Lloyd’s of London has warned that rising competition in reinsurance could place pressure on pricing in 2026, with capital returning to the sector during a period of limited catastrophe activity.
The annual report states the market could become more competitive next year “absent any significant catastrophe activity.” The return of capital may affect pricing levels, while recent reports have pointed to potential merger activity across the sector.
The warning aligns with concerns among Bermuda reinsurers that current pricing conditions may not hold if capacity increases. Lloyd’s added that “given the volatile nature of the class, re/insurers will maintain a clear focus on catastrophe pricing”.
The report points to increased capital availability, including renewed interest from private capital providers and an influx of different forms of capital into the sector.
This development reflects a wider shift identified in the report, which notes the growing role of private equity and private credit in global markets, contributing to the pool of capital available for insurance and reinsurance underwriting.
Lloyd’s also reported continued interest from new participants. The marketplace received more than 50 serious underwriting enquiries during the year, with seven new syndicates commencing operations in 2025 and a further 13 launching on Jan. 1, 2026.
Reinsurance recorded the strongest expansion among business lines, supported by new entrants and structured solutions. The report also states that existing syndicates delivered 7.2% volume growth, while new syndicates contributed a further 3.1%.
The report notes that price decreases of 3.7% followed several years of rate increases, while exposure growth continued across both existing and new syndicates. A 2.4% foreign exchange impact was also recorded during the period.
Lloyd’s describes a market environment where pricing headwinds are present alongside increased capital supply. The report also identifies changes in how risk is underwritten and traded, including the growth of portfolio underwriting and “fast follow” models within the market.
In this context, Lloyd’s maintains that underwriting discipline remains a requirement across the market, particularly in classes exposed to volatility.
The report notes increased demand for political risk, credit and war-related insurance, linked to conflicts including the Russia-Ukraine war and tensions in the Middle East.
“Macroeconomic and geopolitical uncertainty… have also increased demand for coverage,” the report said.
Despite these demand trends, Lloyd’s identified ongoing pressures including rising capital requirements and pressure on casualty reserves. The report also points to a more complex risk environment, with geopolitical, macroeconomic and climate-related risks continuing to evolve and requiring ongoing monitoring.
