Pillars of Salt?

The Signs of Late-Cycle Behaviour

Across parts of the UK casualty market, the signs of late-cycle behaviour are becoming harder to ignore.

Normally you would expect this sort of aggressive competition much later in a soft market cycle.

What makes the current position more concerning is that parts of casualty arguably never hardened in the same way other classes did after Covid.

A lot of casualty business stayed competitive throughout, and now parts of the market appear to be softening even further from what was already a relatively competitive position.

We are seeing:

• meaningful rate reductions
• broader underwriting appetite
• wider cover
• lower excesses
• and increasingly aggressive competition for premium

all while:

• claims inflation remains high
• legal costs continue to rise
• and the long-tail uncertainty within casualty has not really gone away

In some areas, pricing now appears materially below levels many underwriters would historically have associated with the underlying uncertainty involved.

The Role of Capacity and Delegated Authority

At the same time:

• large amounts of capacity continue flowing into MGA and delegated authority models
• more markets are willing to look at risks they would previously have avoided
• and parts of the market appear increasingly willing to prioritise competitiveness over caution

That does not mean MGAs are the problem.

Far from it.

Some of the best underwriting businesses in the market operate through MGA and delegated authority structures.

The issue is not the model itself.

Importantly, this is not solely a delegated authority phenomenon.

Many mainstream insurers and reinsurers are operating within the same competitive dynamics, balancing growth expectations, return on capital pressures and increasingly abundant global insurance capacity.

The delegated authority market itself has also evolved significantly.

Businesses such as Pen Underwriting, including specialist operations such as Manchester Underwriting Management, increasingly resemble sophisticated insurance operating platforms rather than traditional niche MGA models, combining underwriting, pricing, claims management, portfolio oversight and distribution at considerable scale.

That evolution matters because it changes how parts of the casualty market now function structurally.

Historically, softening technical pricing would impact the underwriting carrier balance sheet relatively directly and visibly.

In more modern delegated authority ecosystems, underwriting, distribution, operational delivery and ultimate balance-sheet risk can sit across multiple parts of the capital chain simultaneously.

That does not mean the structures are flawed.

In many cases, the opposite is true.

The delegated authority market has become significantly more sophisticated and institutionalised over the past decade.

But it may also change how long soft market conditions can persist before capital providers react.

Platforms such as Accelerant Holdings have demonstrated how scalable modern capital-light insurance models can become when supported by external risk capital, sophisticated portfolio management and fee-based economics.

Operationally, many of these businesses have performed extremely well.

But modern casualty markets can also remain operationally and financially successful for prolonged periods even while underlying technical adequacy questions continue building underneath.

The Capital Picture

The investor lens matters because the capital behind the market is changing too.

This is not a simple story of capital disappearing.

If anything, the opposite is true.

Reinsurance capital remains strong and alternative capital continues to grow. Investors are increasingly exploring structures such as sidecars and reinsurance vehicles that give them targeted access to underwriting risk, including casualty-linked structures. AM Best places total reinsurance capacity entering 2026 at record levels — approximately $540 billion in traditional dedicated reinsurance capital and a further $120 billion in ILS capital, bolstered by a third consecutive year of robust earnings.

That is not a sign that investors are running away from insurance risk.

It is the opposite.

But it may also allow soft market conditions to persist for longer because capital continues to remain available while reported returns stay attractive.

AM Best has said several reinsurers strengthened casualty reserves in 2024 and 2025 and expects that trend to continue in 2026.

The Financial Times has also reported industry concern that private credit capital may increasingly contribute to competitive pressure around business with thinner margins and more complex long-tail exposure.

What the Market Is Actually Saying

What is perhaps most interesting is that this conversation increasingly appears to be emerging from institutions and market participants who are normally measured, cautious and structurally incentivised not to overreact.

Nobody serious is publicly arguing that the casualty market is in crisis.

In fact, most industry commentary still describes insurer profitability as strong, capital levels as healthy and capacity as abundant.

But underneath that, a more nuanced conversation has clearly started to emerge.

AM Best has repeatedly referenced:

• reserve strengthening
• pricing adequacy concerns
• social inflation
• adverse casualty development
• and the effect of abundant capital on competitive conditions

Perhaps the single most important comment was this:

“Whether the meaningful pricing gains seen for the past several years are keeping pace with loss cost trends is questionable.”

That is an extraordinarily significant statement from a rating agency.

The Lloyd’s market has also publicly acknowledged that conditions are softening rather than soft, easing faster than many expected, and could turn on a knife edge. Again, that is not the language of a market entirely comfortable with the long-term sustainability of current conditions.

Reinforcing that concern, Lloyd’s own underwriting directorate stated explicitly in its Q4 2025 Market Messages that casualty rates appear inadequate — a direct judgement from the market’s own oversight body, not merely an external observation.

How Markets Eventually Turn

At some point, the discussion ultimately becomes one of capital allocation.

Not necessarily because losses suddenly appear.

Not because headlines first turn negative.

But because enough insurers, reinsurers and capital providers stop believing the future economics still justify the current pricing.

That is usually when markets harden.

Because soft casualty markets rarely end due to a single catastrophic event.

They end when enough participants conclude that:

• the return no longer justifies the uncertainty
• reserve risk is no longer adequately compensated
• and there are better places to deploy finite capital

That process can happen surprisingly quickly after years of apparent stability.

The Numbers Behind the Headlines

The interesting part is that insurer results still look strong on the surface.

Lloyd’s reported the following for 2025:

• £10.6bn profit before tax
• £6bn investment return
• £5.2bn underwriting profit
• 87.6% combined ratio

But underneath that:

• rates reduced by 3.7%
• the attritional loss ratio edged up to 47.9% from 47.1% the prior year
• expenses increased, with the expense ratio rising to 35.6% from 34.4%
• the Lloyd’s casualty segment posted an underwriting loss, with a combined ratio of approximately 100.8%, compared to approximately 91.6% the prior year
• and Lloyd’s own forecast for 2026 projects a combined ratio of 90%–95%, with investment return expectations of just 3% — a significantly narrower buffer than recent years have provided

Lloyd’s also referenced reduced major losses, strong investment returns and favourable prior-year reserve development helping the overall result. Howden Re’s syndicate-level analysis adds further texture: even excluding major losses, the Lloyd’s casualty segment posted an accident year combined ratio of 98.6% in 2025 — meaning the underlying performance, before any reserve movements, was close to breakeven.

Allianz and Beazley both continued emphasising underwriting discipline, portfolio quality and controlled growth rather than simply maximising premium expansion.

That part matters.

Strong insurer profits do not automatically mean current casualty pricing is adequate.

There is also a broader market conversation happening around casualty reserves and long-tail deterioration.

AM Best, Swiss Re and Munich Re have all discussed reserve pressure, social inflation and adverse development trends within casualty and liability business, particularly in the US market.

Stephen Catlin has also repeatedly warned about underpriced casualty business and the delayed nature of long-tail claims emergence.

A Word on Geography — and Why It Matters

The UK market is not identical to the US market, and that distinction deserves more than a passing acknowledgement.

The acute social inflation dynamics driving US casualty reserve development — nuclear verdicts, mass tort litigation funding, expanding jury awards — do not directly replicate in the UK legal environment. The UK has no equivalent to the US third-party litigation funding model at the same scale, and punitive damages awards remain rare.

That said, several important transmission mechanisms exist that mean the UK and London markets cannot simply look away from US casualty trends.

First, the Lloyd’s and London Market write significant volumes of US-exposed casualty business — excess and surplus lines, professional liability, management liability and specialty casualty placements where the underlying risk is American. When US casualty reserves deteriorate, London Market syndicates carrying that paper are directly exposed.

Second, global reinsurance pricing does not distinguish neatly between UK and US primary risk. When reinsurers strengthen casualty reserves and tighten capacity globally, UK primary insurers and London Market participants feel the effects through reduced reinsurance availability, higher reinsurance costs, and deteriorating terms.

Third, the UK is not immune to its own claims inflation dynamics. Legal costs continue rising. Conditional fee arrangements have expanded. The post-LASPO environment has produced its own upward pressure on settlement values and litigation frequency in certain casualty lines. Employers’ liability, public liability and professional indemnity have all experienced cost inflation that is not fully dissimilar in character, if not in scale, to US social inflation trends.

The conclusion is not that the UK casualty market faces the same magnitude of reserve risk as the US. The conclusion is that the UK and London markets are sufficiently intertwined — through shared reinsurance capital, cross-border exposure and interconnected pricing dynamics — that the same fundamental question applies here:

Is current pricing genuinely adequate for the long-tail uncertainty being accepted?

The Limits of Better Data

The important point is that casualty problems can take years to properly emerge.

Markets can repeat the same pricing mistake several years in a row before the true position becomes visible through reserve development and IBNR deterioration.

Supporters of the current market will argue that:

• data is better
• portfolio management is better
• and capital structures are more efficient than in previous cycles

That may well prove true in some areas.

It is entirely possible that parts of the market genuinely are operating more efficiently than in previous cycles, with improved analytics, portfolio management and capital structures allowing lower volatility and more sustainable pricing than historical comparisons would suggest.

But casualty has always had one major problem:

You often do not know whether pricing was adequate until years later.

Higher investment income and favourable reserve development can support weaker underwriting performance for a period.

That does not make inadequate pricing sustainable forever.

When the Market Corrects

And when casualty markets eventually correct, they rarely do so slowly.

Capacity pulls back quickly. Excesses rise. Wordings tighten. Entire trades suddenly become difficult to place.

And when that happens, the pain does not stop with insurers.

Clients suddenly face:

• sharp premium increases
• reduced insurer choice
• narrower cover
• and far greater underwriting scrutiny

Brokers then find themselves trying to explain why cover that was easy to place two years earlier has suddenly become difficult.

Where Broking Value Really Lies

The brokers who usually come through these cycles strongest are not the ones who chased the cheapest premium at every opportunity.

They are the brokers who:

• protected underwriting relationships
• understood coverage properly
• managed client expectations early
• and thought about sustainability as well as price

At Jensten London Markets, that is where we believe wholesale broking should add value.

Not simply finding the cheapest line today, but understanding:

• where capacity is sustainable
• which underwriting relationships are likely to last
• and how placements are likely to perform when conditions eventually tighten again

Soft markets create complacency.

Hard markets expose it.

Modern casualty markets may now be capable of remaining operationally successful far longer than previous cycles would historically have allowed.

But eventually capital still asks the same question it always has:

Does the future return still justify the uncertainty?

History suggests that once enough participants stop believing the answer is yes, conditions change quickly.

Or, as Jimi Hendrix once put it:

“Castles made of sand fall into the sea eventually.”

Author’s note:

Steve Bader, Head of Casualty at Jensten London Markets has over 15 years London Market experience. This article was developed using a combination of personal market analysis, industry research and AI-assisted drafting and challenge processes.

The views, thesis and conclusions are my own.

Sources

1. Lloyd’s of London — Full Year Results 2025 (March 2026) Profit before tax £10.6bn; GWP £57.9bn; combined ratio 87.6%; underwriting profit £5.2bn; investment return £6bn; attritional loss ratio 47.9%; expense ratio 35.6%; rate reduction 3.7%; casualty segment combined ratio 100.8%. https://www.lloyds.com/about-lloyds/investor-relations/financial-results/full-year-results-2025
2. Lloyd’s of London — FY2025 Analyst Deck (March 2026) Segmental combined ratios by class including Casualty insurance 100.8%, Property insurance 75.4%, Reinsurance 85.6%, Marine/Aviation/Energy 103.5%, Specialty 86.6%. https://assets.lloyds.com/media-651c0e64-c1d0-4f97-90f7-883c69fe2ef2/ef245f54-7663-4c16-9f87-56b8f0a4e625/FY25%20Analyst%20Deck%20FINAL.pdf
3. Lloyd’s of London — Chief Executive Statement 2025 2026 forecast: GWP £64bn (+/-5%), combined ratio 90%–95%, investment return 3%. https://www.lloyds.com/about-lloyds/investor-relations/financial-results/full-year-results-2025/ceo-statement
4. Lloyd’s — Q4 2025 Market Messages (November 2025) Casualty rates described as inadequate; property rate softening continuing at a pace Lloyd’s considers problematic. Reported in: https://www.insurancebusinessmag.com/uk/news/breaking-news/lloyds-flags-mounting-pressures-as-market-heads-into-2026-558203.aspx
5. Lloyd’s — Rachel Turk, Chief of Market Performance (January 2026) Market described as “softening” rather than “soft”; could “turn on a knife edge.” Speaking at Fitch Ratings Insurance Insights conference. https://www.insurancetimes.co.uk/news/tons-of-opportunities-in-softening-market-for-2026-lloyds-rachel-turk/1457626.article
6. AM Best — Market Segment Report: “Casualty Reinsurance Capacity Remains Plentiful Amid Concerns” (February 2026) Reserve strengthening by several reinsurers in 2024 and 2025; trend expected to continue in 2026. “Whether the meaningful pricing gains seen for the past several years are keeping pace with loss cost trends is questionable.” Reinsurance capacity at record levels (~$540bn traditional, ~$120bn ILS). https://www.businesswire.com/news/home/20250226396569/en/Best%E2%80%99s-Market-Segment-Report-Casualty-Reinsurance-Capacity-Remains-Plentiful-Concerns-Over-Future-Availability-Loom
7. AM Best — Global Reinsurance Outlook revised to Stable (January 2026) Social inflation, casualty reserve concerns, accelerated property softening cited. Casualty described as “a fragile area of opportunity.” https://www.reinsurancene.ws/am-best-shifts-global-reinsurance-outlook-to-stable-as-property-rates-soften-and-casualty-issues-persist/ https://www.carriermanagement.com/news/2026/01/20/283636.htm
8. Howden Re — Lloyd’s Syndicate-Level Analysis 2025 (April 2026) Casualty segment posted an overall underwriting loss in 2025; accident year combined ratio 98.6%. Property and reinsurance carried gains. https://www.insurancebusinessmag.com/reinsurance/news/breaking-news/lloyds-premium-growth-masks-a-deepening-casualty-crisis–howden-re-572462.aspx
9. Lloyd’s of London — Full Year Results 2024 (March 2025) Combined ratio 86.9%; profit before tax £9.6bn; attritional loss ratio 47.1%; expense ratio 34.4%. https://www.lloyds.com/fullyearresults2024
10. S&P Global Market Intelligence — “Lloyd’s underwriting profits dip as pair of business lines slip into red” (March 2025) Direct casualty insurance combined ratio in 2024; segmental analysis. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/3/lloyds-underwriting-profits-dip-as-pair-of-business-lines-slip-into-red-88179568
11. Hampden Group — Lloyd’s 2025 Results Analysis Class of business breakdown; investment income as proportion of total return. https://www.hampden.co.uk/article/lloyds-result-2025-third-year-return-is-20
12. Jimi Hendrix — “Castles Made of Sand” (1967) From the album Axis: Bold as Love, Track 9. Written by Jimi Hendrix.