LCP’s 10th annual Solvency II review: non-life insurers stronger, but facing a more complex and interconnected risk landscape

LCP’s 10th annual Solvency review highlights that the non-life insurer market is larger and better capitalised since the introduction of Solvency II. Assets across the top 100 firms analysed have grown from £152.1bn to £226.6bn, while the aggregate solvency coverage ratio across that 100 has increased from 154% to 192%.

The report analyses the Solvency and Financial Condition Reports (SFCRs) and Quantitative Reporting templates (QRTs) of 100 of the largest UK and Irish non-life insurers to assess key risks, emerging themes and key changes and trends. This year’s report highlights a clear shift to a more interconnected and uncertain risk landscape.

Geopolitical risk is becoming an increasingly important area of focus, with 75% of firms mentioning it in 2025, compared with 64% last year. While several insurers continue to reference the Russia-Ukraine conflict, attention has shifted to geopolitical tensions involving Israel, Iran and the US. Insurers are increasingly focused on potential secondary impacts of geopolitical risks. 37% of firms identified exposures, most commonly across Aviation and Marine, Cyber, D&O, Energy and Political lines. Concerns over inflation and investment impacts rose significantly, cited by 56% of firms versus 36% last year. 

When it comes to other risks, Climate change remains significant for the insurance sector, cited by 82% of insurers (down slightly from 86% last year), although firms are demonstrating a more sophisticated approach to assessing these exposures, with 51% now quantifying climate risks through measures such as stress and scenario testing and catastrophe modelling. Emerging risks continue to be a major area of focus, referenced by 90% of insurers, reflecting increasingly mature risk management frameworks and greater recognition of the interconnected nature of these threats. Examples include civil unrest and gene technology. Cyber risk was highlighted by 83% of insurers (up from 81% last year), with many firms strengthening resilience through enhanced testing and incident response planning. Meanwhile, 33% of insurers identified AI-related risks, acknowledging both the challenges and opportunities associated with the growing use of artificial intelligence.

To help firms translate this evolving risk picture into practical action, LCP recommends firms take these actions:

• Align capital strategies to the evolving risk landscape, recognising the increasing interconnectedness of risks such as inflation, geopolitical risk, cyber, AI and softer market conditions. 
• Demonstrate how governance of emerging risks informs business decisions, such as adjusting underwriting appetite and terms, exclusions and exposure limits, and incorporating new stress and scenario tests.
• Recognise AI as both a risk and an opportunity and strengthen AI risk controls through appropriate AI governance frameworks, employee training and cross-functional working groups.
• Understand and respond to the implications of a softening market, particularly in underwriting, reinsurance strategy and expense management. 

Report author and LCP Partner Cat Drummond, commented: “A decade after the introduction of Solvency II, the non-life insurance market has grown in size and resilience – but the risks it faces have become broader, faster-moving and more interconnected.”

Louis March, LCP consultant and report author, added: “In an increasingly complex world, good governance provides the oversight, challenge and accountability needed to set clear risk appetites and support timely underwriting and capital management decisions.”