Risk managers have warned that the London market needs to undergo rapid and drastic change amid concerns that its position at the top of the global insurance pile is now under threat.
Airmic has release the findings of its The March 2022 Pulse Survey which canvassed members of the Airmic Leadership Group of risk professionals. The pulse survey comprises a combination of questions designed to track market conditions, supplemented by a focus on specific subjects. In the latest survey, the specific questions focused on the challenges the London Market is facing.
- The pace of hardening has slowed since late 2021, but there are concerns that insurance market conditions could yet deteriorate.
- Insurer and broker satisfaction levels are improving, in line with signs of ‘green shoots’ in the market.
- Premium rates for cyber have skyrocketed. A tenth of respondents experienced rate increases of more than 400%.
- Insurers and brokers need to do more to attract talent, especially from other industries. Greater diversity of thought and digitalisation will be key to alleviating the inefficiencies in the London Market faced by Airmic members.
When it came to the London market the report found that Brexit is threatening its place in the global insurance industry.
“London used to be the European Union’s hub for financial services, but Brexit has led insurers to shift decision-making powers back to their headquarters in other countries,” it warned. “Continued focus on regulation, talent, sustainability, and evolving consumer preferences will be crucial to securing the London Market’s global competitiveness.”
The report added: “Our respondents have sounded a dire warning that the London Market’s legacy systems will doom it to irrelevance. Greater investment and understanding of technology among the market’s decision makers are critical to improving the market’s infrastructure.”
When asked about the London market 53% of those questioned said the momentum for change has been maintained post COVID.
However when asked whether UK insurance’s influence has waned since Brexit 30% said either slightly or significantly and just 5% said it had strengthened.
Not one risk manager questioned said the current London market infrastructure is fit for purpose and of that figure 33% said no not at all. They cited lack of collaboration and lack of investment are the biggest barriers to improvement. Nearly 80% of risk managers said it is now taking longer to receive documentation.
“Insurers can be proud of the way they have adapted during the pandemic, for an industry not typically celebrated for its agility,” said the report. “But the legacy systems of the London Market will act as a millstone around its neck unless it takes much bolder strides towards the digital and talent transformation required for its post-pandemic future.
“The insurance model is changing. It is now more geared towards understanding risk and managing it better. Climate change is expected to cause a seismic growth in economic losses, and global insurance premiums will reach record levels.
“The insurance industry needs to rise to the challenge urgently. It needs to shift its focus from protection to prevention. New technologies such as artificial intelligence and machine learning will be key to reducing costs and creating value for all parties.”
It added: “Silos between the ‘risk’ and ‘insurance’ buckets are being removed. But the insurance industry still needs to respond in a more connected way, as our survey indicates. The insurance industry, risk professionals, and government need to collaborate and move forward together.”