Credit entrants form a queue at Lloyd’s, but treaty leads are in short supply

Lloyd’s is a major beneficiary of fresh capacity entering to underwrite credit business, including trade credit, structured credit, and credit and political risk insurance (CPRI).

The Lloyd’s market trades on its A-rated strength, crucial for European banks using insurer credit ratings for capital relief.

“I can easily see another four or five syndicates stepping into Lloyd’s in the next 12 to 24 months,” said Eran Charit, senior broker at Lockton Re, speaking on The Political Risk Podcast.

“We are seeing an influx of insurers and MGAs writing additional credit exposure,” agreed Sarah Murrow, president & CEO of Allianz Trade Americas.

Charit added: “On the back of strong results and a desire to diversify away from property catastrophe, capacity is coming to this market from all directions. Specialty is in vogue.”

July saw several new credit entrants.

Trade credit carrier Atradius was granted in principle approval from the Lloyd’s Council to launch Syndicate 1864, supported by Polo Managing Agency.

The syndicate plans to start underwriting from January 1 2026, focused on supporting European financial sector clients.

Coface also received in principle approval from Lloyd’s in July to launch a new trade credit syndicate, in partnership with managing agency Apollo. Syndicate 2546 is also expected to begin underwriting by year end.

Paris-based Descartes Insurance also said in July that it was entering the CPRI business, citing diversification and “the growing impact of political and credit risks in our changing world”.

In March, MSIG Asia announced a new strategic collaboration between its US, Singapore and Hong Kong arms, to expand the group’s political risk and trade credit product offering for Asian business buyers.

Gallagher Specialty’s latest Structured Credit and Political Risk Insurance Market Report revealed capacity growth with more insurers capable of writing long-term risks than ever before.

For contract frustration and political risks, around $3.5bn of capacity was available globally as of March 2025, the broker estimated.

The risk outlook for credit is mixed, with the same geopolitical and macroeconomic uncertainties on the minds of investors, capacity providers, and insurance buyers, alike.

“US tariffs are likely to increase insurance claims severity in the US and may dampen insurance demand. This is especially true for specialty lines tied to economic activity, such as credit and surety,” said Swiss Re’s World Insurance Sigma Report.

There is also an expectation that credit can benefit from increased demand relating to trade policy – although whether supply will outpace this demand is yet to be seen.

“Tariffs and uncertainty may create some opportunities for insurers,” the Swiss Re report observed. “This is particularly the case for lines of business offering protection against economic and financial disruption, such as credit and surety insurance.”

All the newly entering credit capacity points to a soft market outlook. “There has been an influx of additional insurers providing capacity in credit insurance markets globally. That creates more supply, which drives a softer market,” said Murrow.

Charit underlined that he expects loss activity to increase: “We are in the softest market I have seen in about a decade. Results have been phenomenal, with loss ratios roughly 20–30 points below the historical 50–60% since 2021.”

He added: “This class develops over two to 20 years. At the top level, it looks lucrative, but in the next 24–36 months, losses will start to come in, just as capacity is up and pricing is being driven down in a heightened risk environment – the perfect storm.”

At treaty reinsurance level the CPRI market is remarkably concentrated.

“Less than ten [treaty carriers] probably control around 50–60% of the reinsurance capacity, which means the tail can end up wagging the dog,” Charit said.

“We are desperately in need of more leads. The market is vulnerable to systemic shocks. All it takes is one very large catastrophe event to scare a key reinsurer into leaving the class, and you have a capacity crunch.”

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