The latest report on the London Market from the Lloyd's Market Group points to opportunities and challenges for the sector in comparison with the rest of Europe. Steve Hearn explains that this means
Last month the London Market Group published a report - London Matters - the competitive position of the London Insurance Market, providing a comprehensive assessment of the status of our market. And while some of the data demonstrates there are some issues which need addressing, I believe the findings set out a series of fantastic opportunities.
There is a chance to use the report to inform understanding of what London should and should not be aiming to deliver as a market. We can use that knowledge to devise a strategy for ensuring London remains the centre of excellence for specialty insurance business that the global industry requires. And we can deliver on that strategy to ensure our clients continue to be able to access the risk mitigation solutions they need.
The report comes in two halves. First, data was gathered that demonstrates the size of the market, its share of global business and the contribution to the UK economy.
Second, there was feedback from conversations and survey responses from around 300 of the market's clients - people up and down our distribution chain who take the key decisions as to whether or not to send business to London. They were asked what criteria they use when making this decision. TYhe market itself was then asked what that tells it about the way the market should shape itself in the future.
Size of the London Market
The numbers themselves are pretty impressive. The market is defined as business that is: £45bn of gross written premium written here and backed by capital managed in London, with £26bn of that being written in Lloyd's; £7bn GWP managed through the London offices of company market insurers but placed elsewhere; and a further £8bn in premium marketed through the London offices of broking firms but written elsewhere in the world.
All told, that makes London a £60bn premium market. This generates £30bn to UK GDP which is, variously, 2% of the overall total; 8% of the contribution for London as a whole; 10% of the UK financial services sector; and 21% of the contribution of the City. The London market employs 48,000 people - 34,000 in London and a further 14,000 in the rest of the UK. All of which demonstrates that London remains a distinct and vibrant insurance sector.
But there are some concerns. The market is only keeping pace with global growth in commercial insurance - market share remains at 10% of the global insurance industry. And in reinsurance, the share fell from 15% to 13% between 2010 and 2013.
Furthermore, much of business still comes from the traditional markets in the UK, Europe and North America. The share of high growth markets in Asia, Latin America and Africa fell from 3.2% in 2010 to 2.5% in 2013.
The feedback about why business does and does not get placed here identified a number of threats and opportunities. Naturally clients like purchasing their insurance as close to home as possible, and that may see some business move away from London. But there is a chance to be at the forefront of the growth of analytical-based underwriting and to reinvigorate the market's natural thirst for innovation to produce the new solutions clients are demanding.
The report has provided the fact base from which to drive the strategy. Crucially, this must recognise that this is not a question of London versus any of the other insurance centres - most of the firms active here are also present in those places as well.
What we are doing is understanding where the unique capabilities of London's co-located community can deliver solutions that nowhere else can, and making sure we put the environment and infrastructure in place that will allow that centre of excellence to continue to thrive. This is work we are actively engaged in at the moment and that we will talk more about early in 2015.
However, one thing that can be concluded is that London does matter - the data shows it is an important part of UK Plc and the responses from clients show that they still value the service the market provides. Now we need to grasp this opportunity to ensure London continues to deliver in its role at the heart of the global insurance industry.
Steve Hearn, Chairman LMG and deputy CEO, Willis Group
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