Out-Law News | 13 Nov 2014 | 10:50 am | 2 min. read
Industry lobbyists the London Market Group (LMG) and consultancy body the Boston Consulting Group (BCG) said that "London’s position as the pre-eminent centre" was being undermined by the emergence of other insurance market hubs around the world, including Bermuda, Singapore and Zurich.
Other evidence such as "the declining share of global premium that brokers bring to London" and "the growth of alternative capital challenging the dominance of traditional London capital" also highlight the squeeze on London's global insurance market position.
However, in their report, 'The competitive position of the London insurance market' (56-page / 4.88MB PDF), the groups said London has strengths that can help it retain its status as the leading insurance hub.
"I remain convinced that, despite the relentless march of technology and ever increasing amounts of data into all our lives, true specialty insurance business requires an intense exchange of information and cumulative underwriting expertise that is best served in an efficient way in a centre of excellence," said Steve Hearn, chairman of the London Market Group.
"You need proximity of location to facilitate interaction between high quality, high intellect staff; the value delivered by having the necessary support services – legal, technology, accountancy – close at hand; all delivered within a square mile of a vibrant international city in which people wish to live, with English as the primary language of business and a time zone that places us neatly in the middle of international trade. As my description betrays, that has always been London, a unique face-to-face ecosystem of market players and support services in an attractive location," he said.
According to the report, London's insurance market contributed £12 billion to UK GDP in 2013. The total gross written premium stemming from the London market in 2013 was £60bn, compared with £25bn in Bermuda, £19bn in Zurich and £4bn in Singapore.
London faces a number of challenges, including the increasing localisation of the provision of insurance, the fact it "does not have a strong position in emerging markets", the "high regulatory burden" companies in the London insurance market face and the fact its prices are generally higher than can be found in other insurance hubs, the report said.
LMG and BCG called on the London market to respond by developing new insurance products and services. The London market already has a reputation for "innovation and flexibility", it said. Businesses in London were also advised to improve the "analytical techniques" they use for insurance underwriting, and to "break down barriers to (re)insurance, and intermediation and develop the distribution network creating appropriate local presence, to allow London to compete more effectively in high growth markets".
Insurance providers in London were also urged to look into ways of reducing their cost of doing business to allow for more competitive pricing, such as by streamlining "London specific process" and entering into shared service agreements.
Insurance expert Nick Bradley of Pinsent Masons, the law firm behind Out-Law.com, said that although the report "quite naturally focuses on underwriters and brokers in the London market" and what they can do to preserve London's status as the leading global insurance market in the world, there was also a role for other stakeholders to play in realising that goal.
"The report serves as an important reminder to those of us who serve the London market, be they international law firms based in the City, such as ourselves, or other professional services, that we all have an important role to play in maintaining and indeed enhancing London as the environment in which commercial enterprises across the globe choose to place their commercial risks for protection," Bradley said.
"That may translate into the way we assist with the development of innovative new products, such as cyber or supply chain, the distribution chain, the maintenance of an effective dispute resolution mechanism in court or arbitration, or work to ensure we have an effective regulatory structure," he said.