Lloyd’s boss warns of rising UK charges as insurance market reports exceptional conditions

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The chief executive of Lloyd’s of London, which reported its best underwriting conditions in more than a decade, warned that Britain must be “careful” not to push taxation to a level that discourages investment.

Half-year figures for Lloyd’s showed that a relatively quiet period for major hurricanes helped it absorb a £500m hit from the Baltimore bridge collapse and a smaller hit from the Taiwan earthquake in April and further increase their profits.

Lloyd’s, which reports combined figures for market insurers, on Thursday announced a pre-tax profit of £4.9bn in the first half of the year, up from £3.9bn in the first half previous.

Speaking to the Financial Times, John Neal said insurers and reinsurers were “starting to show their mettle to investors” with stronger returns on capital, but had “a few more years to go” proving their profitability. “It’s not one and done.”

Business leaders have grown increasingly concerned about a potential tax hike by the Labor government in next month’s budget and the effects on Britain’s financial centre.

Lloyd’s is an essential part of London’s financial centre, a centuries-old market where brokers bring a wide range of risks, from credit facilities to supertankers, to be underwritten by more than 50 insurers and reinsurers.

“We have to be careful (about taxes),” Neal said. “I worry about companies that want to list in the UK and that want to be formally established here.”

The risk, he said, is if “a combination of corporate tax and personal tax would be at a level that would make the UK a very difficult place to live, to do business”.

The London insurance market was booming. In the first half of 2024, Lloyd’s sold more insurance and at slightly higher prices, pushing gross written premiums on the market up 6.5%, excluding currency fluctuations, to £30.6bn.

The period, it said, represented a continuation of the best underwriting conditions since 2007, after a long rise in commercial insurance and reinsurance prices.

The combined market ratio – a measure of insurance profitability that shows claims and expenses as a proportion of premiums – improved from 85.2% in the first half of 2023 to 83.7%.

This was complemented by a rise in investment returns as higher rates on fixed income assets, which are the mainstay of insurers’ investments, were accompanied by a rise in equity markets.

The Treasury said: “Following the spending audit, the Chancellor has been clear that tough decisions on spending, welfare and tax lie ahead to fix the foundations of our economy. . . Decisions on how to do this will be made at the budget in the round.”