Geopolitics, property and the London marketplace: Here’s what’s in store for insurance next year
The insurance market in 2024 was defined by record floods and soaring premiums as insurers faced increasing costs and struggled to keep pace with rising claims.
Lloyd’s of London reported a strong profit of £4.9bn before tax in the first half of 2024, up from £3.9bn in 2023. Despite the growth, delays in its digitisation project revealed the issues of transforming a legacy system into the modern age.
So what are expects predicting what 2025 will have in store for the insurance market?
Shifts in political violence
According to law firm DAC Beachcroft’s geopolitical predictions, standalone political violence coverage has become increasingly important for insurers and insureds, especially with the rise in strikes, riots, and civil commotion risks.
Geopolitical tensions, such as the war in Ukraine and the Middle East, have reshaped the political violence market.
“It’s the combination of an understanding that the world is a more volatile place and the impact of exclusions in all-risk policies,” explained Paul Baker, partner at DAC Beachcroft.
In regions like Latin America and South Africa, exclusions on strikes, riots, and civil commotion coverage in property policies have fuelled demand for standalone political violence products. “Rather than any single turning point, it’s the attrition that’s changed,” Napoleon Montes of Hiscox Miami added.
With ongoing global unrest, record number of elections in 2024, and the evolving risk landscape, the expects stated that insurers remain cautious as they adapt to new market realities in political violance risk management.
Just back in October, Lloyd’s of London issued a warning that a potential geopolitical conflict could devastate the global economy, triggering $14.5 tn (£11.89 tn) in losses over the next five years and upending global trade.
Eyes on the marketplace
Sheila Cameron, chief executive of the Lloyd’s Market Association (LMA) outlined the LMA’s priorities for 2025 is a “focus on expertise, advocacy, and culture.”
After challenges in 2024, including delays with Blueprint Two, which was launched five years ago, Cameron stressed the urgency of delivering it in 2025. “Blueprint Two is essential for our market’s future, and we must define how our digital market will work long-term,” she stated.
There will be a key focus on shared data standards, especially for underwriting. She noted that “in 2025, I’ll focus on a campaign to promote common data standards, enabling greater innovation across the industry.”
She went on to highlight advocacy efforts, with an emphasis on regulatory engagement with Europe and North America. “We’ll engage more closely with US states like Florida and California, especially regarding the excess and surplus market.”
While cultural initiatives remain a priority, with particular attention to diversity and the recruitment of female chief underwriting officers. “We’ll focus on early talent and developing the next generation of female leaders in underwriting,” she added.
In addition for the marketplace, Caroline Wagstaff, chief executive of the London Market Group added that “in 2025, we look forward to the government consultation on the captives regime, which could strengthen the UK’s competitive position.”
Captive insurance is a form of self-insurance whereby a company establishes and wholly owns its own insurance coverage. Chancellor Rachel Reeve revealed in her Mansion House speech in November, that the government was consulting on introducing a new framework for UK-based captive insurance companies.
Mix bag for property
Richard Wood, head of property at Westfield Specialty, offered his outlook for the property insurance market in 2025, stating, “I see an underwriting landscape full of opportunity.”
He explained: “The market has seen significant improvement over the last four years and is now adjusting pricing, but I believe the pricing adequacy remains strong across the portfolio.”
“The recent changes reflect the return of confidence within the underwriting community to take on risk,” he Wood added.
He emphasised the improvements since the difficult underwriting years of 2017-2018, when global hurricanes and earthquakes caused significant losses.
“After the storm has come stability. A sustained period of rate rises has allowed insurers to strengthen their balance sheets and maintain sustainable combined ratios,” he noted.
He added that “the property market is now better capitalised, more stable, and has a clearer understanding of pricing and adequacy. These fundamentals make for a much stronger market, one we intend to maximise.”
While law firm DAC Beachcroft added in its predictions that “both peaceful and more violent protests have been a regular theme in the UK and we expect this to continue throughout 2025.”
“It raises a number of potential issues for insurers including in the UK property market, in particular in relation to when it can be said that a peaceful protest turns into a violent one.”
It was revealed last August that the riots that broke out in the UK last July and August cost under insurers £250m in property damage.
Dark fleet risks amid sanctions
It was noted in DAC Beachcroft’s marine, energy and transport predictions, that the continued imposition of sanctions by Western nations on Russia’s oil and gas industry will keep the dark fleet in operation, allowing it to bypass sanctions.
The law firm stated that many of these ships have poor maintenance, lack insurance, and pose significant environmental risks, particularly in the event of an oil spill or collision.
In addition the lawyers noted that ship-to-ship transfers on the high seas often happens without proper oversight, which increases the potential for dangerous and environmentally harmful incidents.
Prime Minister Keir Starmer launched a “call to action” back in July for the private sector—including insurers— regarding the use of shadow fleets carrying Russian oil.
The lawyers went on to explain that with no resolution to the Russia-Ukraine conflict in sight, the dark fleet’s risks are likely to persist in the short to medium term.
DAC Beachcroft added that the insurance industry will need to assess its capacity to cover these growing dangers.