Archive for April, 2015

Challenges for the London Insurance Market

Thursday, April 30th, 2015

By Duncan Strachan, Sedgwick London

The London insurance market is in a fight to remain competitive and maintain its role as a leading market international insurance and reinsurance business.

A strong preference is emerging for commercial entities around the world to place business with a local carrier instead of in London. At the same time, there is increased competition from other insurance markets for those risks, particularly where they cannot be placed locally.

Economic growth in the emerging economies of Asia, Latin America and Africa has driven increased local demand for insurance and reinsurance since 2010, and it is in these locales that the London market has struggled to develop market share.

There has been a slight decrease in the share of commercial lines being placed in London. There also has been a drop in London’s share of the global reinsurance market. As well as competition from Zurich and Bermuda, hubs are strengthening in Singapore, Hong Kong, and Miami to address regional demand for reinsurance.

The main reasons for the increase in the use of local market carriers are: increased capacity and expertise, a perception that they have a better understanding of how things are done locally, and a willingness to offer more favourable terms and conditions. There is also the issue of local regulations restricting access to the market for foreign insurers and reinsurers. These factors have led global insurers and reinsurers to take things into their own hands, by setting up local operations to ensure they can compete for business that is no longer coming to London.

However, in more specialised lines of business, such as energy, general liability, financial institutions, and aviation, customers rank expertise and financial security over price and the speed at which claims are paid. This is where London retains an advantage, thanks to its concentration of specialised underwriters, brokers and, of course, service providers. The high level of capital available also means that the London market is less vulnerable to soft market conditions and able to absorb large claims.

London’s expertise and reputation for innovation means it is well-positioned to build on its position as the first choice for large and complex risks. The subscription market also puts London at an advantage when it comes to providing solutions for high risk exposures. Where the London market needs to improve is in selling its unique expertise to emerging markets.

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