Michael Wade Crown Representative for Insurance Cabinet Office. FT Future of Insurance

Transcription

1 Michael Wade Crown Representative for Insurance Cabinet Office FT Future of Insurance Tuesday 30 th June 2015

2 London as an Insurance Centre The combination of Lloyd s managing agencies and company market operating within the International Underwriting Association are what is known as the London Market as distinct from domestic UK insurance market Over 66% of the 45bn gross premiums written in London are generated from outside the UK The business underwritten is large commercial and wholesale risk, property, casualty, reinsurance, marine, energy, aviation, US surplus line etc and bought to the Market primarily by brokers Collectively, the London Market employs nearly 50,000 people in the UK and represents a GDP contribution of about 30bn or 8% of London GDP. Companies & Managing Agencies are regulated by the PRA or pass-ported as a branch of an EU regulated business. For brokers, the FCA. 2 FT Future of Insurance Tuesday 30 th June 2015

3 Key attributes of the London Market Insurance and reinsurance expertise across almost any class of business or risk A subscription market where there will be differences of opinion or assessment And where there can be leaders and followers depending upon expertise and capacity based upon a single policy form contract Underwriters who are empowered to take decisions and with relative speed and market capacity to support it and pay claims fairly An innovative approach to new risks Global brokers to provide world-wide access to risks Policy signing and claims systems for the Market Recognised quality of regulation and capital (PRA / SII ) Legal, accounting & actuarial infrastructure related services hub The soft London facilities as a major global City, communications & time zone 3 FT Future of Insurance Tuesday 30 th June 2015

4 Key developments over the past 10 years Globalisation at an ever increasing pace Emergence of competitive hubs to London Lloyd s vehicles now compete with London via their own group companies Commoditisation of reinsurance has enabled capital market entry, and competition, to risks at cat levels ( so far ) Tax and Regulatory domicile competition Bermuda, Zurich, Dublin, Dubai, Singapore, Malta, Gibraltar Reliance / availability / demand of modelling risk Challenges of accessing emerging markets & desire of purchasers to execute and buy locally Block deals being transacted cutting out smaller participants or brokers Substantial reduction in the number of London Market syndicates / entities 4 FT Future of Insurance Tuesday 30 th June 2015

5 Key consequences for London A combination of the new insurance hubs, global distribution by brokers, a desire to purchase locally and the original Lloyd s groups locating away from London via subsidiaries means that London is losing its position and share of world insurance business. Reinsurance and Capital Market participation is highly mobile Distribution is no longer dedicated to London it has to earn its business or share Less choice in London for brokers to place business as entities consolidate It is suggested that regulation is seen as a significant barrier to transacting business in London and adds disproportionate costs Despite a low corporate tax environment in the UK it is still difficult to compete with very low or zero tax domiciles. Difficult to access business in emerging markets 5 FT Future of Insurance Tuesday 30 th June 2015

6 What to do?? Thinks. 6 FT Future of Insurance Tuesday 30 th June 2015

7 Maintain & Develop the London cluster 1. Attract, & train, the next generation of insurance professionals to London from across the world in the knowledge that they will return to their domicile with strong London relationships. 2. Ensure that London is synonymous with innovation and free thinking nurture UK graduates and sixth formers, support R&D make London the Risk University of the world 3. Embrace analytics of all disciplines earthquake, wind, flood, cyber 4. Improve market systems to drive down costs 5. Ensure ease of access to underwriters by the Customer and encourage them to visit London this promotes long-lasting relationships and a better understanding of the risks / needs 6. Demand highest professional standards of law, accounting and associated services in London 7. Even if part of a global business, support the London Market Group and be proud to be parochial in promoting London within your organisation 7 FT Future of Insurance Tuesday 30 th June 2015

8 Create better bridges with Government 1. Set out with clarity the competitive issues that the London Market must address if it is to maintain its position the recent LMG Boston report is an excellent example 2. Create more constructive bridges between the London Market and the UK Government so that issues can be explained as colleagues not as lobbyists this has started to happen with the ILS project 3. As a part of this, explain, compare & contrast the regulatory issues & challenges of a global business to HMG. Be very specific with HMG on any barriers or unfairness with live examples so they can understand. Build on the FCA Project Innovate. 4. Likewise, for taxation regime; and ways of attracting London domiciled capital in support of the London Market for example, the ILS project in hand. 5. Examine how the London reinsurance hub might assist the international development role taking on risks currently not insured and applying risk management solutions for example, the Political Champions initiative at DFID 6. Promote the London Market in a coordinated programme to Westminster 8 FT Future of Insurance Tuesday 30 th June 2015

9 An example of what can be achieved. Budget Statement 2015: Global reinsurance The government announced at Autumn Statement 2014 that it would explore options to attract more reinsurance business to the UK. To take this forward, building upon the UK s position as a world leader in the global insurance market, the government will work with the industry and regulators to develop a new competitive corporate and tax structure for allowing Insurance Linked Securities to be domiciled in the UK. This alternative form of reinsurance makes greater use of capital markets and is a key growth opportunity for the sector. Now the challenge is to deliver this could be just the beginning; ILS is estimated to grow from a capital of $65bn to $165bn over the next 3 years currently with not one cent of business written actually domiciled in the UK.. 9 FT Future of Insurance Tuesday 30 th June 2015

10 And then finally.. 1. Working in tandem with the global & specialist brokers London based underwriters to get closer to the insurance & reinsurance buyers in their locality fight for a London placement. 2. Impress upon the global brokers to importance of delivering business to London demand our share if conditions are comparable 3. Encourage the Lloyd s groups to return to their London roots 4. Find ways of fluent communication with the UK Government & regulators 5. Be confident in trading with other hubs particularly for reinsurance they will not go away but they can achieve spread of risk and market penetration for London entities 6. Pursue tirelessly the emerging markets be dynamic 7. Be the most expert and diverse marketplace in the world for risk placement 10 FT Future of Insurance Tuesday 30 th June 2015

11 Disclaimer The views expressed here do not necessarily represent those of the UK Government. Michael Wade Crown Representative for Insurance, Cabinet Office. 11 FT Future of Insurance Tuesday 30 th June 2015