Despite a lack of clarity surrounding the UK’s Brexit vote and what implications this might have for UK insurers and reinsurers, A.M. Best expects London to remain one of the world’s leading European insurance hubs, but does warn of headwinds that continue to pressure the region’s re/insurance industry.
UK insurers and reinsurers continue to move forward with their post-Brexit plans, establishing EU subsidiaries to ensure they can continue to operate in the same manner when the UK does eventually leave the European Union (EU).
Exactly what the operating landscape for insurers and reinsurers in the country will look like post-Brexit remains unclear. However, in a recent briefing, ratings agency A.M. Best said, that in spite of Brexit, it’s likely that London will remain one of the world’s leading insurance hubs in Europe, driven by its large pool of underwriting talent and access to related services.
“Nevertheless, the detail of any negotiated trade deal between the UK and the EU will have a longer-term impact on the UK insurance sector.
“Furthermore, the London market is currently under pressure from other, arguably stronger, forces, including alternative capital, market consolidation and the pressing need for process reform,” said A.M. Best.
Lloyd’s Chief Executive Officer (CEO), Inga Beale, who is to step down from her position in 2019, warned earlier this year that the London market is losing market share and relevance to emerging re/insurance hubs, so the uncertainty brought about by Brexit, which exacerbates the issue, has unsurprisingly not been welcomed across the Lloyd’s and broader London market.
The Lloyd’s market has been under pressure for some time to reform, as while it remains a very important global insurance and reinsurance centre, it’s still very expensive to do business at Lloyd’s, and the marketplace has also been accused of being too slow to adopt innovations driven by the rise of technology and its influence on the global risk transfer space.
Add to this the profitability pressures driven by a prolonged soft market state, although this was somewhat alleviated by the impact of 2017 catastrophe events and the subsequent rate improvements (although these are already fading), and it could be that Lloyd’s and the broader London market have some challenging times ahead.
Lloyd’s is the oldest insurance market in the world, and remains a very important and influential part of the global insurance and reinsurance industry, and A.M. Best feels this is likely to remain the case post-Brexit.
However, it’s important the Lloyd’s and broader London market adapts to the changing market landscape, which includes embracing disruptive but potentially rewarding forces, such as technology and alternative reinsurance capital, in order to remain relevant and competitive both now and in the future.
