The evolving landscape of the insurance market heading into 2025

The landscape of the insurance market heading into 2025 reveals a synergy of geopolitical risks, transforming business practices, and an industry grappling with legacy issues and modern challenges. As outlined by various industry experts, the future holds both opportunities and uncertainties driven by emerging trends.

The insurance sector is adjusting to increased frequency of claims alongside escalating costs, highlighted by Lloyd’s of London which reported a robust profit of £4.9bn before tax in the first half of 2024, up from £3.9bn in 2023. Nonetheless, the organisation has encountered hurdles in its digitisation initiatives. The current digitisation project has faced delays, emphasising the complexity of moving from legacy systems to more modern frameworks.

According to predictions from DAC Beachcroft, standalone political violence coverage will gain critical importance for both insurers and their clients as risks of strikes, riots, and civil disturbances escalate globally. The firm points to geopolitical tensions, including the ongoing conflict in Ukraine and unrest in the Middle East, which have reshaped the landscape of political violence insurance. Paul Baker, a partner at DAC Beachcroft, pointed out that “the combination of an understanding that the world is a more volatile place and the impact of exclusions in all-risk policies” necessitates a recalibrated approach to coverage for risks associated with civil unrest. This trend is particularly prominent in regions with high exclusions in property policies, such as Latin America and South Africa.

In the context of industry priorities for 2025, Sheila Cameron, the chief executive of the Lloyd’s Market Association, emphasised the urgency of progressing the Blueprint Two initiative, which aims to standardise the digital marketplace for longer-term efficiency and innovation. She remarked, “Blueprint Two is essential for our market’s future, and we must define how our digital market will work long-term.” Alongside technical advancements, there is a commitment to advocacy, particularly regarding regulatory adjustments across Europe and North America.

Caroline Wagstaff, chief executive of the London Market Group, highlighted the anticipated government consultation regarding the captives regime, which is expected to bolster the UK’s competitive insurance position. Captive insurance, where businesses establish their own insurance operations, represents a growing focus as organisations adapt to emerging risks.

Turning attention to the property insurance market, Richard Wood from Westfield Specialty noted an “underwriting landscape full of opportunity,” citing significant improvements in recent years despite previous years marked by catastrophic events leading to substantial losses. The sector is poised for further recovery, with robust risk assessment and improved pricing structures, positioning it for stability and balance.

However, the evolving nature of protests, both peaceful and violent, presents new challenges for property insurers in the UK, as highlighted by DAC Beachcroft. Recent events indicate that shifts in public sentiment can directly impact the insurance community, evidenced by the £250m property damage incurred following civil unrest in the previous summer.

In another dimension, DAC Beachcroft pointed out the emergence of “dark fleet” vessels operating in circumvention of sanctions on Russia’s oil and gas industry. The risks associated with these vessels, often under-maintained and severely lacking insurance, add a layer of complexity to marine risk management. Without resolution to the ongoing conflict, potential environmental hazards from oil spills or collisions are anticipated to remain a growing concern for the insurance market.

The unfolding developments within the insurance sector indicate a landscape that is dynamically adjusting to various external pressures, encompassing geopolitical volatility, technological advancements, and enhanced risk management strategies. As the industry prepares for an uncertain future, the interplay of these elements is likely to significantly shape insurance practices and profit margins in the coming years.

Source: Noah Wire Services