The trade body has launched a five-point plan to support the UK’s competitive position after leaving the European Union
Trade body the London Market Group (LMG) has called on the government, regulators and the insurance industry to work together post-Brexit for its five-point plan, launched on 7 June 2021.
This plan asks for relevant regulatory and legislative changes to help grow the insurance industry in the coming months and years, taking full advantage of the new opportunities open to the UK now it has left the European Union (EU).
Sean McGovern, chief executive of AXA XL, London Market Authority’s board member and sponsor of LMG’s government relations work, said: “Right now, the UK government is looking at how financial services should evolve in a post-Brexit world and the London market wants to seize the moment while there is a willingness to support positive change that can benefit the insurance industry.
“The LMG has taken part in various government consultations on the future regulatory framework and Solvency II.
”This document will form the backbone of a comprehensive campaign by the LMG, working with ministers, parliamentarians and the regulators to reinforce the importance of the insurance market and to ask for what it needs to continue to grow globally.”
UK’s competitive position
The LMG’s five-point plan includes:
- Introducing a more proportionate approach to regulation: Recognise the nature of the large complex risks the sector covers, as well as the sophisticated corporate buyers it serves, through a more proportionate approach to regulation.
- An international competitiveness duty for the UK regulators: Ensure that the London market remains the most attractive home for large risks through an international competitiveness duty for UK regulators. This should include bringing forward proposals for international competitiveness to become part of the regulators’ statutory objectives.
- Reforming Solvency II to encourage overseas investment: Making London a natural home for foreign (re)insurance companies by reforming the Solvency II regime. Going through additional and unnecessary regulatory processes is costly and time consuming, hindering overseas firms from operating in the UK.
- Promoting a UK captives market: Increase the choice of buyers and grow the market by developing and promoting a UK captives market. The current Solvency II review offers the UK an opportunity to develop a more attractive regime for captives.
- Access to new and emerging markets: Gaining access to emerging markets around the world can help firms build resilience against natural disasters and climate change events through trade negotiations, regulatory dialogues and market promotion.
McGovern added: “We have put forward a five-point plan to support the UK’s competitive position, grow our exports and deliver increased levels of foreign inward investment into both London and across the regions of the UK, where the market is expanding.”
Insurance is trade lifeblood
LMG represents more than 350 underwriters and brokers in London’s specialist insurance market.
In its latest report - A Plan for the Future, which further explains the five-point plan - the trade body said that “insurance is the lifeblood of trade, investment and commerce”.
The London market earns more than $100bn in income a year and it is growing at a rate of just under 14% per annum, making it bigger than all its nearest competitors combined.
Meanwhile, the report also pointed out that London brings considerable foreign investment into the UK.
The LMG’s research highlighted that over 66% of the capital that comes to the UK’s commercial insurance market is foreign owned. The market thrives because overseas firms from the EU, Switzerland, the US and Japan want to trade within London to access business and take advantage of the available expertise and ecosystems.
The report warned: ”While we have an advantage, it is crucial we do not rest on our laurels. Action must be taken to maintain the UK’s competitive position.”
It also highlighted a more proportionate approach to regulation because ”at present, brokers are regulated by a ‘one-size-fits-all’ approach by the FCA, despite the fact that they deal with sophisticated corporate clients with significant resources and professional advisors at their disposal.”
The report continued: ”They are not consumers in need of protection in the way that individuals or SME customers may be. However, the FCA makes almost no distinction in the way it supervises a London market broker working in the specialty markets in London from the way it supervises a retail insurance broker dealing with an individual’s domestic and motor insurance requirements.”
The LMG recommended that in the next Future Regulatory Framework review, which considers how the regulatory framework for financial services needs to adapt to be fit for the future, in particular to reflect the UK’s new position outside of the EU, that the government should bring forward proposals to deliver a more stratified and proportionate approach to individual sectors within the insurance industry and the type of client being served.
This is because “separate models for personal lines, commercial lines and reinsurance which reflect the nature of risks of these different sectors would significantly aid UK competitiveness”.