Dave Matcham, Chief Executive, International Underwriting Association believes the London market will need to once again show its ability to handle the unexpected in the year ahead.
Over the past year the London company market, like many other business sectors, has been tested in new and unexpected ways. Companies have demonstrated extraordinary resilience, continuing to provide uninterrupted services to clients throughout extended periods of Covid-19 restrictions.
This uncertainty looks set to continue into 2002. There are, however, a number of important industry issues that will certainly occupy attention whatever the working environment. In compiling the International Underwriting Association’s own business plan for the next 12 months we have paid close attention to various risk management surveys recently published. Cyber risk, business interruption, regulatory changes and the pandemic crisis are all problems that keep our sector’s clients awake at night. They have each been the subject of regular dialogue between the IUA and government are the subject of further specific workplans for 2022.
Cyber risk is discussed regularly across all the individual class of business market committees in the company market and efforts will continue next year to analyse different risk scenarios and identify gaps in coverage. The IUA will also be engaging with the Government and National Cyber Security Centre to further discuss the scope of insurance coverage and as policy language develops our member library of cyber clauses will be updated. Supply chain risk and business interruption are two significant topics in this field and we are planning to publish white papers on both in 2022.
Climate risk is another issue that cuts across many different fields of insurance and has risen sharply up the industry agenda over the last 12 months. The IUA’s Climate Risk Committee has been assessing extensive guidance on climate-related financial risk management published by the UK’s Climate Financial Risk Forum, which is co-chaired by the FCA and Prudential Regulation Authority (PRA). This is a developing subject for industry regulators, just as much as it is for insurers themselves and in the months to come we will continue working with the authorities as they develop their supervision plans.
The affordability and availability of insurance remains a concern in a number of specialty classes and the IUA next year will be working with Government and industry bodies in a number of sectors to help address such difficulties. The target is to improve risk profiles so that insurers can have greater confidence and appetite for providing cover to professionals in a number of different industries. These include, in particular, the construction sector where professional indemnity and buildings insurance have been under pressure due to fire safety concerns; financial advisors where claims volatility has been driven by regulatory decisions and solicitors who are looking at revising runoff cover rules.
Elsewhere, the next 12 months should see some significant milestones in the digital transformation of London Market processing services. The year ahead will see both the launch of a new generation of the market’s e-placing solution PPL and a renegotiation of the contract under which companies use central processing services (known as FERN 2). A new joint venture agreement between the IUA, Lloyd’s and DXC Technology will be the focus for a cross-market modernising agenda of digitisation and automation.
2022 will also offer important opportunities to shape the future of insurance supervision in the UK. Following the UK’s exit from the European Union several consultation exercises have been launched to examine how the country might use its new political independence to reform existing regulations. A review of Solvency II has a January deadline and the IUA will also be responding to a consultation of the UK Future Regulatory Framework. Here we will be urging more proportionality when dealing with wholesale business and greater industry involvement in the policy-making process. We have previously supported a London Market campaign for a new competition objective for UK regulators and this has been adopted in HM Treasury’s latest recommendations for reform. Next year we look forward to seeing this change enacted and will be keen to pin down a monitoring process so that it can be seen to deliver real changes in future behavior.
Another London Market Group campaign in 2022 will be to establish a new insurance captives regulatory regime in the UK and we will be working with the Government to explore further opportunities for insurance to be included in new international trade deals.