The London Market must remain vigilant in representing its interests to government and regulators, new research by the International Underwriting Association has found.
There is a common belief amongst companies and brokers that the market needs to be fully engaged with officials to influence legislative debates at the highest level. One of the key findings from a series of interviews was strong support for creating a more powerful representative voice.
The IUA commissioned KPMG to question 25 senior market figures for its research project, including 14 chief executives and seven chief operating officers. The work is complimentary to a research initiative recently undertaken by the Boston Consulting Group (BCG) on behalf of the London Market Group. BCG has been conducting a global study amongst customers of commercial specialty re/insurance and is seeking to measure the London Market’s contribution to UK economic activity and share of global insurance business.
Dave Matcham, chief executive of the IUA, commented: “The London Market Group has recently begun working to raise the London market’s profile in a number of important and influential areas. Given the sector’s significant size and contribution to the UK economy it is vital that its interests and opinions are given a fair hearing. Our findings demonstrate a clear desire for this objective to be fulfilled.”
Another common theme to emerge from the IUA research was a trend for companies to write more business in local markets, but maintain significant oversight of international operations from London offices. The degree of control that London exercises over underwriting hubs abroad varies from company to company, but is often quite substantial including, for example, product development strategies, claims control and finance.
IUA companies and brokers believe a concentration of expertise still makes London a compelling choice for clients. Interviewees stated that the market holds a key position within the global specialty market and is universally viewed as the most influential platform outside a company’s parent country. London’s major advantages are its concentration of experienced, respected and innovative carriers and brokers, together with the availability of auxiliary services such as legal, loss adjusting and claims support.
Regulation is seen as both a strength and weakness of the London market. Many companies feel that conduct rules have improved business operations and enhanced its reputation, while a well-established legal framework helps draw business to the market. But regulatory authorities are considered to be poorly resourced and struggle to retain staff. A frequently expressed opinion was that capital requirements are more burdensome than elsewhere and Solvency II will not introduce a level playing field.
Other issues raised in the research interviews included the importance of the EU financial services passport. This is particularly valued by companies with a parent based outside the EU and where London is the main or only base for accessing continental business.
London’s central processing services, provided by Xchanging Ins-sure, are viewed as integral to the market and there is widespread backing for market modernisation projects to improve processing efficiency.
“The nature of the London Market is changing and our aim in undertaking this research was to better understand the trends and challenges experienced by companies, ” said Mr Matcham. “The results are revealing and I will be using this information to ensure the IUA continues to develop its range of relevant services to members.”
About the IUA
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.