Lloyd’s legacy market set for renewed growth as cycle shifts, says Aon

Momentum is building for a renewed wave of legacy transactions at Lloyd’s, with Aon pointing to shifting market conditions and structural demand as catalysts for growth.

In its “Lloyd’s Legacy Report – April 2026”, the broker argues that softer reinsurance pricing, increased M&A activity and a growing focus on historic liabilities will support a more active run-off market.

The report highlights the expanding scale of the reinsurance-to-close (RITC) market, where five dedicated syndicates, RiverStone, Enstar, Premia, Compre and Marco, have assumed almost $15bn of reserves since 2010.

This growth has brought greater capacity and specialist expertise, Aon observed, alongside more sophisticated, data-driven approaches to reserving and portfolio management.

For cedants, Aon said this evolution is translating into more competitive deal dynamics and the ability to extract value from well-reserved portfolios, while reducing earnings volatility and operational complexity.

“The Lloyd’s legacy market has evolved from a specialist rectification solution into a mainstream tool for managing balance sheets, capital and earnings,” said Rob Margetts, legacy reinsurance broker at Aon.

“As insurers operate in a more competitive environment and prepare for a potential softening of rates across multiple classes, Aon expects legacy transactions to play an increasingly important role in helping managing agents and capital providers protect performance, recycle capital and maintain underwriting appetite,” he added.

Cycle shift to drive activity

Legacy deal activity slowed through 2024 and 2025, the broker noted, reflecting strong underwriting conditions and relatively benign catastrophe losses.

However, Aon said it expects this to reverse as pricing softens and capital discipline tightens.

In such conditions, carriers are more likely to scrutinise underperforming segments and look to offload back-year exposures, particularly in longtail classes such as US casualty and aviation, according to Aon.

The report suggests that legacy solutions will become increasingly relevant as insurers seek to protect current-year performance while managing uncertainty around prior-year reserves.

Aon also pointed to significant untapped demand within the Lloyd’s market.

More than three quarters of syndicates have yet to complete a legacy transaction, indicating substantial headroom for growth.

At the same time, repeat sellers continue to dominate activity, Aon observed, accounting for around two thirds of reserves transacted since 2015.

This reflects the growing use of legacy as a recurring capital management tool, the broker noted, with insurers rebuilding reserve bases within two to three years and returning to the market as part of a broader cycle of capital recycling.

Capital and confidence

Aon’s report outlines a range of benefits for insurers engaging in legacy transactions, particularly in a potentially softening market.

These include reducing exposure to back-year reserve volatility, releasing trapped capital for redeployment, and improving operational efficiency by transferring legacy portfolios away from internal systems.

Legacy solutions can also support M&A and restructuring activity by ring-fencing historic risks that are not central to future strategy.

This is likely to become increasingly relevant as consolidation continues across the market and capital providers seek greater flexibility in how balance sheets are managed.

Confidence in the legacy market has also been reinforced by Lloyd’s efforts to strengthen oversight and governance.

From 1 January 2025, the market introduced a Legacy Oversight Framework, incorporating early engagement through a Legacy Review Panel and formal approval via the Capital and Planning Group.

The framework focuses on areas including risk transfer, capital adequacy and operational capability, while introducing enhanced scrutiny for larger transactions and tighter controls on profit release during integration.

These measures are designed to reduce execution risk and support market stability as transaction volumes increase.

Looking ahead, Aon said it expects structural drivers including continued M&A activity, new entrants and alternative capital, as well as product innovation such as forward exit solutions, to underpin long-term growth in the legacy segment.

“With specialist capacity, governance and execution capabilities continuing to strengthen, insurers that use legacy proactively are well positioned to optimise capital, reduce volatility and maintain strategic flexibility as the cycle evolves,” added Mike Cane, head of capital advisory UK at Aon.