The London Market’s share of the global commercial re/insurance market remained steady between 2010 and 2018, although its share of global reinsurance did decline by 1.7 percentage points during the period, according to analysis by the London Market Group (LMG) and McKinsey.
In a new report released today, titled London Matters 2020, the LMG and McKinsey have provided an update on the fact base around the region’s position in the global insurance and reinsurance industry between 2010 and 2018.
Ultimately, claims the report, the London Market is still the largest re/insurance hub in the world, and predictions that other regional hubs would lower business levels in the London Market have not come to fruition.
In fact, the report finds that the gap between London and the total amount of business written in Bermuda, Switzerland, and Singapore has actually widened, from $16 billion in 2015 to $23 billion in 2018.
At an average of 7.6%, analysis shows that London’s share of the global commercial re/insurance market has remained steady since 2010. However, while the commercial insurance share increased by 0.1 percentage point, the London Market’s share of global reinsurance actually fell in the period, by 1.7 percentage points.
Between 2010 and 2018, the report notes that the global specialty market has decreased in size by 10%. But despite this contraction and pricing and profitability challenges, the London Market has grown its share in the period.
In addition, the report finds that North America has taken over the UK and Ireland as the biggest source of income, while London continues to underperform in emerging markets in both Asia and Africa.
Matthew Moore, Chair of the LMG, commented: “This report finds the London Market in good shape. Aggregate market share held steady, maintaining its dominance over other (re)insurance centres, attracting more US business than ever before and increasing its contribution to UK gross domestic product. Nevertheless, some of the underlying challenges from the first London Matters report in 2014 remain. Our share of reinsurance business is shrinking, our share in emerging markets remains small, we need to replace an ageing workforce and there is more work to do on closing the gender pay gap.
“However, the effects on market structure, products, processes and working practices caused by the COVID-19 crisis are likely to be profound and long-lasting. The (re)insurance industry’s support for the wider business community has never been more important. The current crisis shows that the market can support its trading partners and clients through the toughest of challenges, and the fact it is doing so today is in part down to its adoption of previous LMG initiatives. For example, electronic placement through PPL has meant that remote working has been possible and that contracts have been placed and renewed with legal certainty.
“Current circumstances mean we cannot lose momentum now. London Matters 2020 shows it is more important than ever to build a London Market that can continue to serve its clients whatever the circumstances they face.”
As highlighted by Moore, London Market insurers and reinsurers are certainly not immune to the impacts of the ongoing Covid-19 pandemic. However, the current crisis has seemingly led to an increase in electronic placement and digitisation across the sector, supporting a view that modernisation across the London Market could accelerate post-pandemic.
Prior to the Covid-19 outbreak, Fitch Ratings revised its 2020 outlook for the London market to stable from negative amid the improved pricing landscape and the market-wide profitability review initiated by Lloyd’s.
However, towards the end of March, the ratings agency revised its sector outlook for the underlying fundamentals of the London market insurance space to negative from stable, citing the impacts and disruption caused by the pandemic.
In response to the report, Christopher Croft, CEO of the London & International Insurance Brokers Association (LIIBA), said: “Our members welcome this latest edition of London Matters. Right back at the start of the process, we committed to revisit this document regularly and update it to capture the latest developments. Clearly Covid-19 will have a profound effect on many of the themes highlighted in the report. We’re studying it closely and look forward to discussing its findings with the wider market.”
