To many, London is the centre of the insurance universe. The birthplace of Lloyd’s of London, home to the famous coffee house and Fenchurch Street, the city houses office bases for just about every major insurer and broker in the world. However, with the world changing rapidly, does it still hold its lustre?
According to a new report, entitled London Matters 2020, the market is still in good shape – remaining the largest global reinsurance hub. This flies against predictions that bordered on doom and gloom for the industry, with feelings that businesses would move towards more regionalised locations. In fact, the report suggests that the gap has only widened in recent times. Compared to the total amount written in Singapore, Switzerland and Bermuda, the gap has stretched from US$16 billion back in 2015 to US$23 billion as of 2018 – the most recent year included in the report.
To further emphasise its place at the top of the insurance pile, London’s share of the global commercial reinsurance market has stayed steady – growing by 0.1 percentage points from its 2010 average to stand at 7.6%. However, its share of global reinsurance has suffered a fall – dropping back by 1.7 percentage points.
Overall, where London has suffered is that the size of the global specialty market in general has declined – dropping by 10% between 2010 and 2018. The London market has grown its share, but it’s a piece of a much smaller pie overall. Meanwhile, North America has surpassed the UK and Ireland as the biggest source of income.
“This report finds the London Market in good shape,” said chair of the London Market Group (LMG) Matthew Moore. “Aggregate market share held steady, maintaining its dominance over other (re)insurance centres, attracting more US business than ever before and increasing its contribution to UK gross domestic product. Nevertheless, some of the underlying challenges from the first London Matters report in 2014 remain. Our share of reinsurance business is shrinking, our share in emerging markets remains small, we need to replace an ageing workforce and there is more work to do on closing the gender pay gap.
“However, the effects on market structure, products, processes and working practices caused by the COVID-19 crisis are likely to be profound and long-lasting. The (re)insurance industry’s support for the wider business community has never been more important. The current crisis shows that the market can support its trading partners and clients through the toughest of challenges, and the fact it is doing so today is in part down to its adoption of previous LMG initiatives. For example, electronic placement through PPL has meant that remote working has been possible and that contracts have been placed and renewed with legal certainty.”
The report’s contents have been widely welcomed across the market, but with an air of caution. London and International Insurance Brokers’ Association (LIIBA) chief executive Christopher Croft, for example, pointed to the fact that the landscape has changed post-COVID-19.
“Clearly COVID-19 will have a profound effect on many of the themes highlighted in the report,” he said. “We’re studying it closely and look forward to discussing its findings with the wider market.”
A similar word of caution was noted by Jennette Newman, partner at Clyde & Co and vice-president of UK FOIL. She said that while the report does not take into account COVID-19, it appears that London’s position is secure.
“As the market formulates its response on the pandemic, one clear positive is its proven ability to support partners and clients through difficult times using PPL and other electronic placing mechanisms, such as Whitespace,” she said. “These have enabled the market to carry on transacting business with efficiency and certainty.
“The focus now will be on building closer partnerships with clients as boards refocus on risk and the role of insurance going forward.”
Meanwhile, Simon Matson, CEO of Gallagher UK, suggested that the US being the largest source of revenue could be a positive for healthy trading relationships.
“But of course, this report pre-dates the new world order in which we now find ourselves and does not reflect any impact on the market and on our clients as a result of COVID-19,” he added.
“Those changes, to the way we work and to our customers’ needs, are going to be significant and long lasting. As an industry we must work to maintain the efficiencies we have achieved, as well as thinking about how we look at new and existing risks for our clients going forward.”
