Lloyd’s CEO calls for continued underwriting discipline as underlying performance improves

John Neal, Chief Executive Officer (CEO) of the Lloyd’s insurance and reinsurance marketplace, has emphasised the need for underwriting discipline to be maintained as there will be some, albeit “not a lot” of pressure on price through 2025.

The CEO and other executives at Lloyd’s held a call with the media this afternoon to discuss the market’s strong 2024 performance, which included profit of £9.6 billion and an underlying combined ratio, so excluding major claims, of 79.1%.

During the call, the CEO commented on the rate expectation for 2025 after some softening in certain areas at the January reinsurance renewals.

“Price is an interesting one,” said Neal. “Honestly, there are some areas where I think underwriters can afford to give some price, there are many other areas where they need to take price. So, broad assumption is that, yes, there’ll be some pressure on price, but not a lot.”

Although down year on year as a result of higher losses from major claims, Lloyd’s generated a robust underwriting gain of £5.3 billion in 2024, driven by the reinsurance and property segments, somewhat offset by a less favourable environment in parts of the casualty and aviation classes.

The elevated loss experience in 2024 included impacts from Hurricanes Helene and Milton, as well as the Baltimore Bridge collapse, which pushed the combined ratio up to 86.9% from 84% in 2023.

But as already mentioned, the underlying combined ratio improved to 79.1% from 80.5% in the prior year, and Neal stressed that in order for Lloyd’s to maintain this level of result on an underlying basis, the market needs to maintain discipline.

The underlying performance was also highlighted by Neal when questioned on the impact of the Los Angeles wildfires on the Lloyd’s 2025 outlook.

“You’ve got an underlying combined ratio of 79.1%. Our normal expectation for large loss, being large risk loss, or natural peril losses, is close to 11. So, a normalised combined ratio is 90%,” said Neal. “So, when you ask the earlier question about price, there is a bit, but not a lot. If we want to maintain discipline, we want to maintain the level of return we’re talking about, then we’ve got to maintain a weathered eye on understanding risk, measuring risk, pricing risk.”

After years of fairly poor results during the soft market years, reinsurers generated good returns again in 2024, and Neal was questioned during the call on how reinsurers can withstand pressure from buyers potentially seeking softer rates.

“We’re an unusual world of protectionism, nationalist behaviours, geopolitics, there’s a whole heap of complexity out there, which I think has heightened the perception of risk amongst the buyer of insurance.

“So, if you look at our numbers, today, we’re growing at three times the rate of GDP. Insurance globally is growing at twice the rate of GDP. So, I think there is plenty of opportunity for underwriters to see risk, accept risk, but only accept risk where the price is right,” said Neal.

Adding: “What’s really encouraged us in ’23 and ’24 is the market has not written to the plan that we signed off, so it is showing discipline around right price for the right risk. So, we’ll keep an eye on it. Patrick and the team will keep a weathered eye on it all through the year, but our sense is the market will maintain its discipline around price and other factors as well.”

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