The slow and steady de-equitisation of London’s equity market has dominated the headlines in the UK’s financial pages this year, obscuring what has been one of the City’s great success stories.
The insurance industry accounts for around a quarter of economic activity in the Square Mile, but it’s often ignored or overlooked in the mainstream business press. While London’s equity market has struggled to retain companies and keep pace with international peers, the insurance sector has continued to fight its corner.
London’s share of the global insurance market is eight per cent, and while that figure hasn’t changed much in the past few years, it’s a favourable metric when compared to the capital’s performance in other sectors.
Key to maintaining and growing this share will be innovation and competitiveness. That’s something Lloyd’s of London, arguably the beating heart of the City’s insurance sector, is trying to drive forward. Lloyd’s used to be one of the world’s leading innovators in the world of insurance, but lost that edge a few decades ago. Now, it’s trying to change direction. It’s streamlined its business model to encourage new and innovative ideas to the market while cutting red tape.
Initial indications show the plans are starting to work. Lloyd’s reported its third consecutive year of double-digit growth, with the market’s gross written premium increasing by 11.6 per cent to £52.1bn last year. Volume grew four per cent, with price growth making up the remainder. Efforts to reduce costs have also boosted the bottom line, and further changes are planned, with the first phase of its transformative ‘Blueprint Two’ set to kick off in October. Innovation has returned with the formation of a syndicate specialising in underwriting risks across Africa, one underwriting green energy projects and another dealing with carbon credits.
The government is also planning to launch a consultation into a UK captive insurance regime this spring, which should add a welcome, if small, boost to the sector. The London Market Group has found that lighter-touch regulations could see almost 700 captive insurers move to London.
Arguably, London can’t compete with New York in the world of equities, but it punches well above its weight in insurance, which is something we should celebrate.