London insurance market urged to adjust products, costs to compete globally

The London insurance and reinsurance market must meet demand for new products and reduce the cost of doing business among other ways to retain its position as a global insurance center, according to a report published Monday.

The London insurance and reinsurance market posted gross written premium of £60 billion ($95.23 billion) in 2013, according to the report, “London Matters: The Competitive Position of the London Insurance Market,” published by the London Market Group, a body coordinating market modernization efforts.

More than 65 company market insurers and reinsurers, 91 Lloyd's of London syndicates, eight protection and indemnity clubs, and 200 brokers are active in the London market, the study found.

During 2013, 33% of premiums underwritten in the London market derived from the United Kingdom and Ireland, 31% from North America and 16% from Europe, according to the report, which was compiled by Boston Consulting Group.

The study asked about 300 market participants from across the world and throughout the distribution chain what they saw as the main challenges to London's historic position. Those were found to be: the preference of customers to buy insurance in their local market; a weak position in emerging markets; losing share in reinsurance; higher expense ratios than other insurance hubs; a comparatively high regulatory burden; and the prolonged soft-market cycle.

Respondents also highlighted six key opportunities for London to enhance its position. Those were: meeting demand for new products and solutions; reinforcing the market's traditional underwriting strength with improved analytics; investment in marketing the strengths of the London market, particularly in emerging markets; breaking down barriers to reinsurance and intermediation and developing local presences in high growth markets; reducing the cost of doing business in London by streamlining processes and sharing services; and embracing the rise of alternative capital.

The London Market Group is made up of members of the International Underwriting Association, the London International Insurance Brokers' Association, the Lloyd's Market Association and the Corporation of Lloyd's.