Lloyd’s Chief Executive Officer (CEO) Inga Beale warned at the Association of British Insurers (ABI) conference that the London re/insurance centre is losing market share and relevance, as emerging markets gain traction in the global re/insurance hub space, A.M. Best reported.
Beale said that while London remains the largest global insurance center, it continues to face strong challenges in reinsurance, particularly from emerging markets.
Lloyd’s and the broader London market have kept pace or increased market share in specialist lines such as marine and aviation, but the Lloyd’s CEO cautioned that over the long-term, the London market could see a deterioration of its place as a key domicile for global reinsurers.
In the long-term, Beale said, London is losing market share in the emerging markets and “that’s where a lot of the growth is happening.”
Beale said “nothing’s changed, predictions are that over the next five to 10 years, the largest growth is going to be commercial insurance in emerging markets. Two-thirds of the growth is going to be there.”
While UK-based insurers and reinsurers face the challenge of an uncertain operating environment without a clear ground for business during the transition period out of the EU, the trend of market share loss in emerging markets, which account for much of the expansion in global insurance premium growth, could pose a “threat to London,” said Beale.
A Swiss Re study demonstrated the extent to which the opportunities for re/insurance expansion are shifting East.
In 2016, China was responsible for nearly all global premium growth in the life sector, contributing 2.4% of the global 2.5% growth in premiums, with the remaining 0.1% coming from all other markets combined.
Beale said: “Until a few years ago, any large — US$5 billion-plus — energy risk from Dubai would be placed in London. Now, she said, the word in the insurance industry is that there is enough capacity in Dubai to keep the risk there.”
Growth in advanced markets is clearly feeling the pressures of low-interest rates, slowed economic growth and high competition, and when compared to the rising re/insurance industry in the East, it’s clear that the only way for the established London re/insurance hub to maintain relevance over the long-term is for significant innovation.
To defend its position, Beale said, London is investing hundreds of millions of pounds in technology to make London an easier place for business transactions, while Lloyd’s aims to remove “paper entirely from the process.”
The UK government has also made moves to establish London as a center for insurance-linked securities business.
The government proposed updates to its associated taxation system, legal framework, and options for setting up an ILS vehicle in an attempt to ensure the re/insurance business environment remains competitive throughout the transition out of European Union membership.
“We have to make sure that London is seen as the innovator in product,” Beale said; “Lloyd’s is the leading insurer of cyber insurance, writing well over $1 billion of stand-along cyber insurance right now.”
“London also needs to tell its own story and attract the best talent.” The ability to bring capable people into the market becomes more critical, she said, at a time when we’ve got question marks raised over Brexit.”