operational efficiency and digital capabilities, supporting better performance oversight and reducing frictional costs to maintain Lloyd’s competitiveness as a global marketplace.  These changes in capital oversight align with UK Solvency and similar regulatory regimes, ensuring proportionality by focusing modelling efforts where it matters most, whilst supporting Lloyd’s strategic objectives without weakening capital standards or risk management expectations.

Rachel Turk summarised Q2 performance as positive, noting that timely and disciplined actions are intended to reduce the likelihood of broader remediation in the future. Lloyd’s indicated that it may engage with syndicates writing business at prices lower than planned rate changes, as this will deliver worse than planned loss ratios even if planned premium volumes are delivered.

Open year forecasts

Based on information available at this stage, the outlook remains encouraging overall despite a more eventful 2024 underwriting year, with catastrophe losses returning to more normal medium-term levels, the market is still expected to deliver a strong profit of over 20% on Funds at Lloyd’s, supported by resilient pricing, meaningful investment returns and improving reserve strength across many key syndicates.

Early indications for 2025 are also positive, with loss ratios among the strongest seen at this stage of development, while the core syndicates continue to benefit from robust trading relationships, strong balance sheets and healthy cash positions. Although trading conditions in 2026 are becoming more competitive and some uncertainties remain, notably around Gulf exposures, the overall position is one of resilience, with well-established syndicates appearing well placed to continue producing attractive returns.  We will shortly be sending a further communication giving more commentary and specific details on the 2024 and 2025 forecasts to our clients.

Looking ahead

Lloyd’s indicates increasing caution across parts of the market. As much as we have enjoyed the positive results of the past few years, it is evident that such strong profitability inevitably attracts competition. Competition for business intensified across most lines in 2025, and the pace of rate cutting has continued throughout 2026. Underwriters we speak to are confident that they are renewing business where margin for profit is strong, including for large and extreme loss events. However, if the market continues along current trends, that profit margin will erode quickly.

Our key focus for the year when selecting syndicates has been to ensure that they have access to distribution, buyers for their products, and data to support pricing and assessment of the changes in rates and terms on the bottom line, on capital providers, and on discipline.

This last factor, to only write business where profit is sustainable and repeatable, and to walk away if pricing is no longer adequate for the risk, is now the leading element of our review of syndicates for 2027. It reaffirms the critical importance of diligent syndicate selection and our duty to safeguard our clients’ interests throughout the cycle. While competition and evolving market dynamics present challenges, staying focused on sound underwriting principles and careful capital deployment provides the best foundation for resilient client portfolios. Ultimately, we remain committed to helping our clients navigate uncertainty and making the most of opportunities as they arise, as we have done in the past. 

A video recording of the market messages meeting is available here

Q2 Market Message 2026 - Lloyd's

And slides from the meeting are available here

2026 Q2 Market Messages.pdf