A rise in protectionism in the US and elsewhere will help push up insurance prices, according to the outgoing head of Lloyd’s of London, offsetting the benefit to policyholders of new capital that has flowed into the sector.
Chief executive John Neal, who is leaving the world’s oldest insurance market for broker Aon, said growing protectionism and nationalism would contribute to keeping insurance prices higher for longer in many lines of business.
Lloyd’s, based at the famous inside-out building in central London, houses a centuries-old market made up of more than 50 insurers and hundreds of brokers, selling specialist insurance and reinsurance policies covering everything from cyber attacks to hurricanes.
The cost of insurance policies had been expected to fall because of new capital coming into the industry, but Neal told the Financial Times: “The world is distinctly more challenging for everybody. It’s a combination of growing protectionism, nationalism and geopolitics. That’s not just in 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” in the geographies where they operate.
“If you’ve got to put more capital at risk, then you’ve got to charge more money for the [insurance] policies that you issue,” he added.
Neal said financial risks stemming from trade conflicts, inflation and higher interest rates have all made companies more eager than ever to take out insurance.
He added those headwinds could support continued growth in credit insurance, a line of business in which underwriters at Lloyd’s insure banks and other lenders against default or non-payment, helping them to meet regulatory capital requirements.
Neal’s unexpected exit from one of the top 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 in the 1990s led a McKinsey task force charged with handling rising claims costs at Lloyd’s, will become the market’s chair in May and lead the search 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 in 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 crucial IT project, which Neal had made a core objective to deliver.
“There’s been too many stakeholders,” he said of the project to replace Lloyd’s decades-old back-office systems.
Neal said he expected the total cost of the IT overhaul to reach £300mn, of which the market had spent about 90 per cent to date.
“I think the market’s confident it’ll be executed,” he added.
