Lloyd's profits, premiums rise but keeping 'weather eye' on underwriting

Lloyd's of London is paying close attention to possible additional signs of worsening underwriting performance.

Lloyd's, whose results are derived from the 108 syndicates underwriting in its market, reported a profit before tax of £10.59 billion in 2025, up from £9.63 billion in 2024. Its return on capital increased to 22% from 21%, marking the third-consecutive year of returns above 20%.

However, there were signs of deteriorating underwriting performance. The combined ratio, which measures underwriting profitability, came in at 87.6%, slightly worse than the 86.9% in 2024 despite fewer major claims last year. Major claims added only 5.9 percentage points to the ratio in 2025, compared to 7.8 points in 2024 and a 10-year average of 10.4 points. The underlying combined ratio, which excludes major claims, was 81.8%, up from 79.1% a year earlier.

The underlying ratio is "good" and "sustainable," said CEO Patrick Tiernan, but the market is monitoring deterioration in the expense ratio, attritional loss ratio and the contribution from reserve releases.

"The ability to achieve sustainable returns on underwriting is predicated on keeping a very weather eye on the technical account," he said at an earnings press conference.

Challenging times

The insurance is dealing with fresh difficulties as the Middle East war brings the risk of claims from specialist war policies, for which Lloyd's is a key market. Insurers also stand to wrestle with claims inflation and pressures on investments from the economic fallout of a prolonged conflict. Lloyd's, which is involved in developing insurance solutions for the war, has yet to release claims estimates related to the conflict, but should provide more information in early May.

Lloyd's worsening underlying combined ratio reflected an increase in the expense ratio and saw less benefit from prior-year reserve releases. The releases trimmed 1.7 percentage points from the combined ratio in 2025, compared with 2.5 points in 2024. The attritional loss ratio, which measures the effect of business-as-usual claims, increased to 47.9% from 47.1%.

Prices remain adequate, and the forecast £64 billion of gross written premium for 2026 is "sensible," Tiernan said. However, if margins keep eroding, action will need to be taken.

Dwindling margins

Lloyd's primary casualty business line reported a combined ratio of 100.8% in 2025, up from 91.6% in 2024. The marine, aviation and energy business line's combined ratio increased to 103.5% from 99.2%. Combined ratios above 100% indicate underwriting losses.

Reserve strengthening added 2.2 percentage points to the casualty combined ratio, and the directors' and officers' liability and cyber business lines within casualty are "approaching or are at marginal pricing," Lloyd's said in its annual report. That strengthening also added 11.3 points to the marine, aviation and energy combined ratio, mainly driven by aviation losses from the Russia-Ukraine war, following a 2025 judgement on claims for planes stranded in Russia when the war broke out.

The combined ratio in specialty also worsened, but remained profitable at 86.6%. The property and reinsurance combined ratios both improved.

Prices in many business lines that Lloyd's underwrites are falling, putting pressure on profit margins. Price adequacy is "declining across every line of business and thus at aggregate market level," said Rachel Turk, chief of market performance at Lloyd's. The market may start "running into trouble" as early as later this year given the current rate of decline, she added.

In addition to keeping pricing in check, Turk also urged Lloyd's underwriters to avoid expanding coverage by broadening terms and conditions, which would be a "danger in a softening market." While Lloyd's performance remains strong for now, "margin is slowly seeping away," Turk said, giving the market less room to "innovate" and find new solutions to emerging risks.

Business lines where Lloyd's has particular concerns are property direct and facultative business and US general liability, Turk added.

Underwriting performance is one of the cornerstones of the new five-year strategy Lloyd's announced along with its 2025 earnings, and which is designed to "advance and protect" the Lloyd's market, Tiernan said.

"This strategy positions the market's financial performance at the core of all we do," he said. "It is a disciplined, market-led and necessary sharpening of our financial edge."