With 2025 drawing to a close, economic shifts, geopolitical dynamics, natural catastrophes and technological developments are influencing risks and opportunities for insurers and brokers worldwide. As we navigate an ever-evolving insurance landscape, this report provides a concise overview of key trends and developments shaping the global insurance market today – and into 2026.
The UK and Global Economy
- UK economy – Inflation is easing, but growth is fragile: Official data published in November showed UK CPI for October, with services still a key watchpoint. Against a backdrop of weak momentum, UK monthly GDP for October was reported as down 0.1%, reinforcing the “slow-growth” narrative that matters for exposure bases, credit conditions and litigation frequency assumptions. (Sources: ONS, Reuters)
- UK rates – BoE holds Bank Rate at 4%: In its November decision, the Bank of England’s MPC voted 5–4 to maintain Bank Rate at 4%. For insurers, the implications remain two-sided: higher yields continue to support investment income and discounting, while uncertainty around the path of rates and growth keeps pressure on reserving assumptions, asset-liability management and demand-sensitive lines. (Source: Bank of England)
- UK Autumn Budget – Stability, inflation impact, and a small IPT change to watch: The Chancellor delivered the much-anticipated Budget on 26 November. The OBR forecast that Budget measures would reduce CPI inflation by around 0.3 percentage points in 2026.” For insurers, easing inflation helps on claims-cost pressure at the margin (especially where wage/service inflation matters), but any boost is tempered by weak underlying growth and continued sensitivity to the rate path. Tax policy decisions were forecast to raise GBP £26.6 billion by 2030/31, keeping affordability and consumer/SME resilience front of mind for personal lines retention and SME purchasing behaviour. Finally, while the standard rate of Insurance Premium Tax (IPT) remains 12%, the Budget included a targeted change. IPT at 12% will apply to insurance on new vehicle leases through qualifying motor vehicle leasing schemes from July 2026, which may be relevant for fleet/leasing channels and affected customer cohorts. (Sources: HM Treasury, OBR, House of Lords, UK)
- US economy – Fed eases again, but signals a cautious path into 2026: In December, the Federal Reserve cut the federal funds target range to 3.50%–3.75%, citing a shift in the balance of risks and reiterating that further moves will depend on incoming data. For insurers and reinsurers, the message is still mixed. Easing policy can support economic activity and some lines’ exposure bases, while the level of rates remains meaningful for investment income, discounting, and (in long-tail classes) the interaction between rate-path assumptions and reserving. (Sources: Federal Reserve, Reuters).
Insurance Industry Developments
- Commercial pricing – Broad softening continues, with pockets of firmness: Indexes continue to show year-on-year declines in average commercial rates, with property and financial/professional lines generally softer than casualty for complex and loss-exposed accounts. The likely outcome is more choice of lead terms in many classes, but less flexibility where aggregation, nat cat, or severe loss potential dominates. (Source: Marsh)
- UK regulation – Capital reforms continue to open investment pathways (with guardrails): In October, the PRA finalised its Matching Adjustment Investment Accelerator (MAIA) framework, designed to reduce barriers to timely and capital-efficient insurer investment (while keeping prudential constraints). For life and annuity writers (and their reinsurers), this matters because asset strategy feeds directly into pricing competitiveness and demand for certain forms of funded reinsurance and capital solutions. (Source: Bank of England/PRA)
- London market positioning – Underwriting appetite and “licence to operate” debates continue: Lloyd’s leadership messaging in Q4 continued to emphasise the market’s “apolitical” stance and the breadth of risks it supports, including energy—an issue that continues to attract external scrutiny as ESG requirements diverge by jurisdiction. (Source: Financial Times)
Underwriting Performance
- US P&C results – Cat remains the swing factor: Major US carriers again highlighted that catastrophe and weather volatility continues to drive quarterly noise, even where underlying attritional performance improves. For buyers, this translates into continued underwriting focus on construction quality, secondary perils, and credible mitigation evidence at renewal. (Sources: Chubb, Travelers)
- Underwriting for cyber – benign market pricing vs. persistent systemic worry: A notable Q4 theme is the tension between continued softening in many cyber rate environments and concern about aggregation, contingent business interruption.(BI) and systemic events. High-profile incidents have produced significant claims, but not enough (yet) to re-harden the entire market. (Source: S&P Global)
Tech, Cyber and AI Developments
- UK cyber claims – Severity is rising: The UK industry reported GBP £197 million paid in cyber claims in 2024 (triple the prior year), with ransomware/malware featuring prominently in claim drivers. This is useful context for business leaders still treating cyber insurance as only an ‘optional extra’. (Source: ABI)
- AI security – ‘prompt injection’ is being treated as a structural risk, not a patchable bug: The UK NCSC warned that cyber attacks injecting malicious text prompts into AI systems may not be fully mitigable in the way the industry learned to mitigate classic SQL injection vulnerabilities. For insurers, this starts to matter in underwriting controls. Vendor security questionnaires, model governance, and insured AI-enabled workflow dependencies are becoming more material in cyber and PI submissions. (Sources: NCSC, TechRadar)
- EU AI Act – Obligations for general-purpose AI providers are now in application: The European Commission published guidance in October clarifying obligations for providers of general-purpose AI models under the AI Act. Even for non-EU headquartered firms, this is increasingly relevant through supply chains, contract clauses and product governance expectations. (Source: European Commission)
Reinsurance Market
- Renewals – Competitive conditions, with rate decreases discussed: Early December commentary from market participants pointed to reinsurance supply outpacing demand in several segments, with discussions of 10–15% decreases in some areas (notably where loss experience and attachment structure support it). As ever, outcomes remain granular – loss-affected programmes, trapped collateral issues and high-risk layers can behave very differently. (Source: Reinsurance News)
- ILS / Cat bonds – Record 2025 issuance keeps alternative capital central for peak perils: Catastrophe bonds continued to play a major role in reinsurance capacity as sponsors diversified away from purely traditional markets. By late November 2025, tracked 144A cat bond issuance had passed USD $20 billion for the year (with total settled issuance including private deals above that level), underlining sustained investor appetite and giving buyers another route to manage peak-peril aggregation and portfolio volatility. (Sources: Financial Times, Artemis, Aon Securities)
Natural Catastrophes
- Loss totals – Elevated insured losses remain a defining feature: Global insured losses for the first nine months of 2025 were estimated at around USD $105 billion, again dominated by weather-related events and underscoring the “high-frequency, high-severity” environment that’s shaping pricing, terms and aggregate management. (Source: Gallagher Re)
- Caribbean wind / floods – Hurricane highlights sovereign and private-sector recovery funding needs: After Hurricane Melissa struck Jamaica in October, resulting in losses estimated at USD $10 billion, the island nation secured up to USD $6.7 billion in international funding for reconstruction. Reports on the post-event funding package noted the very large damage estimates and the role for pre-arranged disaster-risk financing (including insurance mechanisms) in providing immediate liquidity. (Source: Reuters)
- US severe convective storms (SCS) – The secondary-peril discussion continues: Market reporting again pointed to very high US SCS loss activity, reinforcing why attachment points, deductibles, and granular exposure management are becoming central even outside traditional hurricane zones. (Source: Wall Street Journal)
Geopolitical Risks
- Marine war-risk – Premiums can move rapidly as threat perceptions shift: Black Sea war-risk premiums were being quoted around 0.6%–1% of vessel value for some calls in early December, with underwriters reviewing terms daily. For insureds, the operational effect of this uncertainty is not just hull/cargo cost – it’s also routing problems, delays, contractual penalties and contingent business interruption (BI). (Source: Reuters)
- Security as a regulatory theme: UK regulatory leadership messaging continues to stress that international geopolitical security considerations are increasingly intertwined with financial system resilience. This is relevant for sanctions compliance, supply-chain exposures, and the treatment of defence-related risks across insurance and capital markets. (Source: FCA)
Looking ahead: Market needs and insurance “gaps”
Below we highlight a few areas where demand is expected to outpace existing insurance solutions in 2026 and beyond – where product innovation, clearer wordings, and London-market backed structures will be critical.
- Power for AI and data centres – The SMR insurance opportunity: Electricity demand forecasts linked to data centres are growing, and recent reports highlight the scale of the challenge for power generation and grids. A favoured solution is locally distributed nuclear energy, in the form of small modular reactors (SMRs). As SMR investment moves from policy and financing into delivery, the insurance market will need to keep pace across construction, marine transit, operational all-risks, liability, environmental impairment, business interruption and (critically) integrated project risk across multi-year build programmes. There is a particular need for coherent, London-market backed placements that combine specialist engineering, nuclear and supply-chain expertise. (Sources: WTW, Reuters)
- Cyber systemic risk – Expanding coverage without expanding tail risk blindly: Claim severity signals and continued incident frequency sit awkwardly alongside a soft pricing environment. The likely gap is not “more cyber cover” in general, but better-structured cover: clearer contingent BI triggers, more explicit coverage for critical dependencies, and credible pathways to systemic risk-sharing (pooling/reinsurance/ILS) that don’t leave individual carriers holding unpriceable aggregation. (Sources: ABI, S&P Global)
- Climate adaptation and resilience finance – Narrowing the protection gap: With insured losses remaining elevated, there is increasing interest in parametric solutions, resilience-linked structures, and public-private mechanisms – especially for flood, heat and secondary perils where traditional indemnity approaches struggle to scale quickly. (Source: Gallagher Re)
Let’s discuss your way forward
As always, if you’d like to talk through what any of these themes mean for your 2026 placement strategy – whether you’re a broker, MGA, carrier, reinsurer or insurtech – we’re keen to discuss your goals and how we can help.
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Disclaimer:
This market report was developed for reference only, and any prospective statements about possible future events or performance are based on developing factors regarding economic and business activity relevant to financial and insurance markets. Such prospective statements involve risk as actual results may differ materially from those expressed or implied due to future changes in relevant factors. We are not responsible for the accuracy of the third-party information cited herein and undertake no obligation to update any such data or prospective statements, nor do we in any way intend to provide legal, financial, or insurance advice regarding any existing or future litigation or other matter discussed or projected herein. Please seek the advice of your own professional advisors or counsel regarding your specific circumstances.
