Marie-Louise Rossi looks at the current state of the London market.
The London insurance market is in many ways a microcosm of the global insurance and reinsurance industries. The board of the International Underwriting Association (IUA), which represents companies in the London market, consists overwhelmingly of companies from mainland Europe, North America and Bermuda, with representatives also from Japan, Australia and the UK. The capital that supports Lloyd's has a similarly international flavour.
Fading of old mentalities
As a result, the old London-versus-the-rest-of-the-world mentality has been consigned to history - a process that the IUA and its predecessor organisations helped to initiate. Instead, the IUA and its members have always seen the London market as an international resource, where most of the capital is supplied by overseas entities.
The big issue now is how London can remain an attractive location for capital. This imperative has driven many of our activities, and indeed those of Lloyd's and our broker colleagues, over the past few years.
Assessing the health of the market is never straightforward. There are no comprehensive figures for premium income or capital. Even at the best of times people leave, just as others join for the first time. That is only to be expected in a competitive environment, and it is healthy. Yet I believe there has been an overdue improvement in the way London is perceived, both internally and externally, in the past 12 months.
After September 11, there was much publicity given to the spate of start-ups in Bermuda which, accompanied by withdrawals from London and the slow progress of market reform, gave some people the impression of decline. Now that the dust is starting to settle, an altogether different picture is emerging.
We know that the Lloyd's market has expanded its capacity to record levels thanks to an influx of mainly North American capital. It is not possible to state the size of the company market in London with the same precision because, under the EU single market, a large number of IUA members report to their home country regulators and are not obliged to separate out their UK income.
The figures supplied by the back office bureau (now a joint venture between IUA, Lloyd's and a third party, Xchanging) are, however, the most reliable guide to trends that we have, and they indicate that London company market premium income continues to rise significantly. There may be fewer players, but they are writing more business collectively than used to be the case, a trend that pre-dates the recent hard market. Several of our members have recruited additional underwriters and, in a few cases, whole teams to their London operations.
We are also seeing a further influx of Bermudian companies into the London market as the new start-ups seek a presence here, just as their predecessors did in the 1990s. Indeed, at the time of writing a new Bermuda-based insurer has just announced plans to set up a London marine operation.
This is not to say that all is as it could be in London. Many of our business processes and practices continue to need to be brought further up-to-date, although reassuringly there has been some tangible progress of substance in the last year or so.
At the last year-end renewal season significantly more than 50% of all business was conducted on LMP slips designed to provide greater clarity and uniformity of process, and usage continues to increase. This has shown that, contrary to what many people think, we can improve the way we do business. There is no reason why we cannot now go on to deliver on other aspects of LMP (the London market reform process). Going forward, one of LMP's major projects is to improve the accounting and settlement processes, making it possible to move money far more quickly and cost-effectively. The relevant working party, which I chair, will be reporting the results of its current cost-benefit study in the summer.
Making the London market as efficient and user-friendly as possible was always going to take some time, but we are making progress. Our success will be of benefit not only to London, but to the whole global risk management industry.
By Marie-Louise Rossi
Marie-Louise Rossi is Chief Executive of the International Underwriting Association.