London's loss of relevance top of minds at Insurance Day Business Briefing
Top insurance executives have warned that London must do much more to attract business from emerging markets
Two years after the publication of the London Matters report, the market’s global relevance remains under threat, top industry executives told attendees at Insurance Day’s Business Briefing.
Mark Gregory, chief executive of Axis’s international insurance division, said the London market lacks a coherent strategy in attracting business from emerging markets.
“Reading the London Matters report it was depressing to see there is no strategy around emerging markets,” Gregory said. “How on earth can we really attract SME [small and medium-sized enterprise] business out of Latin America and into London and compete on an equal cost footing with some of the global and regional composites that work there?
"We don’t understand the culture, as far as we’re concerned it’s all a bit too cheap, and actually it’s easier to look at the US or Europe.”
The landmark London Matters report of 2015, and a 2017 update, revealed that gross written premiums coming to London from emerging markets fell from $10.5bn in 2013 to $9.3bn in 2015 even as those markets grew. London’s share of global reinsurance premiums steadily dropped from 15% in 2010 to 12.3% in 2015.
Vicky Carter, vice-chairman of Guy Carpenter’s international operations, said the market must be “much more proactive” in finding the “right partners and right people” in emerging markets.
After a six-year long decline, re/insurance rates are set to bounce back in the wake of hurricanes Harvey, Irma, and Maria, earthquakes in Mexico, and wildfires in California. Re/insured losses from those events are expected to come in at $100bn-plus.
Grahame Millwater, chief executive of Beach Capital, said that a market upturn should not detract from the necessary reforms of the market, particularly as costs are concerned.
“My concern is that the market cycle is just a market cycle, and could lead to complacency,” he said. “I think there’s been an awful lot said about the cost of doing business here. … My word of caution is let’s not be complacent, let’s keep going with the reform of this marketplace.”
Lloyd’s chairman, Bruce Carnegie-Brown, has urged managing agents in particular not to allow any improvement in pricing to distract them from addressing the market’s inefficiencies. Speaking to Insurance Day earlier this week, Carnegie-Brown said the market cycle should not “get in the way” of the modernisation of the market.
Paul Merrey, a partner at KPMG, said that, as far as costs are concerned, insurers “are talking a lot,” but he “is not seeing as fundamental a reshaping as [the market] needs.”
“Everyone sees how it can be different, but they don’t know quite how it can end up,” he told attendees at the briefing.
The pressures facing the re/insurance industry have led many in the market to suggest only the larger players will win out, but Merrey said the available evidence suggests this is not necessarily the case.
“The rise of [managing general agents]… proves that, actually, if you can focus on a particular area and be well-regarded in that particular area, you can move a lot faster and be successful,” he said.