In 2025, geopolitical dynamics, economic shifts, and technological advancements 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.
The UK and Global Economy
- UK economy: UK inflation eased slightly to 3.4% in May, down from 3.5% in April, driven by lower transport costs but offset by sharp food price increases – including a 17.7% rise in chocolate prices due to poor West African harvests. The Bank of England held interest rates at 4.25%, citing ongoing inflationary pressures and global uncertainty. For insurers, this signals continued pricing strain across long-tail and property lines, as persistent inflation affects claims severity and reserving assumptions, while delaying monetary easing that could improve investment returns. Inflationary resilience remains a critical variable for underwriting strategy in H2 2025. (Sources: The Guardian, BBC News)
- U.S. economy: During June, the U.S. Federal Reserve held interest rates at 4.25–4.50%, cautioning that although two rate cuts are still anticipated by year-end, the pace of future easing – especially in 2026–27 – will be “slower” due to ongoing inflation pressures tied to trade and geopolitical tensions, warning of persistent inflation potentially running near 3 % next year. For insurers, this signals prolonged pressure on investment income and discount rates used in reserving models. Meanwhile, the Fed’s tempered tone may lead to more stable yield environments, requiring recalibrated ALM strategies and careful product pricing as monetary conditions evolve through H2 2025 and beyond. (Source: Reuters)
- Global economy: The International Monetary Fund (IMF) April 2025 World Economic Outlook projects a global growth slowdown to 2.8% in 2025 (down from 3.3% in January), with advanced economies expanding just 1.4% and the U.S. at 1.8%, amid escalating trade tensions and policy uncertainty. Headline inflation is forecast to ease gradually to around 4.3%, but multi-year high input costs and unresolved global trade disruptions threaten cost inflation. For insurers, this means claims inflation may remain elevated and investment returns subdued, necessitating tighter reserving and premium recalibration strategies for product lines sensitive to economic and pricing volatility. (Source: IMF)
Insurance Industry Developments
- Premiums and capacity: Global commercial property insurance premiums fell 6% in Q1 2025, accelerating from a 3% drop in Q4 2024, as ample market capacity and reduced reinsurance costs fuelled pricing relief. The UK saw a mirrored 6% decline, while the US and Pacific recorded steeper 9% reductions. This trend is attributed to aggressive competition and attractive reinsurance pricing, with insurers offering enhanced terms and lower deductibles. Despite softer pricing, underwriting discipline persists – poor-quality or high-loss accounts still face less favourable renewal terms. Insurers and brokers should prepare for continued market softening, particularly if reinsurance pricing remains stable. (Source: Artemis)
- Specialty lines: Directors & Officers (D&O) and professional indemnity premiums continue to see marginal increases, driven by legal and regulatory pressures across the UK and US. Intensifying competition and capacity influx – particularly in the US – have driven rates lower, though underwriters are adopting more sustainable pricing strategies across regions . London remains a preferred region, offering broader coverage and flexibility on sub-limits and entity investigation endorsements. In the UK and Europe, rising claim frequency – especially in insolvency and employment disputes – and increased legal and regulatory scrutiny are pressuring margins, prompting market stabilisation with fewer rate reductions. Insurers are responding with long-term agreements and enhanced policy features, signalling a shift toward disciplined growth and coverage depth. (Source: Gallagher Specialty)
- Regulatory developments: The UK’s Prudential Regulation Authority (PRA) issued new guidelines in April focusing on climate-related disclosures, calling on insurers to enhance transparency regarding their climate risk exposure and mitigation strategies. The PRA warned that banks and insurers have significant “gaps” in how they assess and manage both physical and transition climate risks, instructing firms to conduct internal reviews – with a follow-up compliance review in six months. (Source: Global Regulation Tomorrow)
Underwriting Performance
- London market: Lloyd’s of London is experiencing continued strong performance, according to an April 2025 report from the Lloyd’s Market Association (LMA) and ICMR. Gross written premiums in 2024 reached GBP £55.5 billion, with underwriting profit across nearly all syndicates and a pre-tax profit of £9.6 billion. Major claims – such as two U.S. hurricanes – totalled 7.8% of premiums, still below long-term averages. The report also outlines strategic priorities for 2025, including digitisation, regulatory engagement, technical expertise, and cultural transformation across the Lloyd’s market (Source: Lloyd’s Market Association)
- London outlook: In its Q2 2025 Market Message, Lloyd’s of London stressed a strategic shift towards “risk awareness, not risk aversion”, highlighting the need for disciplined underwriting amid fragile market conditions, reflected by a subdued Q1 risk-adjusted rate change of -3.3%. Lloyd’s senior leadership urged realistic syndicate strategies, enhanced scrutiny on claims performance, and proactive capital management to address macroeconomic uncertainties, signalling a decisive move towards profitability and operational efficiency. (Source: Reinsurance News)
Tech, Cyber and AI Developments
- Cyber attacks target insurers: Cyber incidents escalated notably in Q2 2025, affecting the insurance industry directly. In June, U.S. insurer Aflac revealed that a “sophisticated cybercrime group” had infiltrated its network via social engineering tactics, potentially compromising sensitive customer information – including social security numbers, health, and claims data. However, no ransomware was detected and core services remained operational. The insurer swiftly engaged third-party cybersecurity experts and contained the breach within hours. This incident is part of a broader wave of attacks targeting the insurance sector, with indications that the “Scattered Spider” hacker gang may be responsible. Insurers should reinforce employee training and incident response protocols as exposure risks escalate. (Source: Reuters)
- AI legislation: The European Union’s new AI Act has now entered into force, with rules for generative Artificial Intelligence applying from August. While the EU introduces a formal regulatory framework, the UK favours a flexible, principles-based model, empowering sectoral regulators like the FCA and PRA to oversee AI deployment in financial services – including insurance – with no new central AI authority required . With 75% of firms already using AI, including for credit risk and capital management, the UK Treasury and regulators are conducting ‘Calls for Evidence’ and market reviews to ensure governance remains robust. This approach balances innovation with oversight and enables insurers to adopt AI solutions while maintaining ethical and operational controls. (Source: KPMG)
Reinsurance Market
- Record cat bond quarter: Catastrophe bond issuance is projected to exceed USD $10 billion In Q2 2025, marking the first-ever quarter to hit this milestone, as demand from cedants and investors surges. This underscores growing reliance on insurance-linked securities (ILS) for alternative reinsurance capital and reflects investor appetite for diversified, yield-enhanced vehicles in a low-corruption insurance environment. Reinsurers and brokers should anticipate continued high ILS activity into H2 2025. (Source: Artemis)
- Buyer-friendly renewals: Annual renewals in April – spanning the US, Japan, South Korea, India, and beyond – were highly competitive and buyer-friendly, with ample capacity and price reductions seen in loss-free P&C and cat accounts. This trend reflects continued strong reinsurer appetite and disciplined underwriting following a benign catastrophe season. (Source: Insurance Journal)
Natural Catastrophes
- U.S. severe storms: A series of severe convective storms (SCS) and tornadoes across the central and eastern U.S. in May – most notably in St. Louis, Missouri and Laurel County, Kentucky – are estimated to have caused insured losses of up to $7 billion, ranking among the costliest SCS events in U.S. history. So far in 2025, SCS losses for U.S. insurers have surpassed $20 billion. (Source: MST)
- Global catastrophe losses: According to an April 2025 report from Swiss Re, global insured losses from natural catastrophes reached USD $137 billion in 2024, and are projected to grow to approximately $145 billion in 2025, aligned with a long-term annual growth trend of 5–7%. Among the disasters contributing most to the accumulation of losses were hurricanes Helene and Milton, severe convective storms (SCS) in the US, large-scale urban floods around the world and the highest ever recorded natural catastrophe insured losses in Canada. (Source: Swiss Re)
Geopolitical Risks
- Gulf marine premiums jump: Geopolitical volatility remains elevated in Q2 2025, notably due to continuing tensions around conflicts in Ukraine and the Middle East. Marine insurance premiums for hull and machinery cover on vessels transiting the Strait of Hormuz jumped by over 60% in June, rising from around 0.125% to approximately 0.2% of vessel value – an increase strongly linked to ongoing hostilities between Israel and Iran. (Source: Insurance Business)
- Tariff tensions: The complex situation around U.S. trade tariffs continues to evolve. In May, a three-judge panel of the U.S. Court of International Trade ruled that tariffs introduced via the 2025 International Emergency Economic Powers Act (IEEPA) were unlawful. While the decision is under appeal and a temporary stay allows tariffs to remain, insurers exposed to marine cargo and trade risks should monitor renewed uncertainty in trade flows, supply chain stability, and refinancing of trade credit coverage. (Source: The Guardian)
Looking ahead..
As we progress further through 2025, Costero Brokers remains committed to supporting our clients and partners in navigating their challenges. Our expertise and insights are here to help you make informed decisions and seize opportunities in a rapidly changing market.
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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.
