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The chief executive of Lloyd’s of London, which has reported its best underwriting conditions in more than a decade, has warned that the UK has to be “careful” not to push taxation to a level that deters investment.
Half-year numbers for Lloyd’s showed a relatively quiet time for major hurricanes helped it absorb a £500mn hit from the Baltimore bridge collapse and a smaller hit related to the Taiwan earthquake in April and still boost its profits.
Lloyd’s, which reports combined numbers for the insurers within the market, announced on Thursday a pre-tax profit of £4.9bn in the first half of the year, up from £3.9bn in the first half of the prior year.
Speaking to the Financial Times, John Neal said insurers and reinsurers were “beginning to show our mettle to investors” with stronger returns on capital, but had to “carry on for another few years” demonstrating their profitability. “It’s not one and done.”
Business leaders have grown increasingly anxious about a potential tax rise by the Labour government in next month’s Budget and the effects on the UK’s financial hub.
Lloyd’s is a critical part of London’s financial centre, a centuries-old market place where brokers bring a range of risks, from credit facilities to supertankers, to be underwritten by more than 50 insurers and reinsurers.
“We’ve got to be careful [on tax],” Neal said. “I worry about businesses wanting to list in the UK and wanting to be formally established here.”
The risk, he said, was if “a combination of corporation tax and personal tax was at a level that it made the UK a very difficult place to domicile, to do business”.
London’s insurance market has been on an upswing. In the first half of 2024, Lloyd’s sold more insurance and at slightly higher prices, pushing gross written premiums across the market up 6.5 per cent, excluding currency swings, to £30.6bn.
The period, it said, represented a continuation of the best underwriting conditions since 2007, after a long upswing in commercial insurance and reinsurance prices.
The market’s combined ratio — a measure of profitability in insurance that shows claims and expenses as a proportion of premiums — improved from 85.2 per cent in the first half of 2023 to 83.7 per cent.
This was complemented by a rise in investment returns as higher rates on fixed-income assets that are the mainstay of insurers’ investments were accompanied by rising equity markets.
The Treasury said: “Following the spending audit, the chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy . . . Decisions on how to do that will be taken at the Budget in the round.”
