Out-Law News | 10 May 2017 | 4:40 pm | 2 min. read
The report, which builds on data first published in 2014, confirms that the industry "cannot afford to be complacent", according to analysts at industry lobby group The London Market Group (LMG) and Boston Consulting Group (BCG).
However, LMG chairman Nicolas Aubert praised the "tremendous effort that has been committed in the last 18 months to grow and modernise the market". This was not reflected in the report, which was based on the volume of business underwritten in London between 2013 and 2015, he said.
"Now is the time to maintain our focus and, indeed, review and revisit our plans, so that we can build momentum in our work to protect and enhance the pre-eminence of the London market in an increasingly global and competitive market," he said.
The London market remained the largest global centre for commercial and speciality insurance over the review period, and also "demonstrated its ability to innovate" through the growth in cyber risk insurance coverage, according to the report. Insurance business continued to make a "significant" contribution to the economies of both the City of London and the UK as a whole, accounting for 26% and 0.9% respectively in 2015, according to the report.
However, London's share of global reinsurance premiums fell from 13.4% to 12.3% between 2013 and 2015, continuing the trend identified in the 2014 report. The analysts previously estimated London's share of the global reinsurance market at 15% in 2010. The report identified two factors contributing to this decline: increased competition, particularly from emerging markets with lower costs and expenses; and the impact of protectionist trade policies and lack of appetite in some of the world's highest growth areas.
London premiums from emerging markets fell from $10.5 billion in 2013 to $9.3bn in 2015, according to the report. This could partly be down to the fact that much of the growth in emerging markets was likely to be in less complex risk insurance, much of which could be catered for locally. However, it also indicated a "lack of appetite" among London businesses and "a lack of ability to compete", the report concluded.
"The London market has to consider whether shorter-term considerations of profitability outweigh the longer-term opportunity to establish a strong presence in the parts of the world that are likely to drive future growth," the analysts said in the report.
The report also highlighted a worrying lack of diversity at London insurers, particularly amongst senior staff. While the proportion of female staff, at 41%, was in line with the UK average in 2015, the industry's proportion of female executive directors was "very low", at 5% compared to a FTSE 100 average of 21%, according to the report.
"It is of particular concern for our industry's future that attracting staff from diverse backgrounds remains a struggle for the London market, and market players need to build a sense of urgency in how they identify, develop and promote women into leadership roles," said LMG chair Nicolas Aubert.
The UK has been consulting on plans to implement a competitive corporate, tax and regulatory framework for insurance linked securities (ILS) as soon as this year, depending on the outcome of the general election on 8 June. ILS arrangements offer insurers an alternative to traditional reinsurance, particularly in relation to large and complex risks, and now account for about 12% of the overall reinsurance market, according to a Treasury consultation paper published late last year.