Fitch concludes that the Lloyd’s market’s disciplined approach to underwriting, reserving, and investment management leaves it well placed to navigate a softer pricing cycle over the next two years.
The global credit rating agency highlights that Lloyd’s continues to hold a very strong capital position and expects its credit profile to remain robust through 2026, even as pricing conditions begin to weaken and claims linked to the Iran conflict emerge.
The agency notes that underwriting performance remained highly resilient, with Lloyd’s generating £5.2 billion in underwriting profit, broadly in line with the prior year.
The combined ratio stayed at an excellent level of 87.6%, only slightly higher than 2024, while major losses were relatively modest and contributed a smaller share of claims than in the previous year. Fitch attributes this performance to favourable loss experience and disciplined underwriting.
At the same time, Fitch notes that the market environment is shifting. Risk-adjusted pricing declined by 3.7% in 2025, marking a reversal after several years of rate strengthening.
Fitch expects this downward trend to become more pronounced in 2026, although it stresses that pricing remains at a level that should continue to support solid underwriting results despite broader economic and geopolitical uncertainty.
Fitch also points out that Lloyd’s has exposure to the Iran conflict through specialised lines such as marine and aviation war, political violence, trade credit, and energy.
However, Fitch does not expect widespread claims from standard property or cyber policies, as these typically exclude war-related events. Fitch currently views the situation primarily as an earnings impact, though it cautions that a prolonged conflict or wider disruption to global markets could increase volatility.
On capital strength, Fitch underscores that Lloyd’s solvency position remains very strong. The market-wide Solvency II coverage ratio stood at 200% at the end of 2025, comfortably exceeding internal risk thresholds, while central solvency coverage rose significantly to 496%, supported by reinsurance protections within the central fund. Fitch considers Lloyd’s capitalisation and leverage metrics to be firmly aligned with its current rating level.
Fitch further emphasises the prudence of Lloyd’s investment strategy, noting that the portfolio is largely concentrated in high-quality bonds and cash, with a relatively short duration. Investment income was strong in 2025, contributing GBP 6.0 billion. In addition, Fitch highlights that reserving practices remain cautious, with the reserve margin increasing to GBP 6.6 billion within total net claims of GBP 58.8 billion.
Overall, Fitch concludes that Lloyd’s disciplined approach to underwriting, reserving, and investment management leaves it well placed to navigate a softer pricing cycle over the next two years, maintaining strong credit fundamentals even in a less favourable market environment.
