Lloyd’s Warns of Softening Market as 2026 Approaches

Lloyd’s of London has warned market participants to brace for a more challenging trading environment in 2026, as pricing pressures intensify and underwriting discipline becomes increasingly critical.

In its Q4 2025 Market Message, delivered on Friday by Chief of Market Performance Rachel Turk, Chief Actuary Mirjam Spies, and Chief of Market Oversight, Caroline Sandeman-Allen, Lloyd’s struck a cautiously optimistic tone — praising the market’s strong capital position while cautioning against complacency amid signs of rate softening across key classes.

“We enter 2026 from a position of strength,” Turk said, “but this is no time for a loss of discipline. Sustaining profitability will depend on the quality of underwriting, not the quantity of business written.”

Lloyd’s reported a robust underwriting result for the first half of 2025, underpinned by firm pricing, healthy investment returns and continued capital strength. However it was noted that the second half of the year had brought additional challenges — including adverse foreign exchange movements, and evidence of renewed competition in several lines of business.

Despite these pressures, Lloyd’s confirmed that its capital framework remains strong, with solvency ratios comfortably above regulatory thresholds. The Corporation described its balance sheet as “resilient and well-positioned” to support syndicate business plans for 2026, where it is targeting £67.4 billion in gross written premium, representing growth of 2.3% on a like-for-like basis. Over 10% of the additional growth will come from new entrants, new structured solutions and growth in other delegated areas, Turk said. Reflecting market challenges, Lloyd’s is targeting a combined ratio of 91.2% in 2026 compared with an updated projection of 88.7% for this year.

Analysts and brokers have noted a gradual easing of rates, particularly in the property and casualty sectors. The Q4 message acknowledged this trend, describing “mounting competitive pressures” and “signs of softening across multiple lines.”

Lloyd’s urged managing agents to maintain “firm control of pricing and exposure,” warning that rate erosion could quickly erode the profitability gains achieved over the past two years.

“Now is the time to hold discipline,” Turk added. “Chasing volume will not deliver sustainable returns.”

The message also highlighted changes in how risks are being placed. Lloyd’s pointed to the growing prominence of facility-led and cross-class arrangements, reflecting a broader evolution in market structure. These developments, it said, will require syndicates and brokers alike to adapt their approach to distribution and capacity management.

Caroline Sandeman-Allen emphasised that oversight efforts in 2026 will focus on “sustainable, disciplined underwriting” and on ensuring that delegated authority and facility structures align with each syndicate’s stated appetite and controls.

Chief Actuary Mirjam Spies confirmed that Lloyd’s capital base remains robust, with central solvency comfortably above target ranges. “Our capital resilience continues to provide confidence to markets, regulators and members,” she said. “It gives us the flexibility to absorb shocks and support the innovation and growth plans of our participants.”

They reaffirmed that maintaining this strength would remain a top priority as global uncertainty continues — particularly amid volatile macroeconomic conditions and elevated catastrophe exposure.

In closing, Lloyd’s leadership called on the market to prioritise long-term sustainability over short-term expansion.

“We are in a cyclical business,” Turk reminded delegates. “Strong markets invite competition — but our task is to protect the quality of the Lloyd’s platform, not just its size.”

The overarching message was clear - Lloyd’s remains confident in its financial footing, but warns that the next phase of the cycle will test the market’s resolve to maintain underwriting discipline.

The coming year is likely to bring more demanding conversations within the market as it looks to balance competitive pressures against the need for price adequacy. Syndicates will face heightened scrutiny on underwriting performance and capital efficiency, while coverholders are expected to demonstrate stronger oversight and alignment with delegated authority controls.

The consensus is that 2026 will mark a return to fundamentals: careful risk selection, prudent capital management and sustained discipline — hallmarks of a market determined to hold its ground in softer conditions.

For the full Lloyd’s Q4 2025 Market Message and supporting materials, visit lloyds.com/news-and-insights/news/market-message-nov-2025.