The UK’s Economic Secretary to the Treasury has praised the London market as it launched its latest wide-ranging report into its role within the global industry.
John Glen (above) praised the market for the work it has been doing to the face of the pandemic, its huge contribution to the UK economy and its efforts to drive diversity.
“At a time when the country is coming to terms with COVID it is good to be able to recognise the resilience the financial services sector and the role that insurance plays within that,” he said.
Mr Glen said the market employed 50,000 staff and contributed £37 billion to the UK economy. He added he was pleased to see London looking to attract talent from across the world as it drives diversity.
It came as the London Market Group (LMG) and McKinsey, launched London Matters 2020 an update of the fact base around London’s position in the global re/insurance industry between 2010 and 2018.
LMG CEO Claire Lebecq (below) said: “When we commissioned the report in 2019, I did not have any idea that we would be presenting this against the backdrop of the COVID pandemic. I believe that this report will provide a real benchmark for the industry once we have emerged from the challenges we face at present.
The report found:
- The London Market remains the largest global re/insurance hub. Predictions that its significance would diminish as business gravitated to regional centres has not been borne out, and the gap between London and the total amount written in Bermuda, Switzerland and Singapore has widened from $16 billion in 2015 to $23 billion in 2018.
- London’s share of the global commercial re/insurance market has remained steady since 2010 at an average of 7.6%. Commercial insurance share has grown by 0.1 percentage point, while its share of global reinsurance has fallen by 1.7 percentage points.
- The size of the global specialty market has declined by -10% between 2010 and 2018. The London Market has grown its share despite pricing and profitability challenges over this period.
- North America replaces the UK and Ireland as the biggest source of income.
- London has continued to underperform in emerging markets in Asia and Africa.
Matthew Moore, Chair of the LMG said: “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.”
The market reacted to the report and its contents with Christopher Croft, CEO of broker representative body LIIBA, saying its members will be looking long and hard at the statistics and their implications
“Our members welcome this latest edition of London Matters,” he said. “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.”
Jennette Newman, partner Clyde & Co, and vice-president, UK of FOIL (Federation of Insurance Lawyers) said the market’s reputation will count for much as the world rebuilds post the pandemic.
“If the London Matters report tells us anything, it’s that London’s position in the global insurance industry is secure – though with the important caveat that the report takes no account of COVID-19,” she explained. “As the market formulates its response on the pandemic, one clear positive is its proven ability to support partners and clients through difficult times using PPL and other electronic placing mechanisms, such as Whitespace. These have enabled the market to carry on transacting business with efficiency and certainty.
“The focus now will be on building closer partnerships with clients as boards refocus on risk and the role of insurance going forward.”