Global reinsurers have taken a share of the re/insurance market from London, as factors like a high concentration of specialist insurers and Brexit have contributed to its shrinking market presence in emerging markets and threaten a continual reduction of its global market share.
The London Market Group (LMG) and The Boston Consulting Group (BCG), have today released figures on the City’s re/insurance industry, revealing the London market continues to lose out to competition in areas of reinsurance, emerging markets and diversity, although its overall strong market position has remained, for the time being at least.
The London market reinsurance premiums dropped from 13.4% in 2013 to 12.3% in 2015, in a continuing decline since London Matters report first estimated its share at 15% in 2010.
The LMG report is based on an investigation into London’s position in global insurance between 2013 to 2015, and although it reveals a stagnation of the market, the group said the data doesn’t reflect the last 18 months of effort to grow the London insurance space – which is expected to be felt by the industry in coming years.
The LMG said it will take steps to modernise and streamline the London insurance environment to counteract the market share losses with initiatives to boost the industry, Paul Clark, Partner at BCG said; “BCG’s analysis re-affirms London’s traditional areas of strength and unique position in the global insurance market.
“Yet London’s long-term competitiveness is under threat. To respond, the Market will need to redefine its relationships with emerging markets and work with regulators to support market needs. The upcoming Brexit process could provide an opportunity to deliver on both.”
Nicolas Aubert, Chairman of the LMG added that many of the London market challenges the group identified in 2014 have stayed the same, he said “this should give us all cause for concern,” highlighting that in light of growing competition and Brexit losses, London “cannot afford to be complacent.”
“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.”
London’s emerging market share shrunk from $10.5 billion in 2013 to $9.3 billion in 2015, with Asia being the region where London lost out the most – despite having the highest growth rate globally.
However, the report highlighted, most of the Asian market growth has been captured, not by global carriers, but by emerging market local carriers which have on average grown premiums “by 6.9% in commercial insurance and 1.6% in reinsurance between 2013 and 2015,” while “over the same period, global carriers have remained largely flat, with a slight increase in commercial insurance premiums and a slight decrease in reinsurance premiums.”
The report also stressed London’s lack of diversity, with the market falling far behind on the gender equality dimension, owning up to a proportion of female executives directors at just 5% compared to the FTSE 100 21% average.
The overall proportion of female staff, however, is at the UK average of 41%.
Although its emerging market has shrunk, its share of insurance premiums in established markets has remained steady or grown – particularly in the areas of specialist risk classes and an estimated 74% per annum growth in cyber premiums from 2013 to 2015.
The LMG, however, added that while the market has fallen behind in some areas, overall it remains “the largest global centre for commercial and specialty risk,” making a significant contribution to UK GDP, “the Market’s direct contribution to the UK economy is estimated at 0.9% of GDP in 2015 and accounts for 26% of the contribution of ‘the City’.”