After the dark days of 2017 – the year of Hurricanes Harvey, Irma, and Maria – when Lloyd’s reported an underwriting loss of £3.4bn, it’s fair to say the intervening years have been good to the London market rating-wise.

The heavy losses brought into stark realisation the ebbing away of underwriting performance margins over many years. This in turn heralded a much tighter focus on underwriting, and a firming market from 2018 onwards – slight at first, and ramping up significantly in 2019 and 2020.

And so the question turns from one of ‘when will the London market hit price adequacy?’ to ‘when will hard market make way?’

The unexpected and unforeseen repercussions of COVID-19 have certainly complicated the answers to both these questions.

Excluding the impact of the pandemic, Lloyd’s actually would have returned to an underwriting profit in 2020, with a combined operating ratio 97% off the back of risk adjusted rate increases of 10.8%. This would have been the first underwriting profit the market had seen since 2016, and arguably for certain lines at least, could reflect price adequacy.

As it is, however, COVID-19 claims took the combined ratio to 110.3%, with payouts totalling £6.2bn.

Across the global specialty market, it has ensured that momentum has stuck with the hard market. But as the world emerges from the pandemic, and underwriters rewrite policies to account for COVID-19 losses, could the ever-increasing premium rises be coming to an end?

On his H1 investors call discussing the performance of Allianz Global Corporate & Specialty, Allianz CEO Oliver Bäte said this was “one of the hardest markets that we've seen probably in a decade”, as the unit reported Q2 hikes of 22% for renewal business across the portfolio.

While this was down on the 24% rate increases reported at FY 2020, it is level with the Q1 2021 figure, and up on the same point last year, when rates were increasing by 20.5%.

This suggests that the hard market could at least now be plateauing. But these are price rises nonetheless, on top of what have already been hefty hikes over the last two years.

Hiscox London Market reported average rate increases across the portfolio of 12% year-on-year in H1, with a cumulative rate increase of 60% since 2017.

Cyber is one of the lines driving up premium prices according several insurers, with the growing number and severity of ransomware attacks causing rate rises of 20% in this class for Hiscox.

Other lines, where losses are less prolific, are seeing smaller increases. But these are increases all the same, as carriers continue to prioritise underwriting performance in an environment where investment income is still hampered by low interest rates.

Hiscox London Market had a combined ratio of 81.7% at H1 (a 23.5 point improvement on the prior-year period) and had rate rises in 15 of its 17 lines, with 11 lines achieving increases in the double digits.

How long these rate hikes can be sustained is unclear and will be determined by what the loss picture looks like in the second half of the year. But within other major carriers there is evidence of sharper falls. At Chubb, for example, its London wholesale unit secured a quarterly rate increase of 13% in Q2, down from 20% the previous quarter.

The picture needs to be looked at on a class by class basis, but there is now wide acknowledgement that the industry at large is operating under hard market conditions. With that comes greater appetite to deploy capital and take advantage of these conditions – something mentioned by various carriers in their H1 results.

In doing so this may be what eventually returns the market to a more stable position in terms of premium pricing. But after the unforgiving experience of operating in a soft market pre-2018, and the increasingly volatile nature of losses, underwriters will be keen to maintain these hard premium prices for the foreseeable future.