The commercial insurance market may not be on the verge of lower premiums, despite recent speculation, according to Lloyd’s of London chairman Bruce Carnegie-Brown. Speaking to Reuters on Thursday, Carnegie-Brown noted that the market is not yet seeing a significant decline in commercial insurance prices, even after a prolonged period of price hikes. This comes as Lloyd’s reports a 26% increase in first-half pre-tax profits, reflecting the industry’s ability to weather economic pressures.
Why Prices Have Stayed High
Commercial insurers have faced numerous challenges over the past few years, including the global pandemic, geopolitical tensions, rising inflation, and increased losses due to natural disasters. In response, many insurers have raised prices and excluded high-risk areas of business. This combination of factors has kept insurance premiums high, even as some industry experts anticipate a potential market softening.
Insurance Prices Flattening, But Not Falling
While some in the industry believe that the peak of the market has been reached, Carnegie-Brown cautioned that any significant decrease in prices may not be imminent. “Some people are calling the top of the market and thinking that prices will come down,” he said. However, he added that many insurance companies are not in strong enough financial positions to lower prices. This suggests that the ability to adjust premiums may remain limited in the near future.
Reinsurers to Play Key Role in Future Pricing
Reinsurers, who provide insurance to insurers, are set to meet next week in Monte Carlo to negotiate pricing agreements for 2025. These negotiations will likely impact commercial insurance prices, as insurers will decide whether to pass on any rate changes to their business clients. According to Fitch analyst Manuel Arrive, a “moderate softening” in property catastrophe reinsurance rates could be on the horizon for the January 1 renewal season. However, it remains to be seen how this will affect overall market conditions.
Lloyd’s Sees Profit Surge, But Stays Cautious
Lloyd’s has performed well in this challenging environment, with its pre-tax profit climbing to £4.9 billion ($6.44 billion) in the first half of the year. The organization’s members have strategically avoided riskier business lines, contributing to this profit boost. Gross written premiums also saw a 6.5% increase, reaching £30.6 billion. Additionally, Lloyd’s combined ratio—a key measure of profitability in underwriting—improved to 83.7%, compared to 85.2% last year.
Despite these strong financial results, the broader market’s outlook remains uncertain. As reinsurers and insurers gather to set the tone for 2025 pricing, the industry will be watching closely to determine how rates and profitability evolve.
What This Means for Insurance Agents
For insurance professionals, this news underscores the need to stay vigilant in tracking market trends. Commercial clients may be hoping for price relief, but agents should prepare them for the possibility that premium reductions might not happen as quickly or as significantly as anticipated. Understanding the dynamics between insurers and reinsurers will be critical in advising clients and navigating upcoming renewals.
As the market continues to shift, staying informed will be key to helping clients manage their risk portfolios effectively.