London’s share of global reinsurance market is shrinking

London’s share of some of the world’s fastest growing insurance markets is shrinking, putting its position as a global centre for the industry under threat.

The City has long been a hub for specialist and wholesale insurance – about €84 billion of premiums were written in the City in 2015. However, new figures from Boston Consulting Group and the London Market Group, an industry association, show that London's share of the global reinsurance market dropped from 13.4 per cent in 2013 to 12.3 per cent in 2015.

Britain’s position also slipped in sales to emerging markets clients, including in Asia and Latin America. London’s share in Asia, for example, fell from 3.9 per cent to 2.7 per cent, even as the market grew rapidly.

Paul Clark from BCG said that size had helped global groups such as Swiss Re and Munich Re. "The reinsurance market is globalising and scale is important. The global reinsurers are doing well against London, which has smaller and more specialised reinsurers."

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In emerging markets much of the growth comes from commoditised products such as motor insurance, while London’s insurers tend to focus on more specialist services.

Since the UK voted for Brexit in June last year many insurers are making plans to move some parts of their business from London. Lloyd's and AIG are among those looking to move people to other parts of the EU so they can keep doing business with the remaining 27 EU nations.

Sense of urgency

“Brexit has created a sense of urgency . . . there’s a feeling that we need to accelerate momentum and not be complacent,” said Nicolas Aubert, chairman of the London Market Group.

The industry is trying to make London a more attractive place for insurance business. Many insurers complain that the city can be inefficient and expensive, so London Market Group is pushing for automation of some of the more laborious manual processes - data entry, for example. It also wants to do more to market London’s expertise in Asia and Latin America.

“As emerging markets are growing there is a new generation of business people who have not historically been exposed to London,” said Mr Aubert. “It is clear that there are a number of people, especially in emerging markets, who do not know what the London market is capable of. There is a big opportunity for us.”

Mr Aubert said the results of efforts to boost the city’s standing would not become visible until 2019.

Specialist areas

Overall, London’s position in insurance was broadly unchanged in 2015, with a 7 per cent share of the global commercial insurance and reinsurance markets.

The weakness in reinsurance and emerging markets was cancelled out by gains in specialist areas such as marine, energy and aviation. However, all three of those markets are shrinking, but London’s sales are falling less quickly than the market as a whole.

The other bright spot was cyber-insurance. Although the market is relatively small, it is growing quickly, with premiums rising by about 75 per cent a year. About $700 million (€643m) of cyber-insurance premiums were written in London in 2015. – Copyright The Financial Times Limited 2017