With the UK’s departure from the European Union still four months away new figures show that over £4.5 billion of premium income has already left the market
The International Underwriting Association (IUA) has issued its annual statistical report today which showed premium income for the London company market grew by 10% last year with £21.436 billion of large commercial and wholesale risks underwritten by firms in the City. However, the increase also took into account a 3% (£640 million) drop in the level of business written from Continental Europe
However, IUA CEO Dave Matcham (pic) said that while this was the first of the association’s annual statistical reports which has been able to assess the impact of Brexit there may be more to come.
“We were expecting a fall in European premium, but we were not sure as to how much of an impact it would have,” he said. “Have we seen the full impact of Brexit on the market? My suspicion is that we haven’t yet.”
“What we do know is out members are very well prepared for Brexit and we will see the benefit of those preparations in the coming year,” he said.
Mr Matcham added that continental Europe was wider than the EU member states and that the association’s membership have said there is still European business which wants to remain in London.
“Our members say that there is still a demand to place their risks in London,” he added. “There is a belief by some that a deal will be struck and that it will remain business as usual. The London market has the reputation for its products and services and these remain attractive to European firms. There are also very strong relationships with the market which continue.”
While the report also shows a further £6.197 billion was written in other offices outside of London but overseen and managed by London operations. Combining the figures for direct and indirect business gave the company market an overall intellectual and economic premium of £27.633 billion for 2019.
However, the IUA said the indirect business figures have been heavily hit by firms’ preparations for Brexit, given the uncertainty over whether any deal can be struck before 1 January 2021.
“Company restructuring necessitated by Brexit, however, has resulted in a large fall in the amount of ‘controlled’ premium written in European offices, but overseen and managed by London,” warned the report. A total of £4.508 billion previously written in this manner is now recorded by continental operations instead.
Mr Matcham said; “With the end of the Brexit transition looming our report shows that IUA members are well positioned to continue serving their clients with new operational structures up and running. Reorganisation and the impending loss of financial services passporting rules has meant that a large amount of business written in Europe is no longer overseen and managed in the same way by London but reported directly to operations located within the EU. Such restructuring has increased costs for IUA members, making them globally more inefficient and, ultimately, less able to offer a better deal for clients.”
This year, for the first time, the report identifies three new lines of business: political risk (£0.261 billion), trade credit (£0.243 billion) and standalone cyber (£0.253 billion). Property remains the largest class of business (£5.365 billion) followed by liability (£3.575 billion).
Mr Matcham said he believed that the cyber figure was under reported given the continued work to define what constitutes cyber cover and moves to address the issues of silent cyber coverage within current policies.
“I believe that we will see cyber coverage grow for a number of reasons including the fact that there is business we have yet to access,” he added.
The Association said strong rates of premium growth across a wide range of business lines have been experienced by many companies. The hardening market conditions are supplemented by firms developing growth areas such as cyber and transfers of business from Lloyd’s of London into the company market.
“Our annual statistics report reveals a remarkable performance by the London company market in 2019,” added Mr Matcham. “Particular growth has been noted in energy, aviation, property and professional lines, though all classes appear to have benefited from improved market conditions to some extent. More business is also being written through managing agents with the amount of delegated authority premium up by 28%.”
This year also marks the tenth anniversary of the report.
Mr Matcham said: “Our market has certainly changed significantly over the decade in which we have been studying it. There has been substantial growth, from a total of £19.62 billion in 2010 to £27.63 billion for 2020. The make-up of market participants has also altered with an increase in overseas capital, consolidation amongst the largest players and firms increasingly operating in both the Lloyd’s and company markets.”