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An increase in protectionism within the US and elsewhere will help push up insurance prices, in accordance with the outgoing head of Lloyd’s of London, offsetting the profit to policyholders of recent capital that has flowed into the sector.
Chief executive John Neal, who’s leaving the world’s oldest insurance marketplace for broker Aon, said growing protectionism and nationalism would contribute to keeping insurance prices higher for longer in lots of lines of business.
Lloyd’s, based on the famous inside-out constructing in central London, houses a centuries-old market made up of greater than 50 insurers and lots of of brokers, selling specialist insurance and reinsurance policies covering every thing from cyber attacks to hurricanes.
The price of insurance policies had been expected to fall because of recent capital coming into the industry, but Neal told the Financial Times: “The world is distinctly more difficult for everyone. It’s a mix of growing protectionism, nationalism and geopolitics. That’s not only within the US — these considerations apply in all parts of the world.”
Neal also said barriers to trade could prompt regulators to require insurance businesses “to deposit more capital” within the geographies where they operate.
“If you happen to’ve got to place more capital in danger, then you definitely’ve got to charge extra money for the [insurance] policies that you just issue,” he added.
Neal said financial risks stemming from trade conflicts, inflation and better rates of interest have all made firms more eager than ever to take out insurance.
He added those headwinds could support continued growth in credit insurance, a line of business through which underwriters at Lloyd’s insure banks and other lenders against default or non-payment, helping them to fulfill regulatory capital requirements.
Neal’s unexpected exit from one in all the highest City of London jobs to run the reinsurance business of Aon, the world’s second-largest broker, comes amid broader changes in Lloyd’s senior leadership.
Sir Charles Roxburgh, a former senior Treasury official who within the Nineteen Nineties led a McKinsey task force charged with handling rising claims costs at Lloyd’s, will turn out to be the market’s chair in May and lead the seek for Neal’s successor.
Neal, who has been Lloyd’s chief executive since 2018, has led the market through a period of high profitability.
But in annual results announced on Thursday, Lloyd’s reported underwriting profit of £5.3bn for 2024, down 10 per cent compared with 2023.
Profit was dragged down by big catastrophes within the US, including hurricanes Milton and Helene and the collapse of a bridge in Baltimore.
Pre-tax profit at Lloyd’s also fell 10 per cent to £9.6bn. The gross written premium rose 6.5 per cent to £55.5bn.
The turnover in Lloyd’s senior leadership comes amid persistent challenges with a vital IT project, which Neal had made a core objective to deliver.
“There’s been too many stakeholders,” he said of the project to switch Lloyd’s decades-old back-office systems.
Neal said he expected the whole cost of the IT overhaul to achieve £300mn, of which the market had spent about 90 per cent to this point.
“I believe the market’s confident it’ll be executed,” he added.
