Halfway through the year, we have witnessed volatility in the casualty market not seen since the COVID-19 pandemic. From geopolitical events to business sentiment, it’s fair to say that the first six months of the year have been eventful.  The softening of the casualty market has continued in both Q1 and Q2, offset by new business as clients and assureds alike explore the market for competitive premiums and broader coverage. Our international and DUA division has equally seen a softening of the market, with broker-clients opting for domestic markets, rather than seeking London support. However, our Healthcare and Medical Malpractice division, Medicas, performed exceptionally well. Strong renewal retention and new business flow demonstrate that niche, super-specialty lines continue to weather the storm.

To many industry participants, the hard/soft environment is a well-known cycle, which often unearths the weakest links in the industry. The recent US losses, particularly in property have had minimum impact on ratings, offset by the significant availability of capital from reinsurers, global investors and Risk Retention Groups. 

In July, we also announced the launch of Scious Underwriting Ltd,  London Market Processing Ltd (LMP) and Synergio (FCA Appointed Representative platform for international regional brokers), which was relaunched in January 2025. These additional initiatives were launched to accelerate growth and strategically diversify and innovate our revenue streams beyond core broking income. We expect to see the full impact of Scious and LMP by the end of the year, with Synergio demonstrating strong interest to date. Our European and Northern Ireland divisions follow a similar pattern to our UK operations, in that the market sentiment has led to renewal premiums decreasing across casualty lines - which is offset by new enquiries. 

The global economy in 2025 is navigating a period of cautious recovery and structural transformation. After enduring the lingering effects of post-pandemic inflation, supply chain disruptions, and geopolitical tensions, major economies are experiencing moderate to low growth, with murmurs of changes to UK’s fiscal policies in the next budget. We anticipate global GDP growth of around 3%, where we expect to see much of the growth from emerging markets, such as Africa and Asia. This is linked with the activity we have encountered at Servca, particularly around reinsurance activity and emergence of new MGAs in Africa. 

We expect interest rates to stabilise at current levels, which we expect will shift (re)insurer focus towards maintaining premium stability and supporting investment into technology advancements.  

That said, key risks remain - namely geopolitical conflicts impacting marine and cargo, climate-related disruptions, and trade fragmentation/tariffs pressuring global cooperation, hence the cautious optimism. Much like Q4 2024, there is ample capacity supporting new MGAs and ventures with unique distribution to support growth in a bid to maintain and build market share, whilst keeping the cost of acquisition and churn rate competitively low. For the casualty insurance market, much like 2024 - we expect this to continue into 2025, which will provide insureds with a greater selection of insurers, coverage options and competitive tension to reduce premium.

With the recent legislative updates in the US around blockchain and ever competing environment around AI – we expect to see technology in the insurance sector ramp up sharply over the next 12-18 months. As mentioned in our Q4 2024 overview, this will drive down the long-term cost of acquisitions with the utilization of open API integrations – which the Lloyd’s Market are also participating in, with Blueprint Two and PPL to digitalize the Lloyd’s landscape and making access to Lloyd’s easier and quicker.

Having spoken with technology companies over the last three months, we expect there to be an increase in ‘InsurTech’ launches designed to automate risk selection, underwriting and customer acquisition, similar to the financial services platforms seen some years ago. 

We have experienced a slowdown in the personnel and recruitment market, particularly in senior positions. This is most likely driven by a mixture of share-options tie ins, M&A and a general cooling of salaries as the industry contends with the soft-market cycle and increased operating costs. 

As we have always stressed, recruitment is a primary indicator of any industry sector.  Where we have seen a reduction in senior headcount movement, we expect this to be offset with technology, innovation and an increased number of senior brokers and underwriters establishing their own platform (hence the busy activity we have seen at Synergio). Fortunately for many employers, the increases in NI contributions have been somewhat softened with the stabilizing of renumeration as brokerages, MGAs and insurers contend with higher transactional and regulatory costs.   

The Marshberry M&A report released earlier this year made interesting reading around the M&A activity in 2024. Leeds based JM Glendinning emerged as the most active buyer in the UK, while several US-based wholesalers signaled their intent to actively start looking at placing their flag in London. Although M&A activity cooled off in Q4 2024, we’re now seeing a resurgence, driven by a mix of new buyers. That said, the average ticket size has decreased compared to 2023 and early 2024 demonstrating that the smaller intermediaries are increasingly being considered, largely due to the given lack of supply of larger acquisition targets. 

The challenge with M&A remains that it can arguably stunt growth and innovation – both of which, as we know, often comes from calculated risk taking.  Acquired firms appear to be more focused on integration rather than innovation, which we expect will stifle growth as M&A activity continues to surge among the new breed of buyers. 

In terms of challenges and opportunities, 2025 is already presenting more than 2024, largely due to a perceived sense of stability and a return to ‘normal’. The soft market cycle across casualty lines looks like it’s here to stay for a few more years – which intermediaries and insurers have adapted to. The positive is that insureds and overseas brokers will have a wider selection of capacity, thus allowing stability around premiums and renewals. 

We expect there to be a number of new MGA launches (as there have been in Q1 and Q2 so far).  We optimistically expect the niche, super specialty lines – such as Healthcare and Medical Malpractice will show stronger growth compared to other lines.   

The competitive tension across the Lloyd’s and London Market drives our industry as we navigate change and seek growth opportunities – which will invariably come down to service levels and premiums. 

May the best broker(s) win.