Lockton has flagged a potential shift in the financial institutions market as rate reductions slow and insurers become more selective.

Discipline is returning, with profitability pressures leading to tighter underwriting and selective rate increases, according to the broker’s July Financial Institutions Market Update.

“Financial lines insurance conditions remained favourable for financial institutions in 2025, supported by ample market capacity and strong competition,” Lockton said.

“However, mounting profitability concerns signalled a possible shift ahead.”

Lockton says the market is expected to become more selective over the next 12-24 months despite continued strong capacity.

“Slowing rate reductions, insurer consolidation and uneven profitability point to greater rate discipline and tighter underwriting, particularly at the primary layer.

“Looking ahead, insurers are signalling a sustained shift towards qualitative underwriting, with governance maturity, claims handling discipline, data transparency and regulatory readiness acting as core differentiators.”

Rates for fintech insurance have stayed flat this year, reflecting insurers’ growing appetite for the sector.

But not all fintechs are benefiting from the pricing conditions.

“Early-stage start-ups pose a greater risk than their larger counterparts; to offer cover, insurers need to be confident in their understanding of the business and its operations,” Lockton said.

“Regardless, continued downward pressure ensures that now remains an opportune time for fintechs to evaluate the size of their limits and secure excess layers at a competitive price.”

For insurance companies, market conditions remained broadly buyer‑friendly at the end of last year, supported by significant capacity and easing reinsurance conditions at January renewals.

“Despite this, underwriters are placing increasing weight on governance maturity,” Lockton said.