Insurance Industry
- greaterlondon
- Apr 18, 2015
- 3 min read
The city of London is at the centre of the global financial markets. The presence of leading multinational companies and the operations of the London stock exchange (which is the 4th largest in the globe with a market capitalisation topping £2.377 trillion as of 2011), make London one of the most important places for business in the world. The city has one of the best developed and managed financial systems in the world and has been managed by the Financial Services Authority since 2001. This is vital, especially considering the multiple shocks that the global financial markets have endured in the past few years. To understand the insurance industry and its players, one must get a firm grasp of the basic requirement for insurance; risk. Insurance exists to help individuals or businesses to manage financial risks by setting aside funds to mitigate losses in the event that a risk occurs. The insurance industry is broadly divided into Life Insurance and Non-Life insurance. Non-life insurance is a broad category that includes general insurance products like domestics and motor vehicle insurance, as well as maritime insurance and reinsurance. The market can be looked at from the perspective of premiums paid to the insurance companies or according to the assets held by the companies.
Looking at the entire United Kingdom's non-life market will help put London's insurance industry into perspective. This is due to the fact that a lot of the insurance business transacted in London is not specific to the city. As far back as 2003, the Association of British Insurers recorded that non-life premiums in the UK were £57 billion. Truly an international hub for insurance, the UK contributes to 8.4% of global premium income. The industry also contributed £7.6 billion of export sales in Britain in previous years. This global outlook towards the UK is due to the magnanimity of the insurance industry in Britain coupled with regulatory sincerity and an excellent business environment.
The insurance industry in London is essential to the economy of London and the UK. In Central London alone, insurance companies located within Canary Wharf employ about 40,000 professionals. These professionals and the companies they work for have made London a global champion for the execution of complex, large or unique commercial risks. London insurance holds a 10 to 15% market share of the large industrial risk market globally. The industry also accounts for 1.2% of the British GDP. Although the market in London does not account for much of the Life insurance business, total premiums were estimated to be between £28 and £32 billion. These figures have witnessed a steady rise since the late 1990s.
The main players within the insurance and reinsurance markets in London can be classified into a few distinct but correlated groups. The first group is the insurance companies. The 20 largest reinsurance and insurance companies all have their offices in the city of London, and it is estimated that over 100 insurance companies operate in London. They provide access to insurance products and underwrite the local and global business in the London market.
The second group of players are the insurance brokers. They make up an integral part of the insurance industry in London since almost every risk underwritten in the city is intermediated. Consequently, a significant portion of the largest insurance brokerages in the world have representation in London.
Other groups of players in the insurance market in London include non-marine treaty reinsurance. London's market share of the global reinsurance business is significant and stands at a whopping 25% of the globally available reinsurance. Similarly, London is considered a global hub for transport, aviation and marine insurance and reinsurance, accounting for 19% of the global business.
The London insurance industry's place as one of the largest insurance markets makes a notable addition to the international financial services market. Specifically, the global focus on the London market implies that the insurance industry in London and the UK play a central role in managing the risks within the global economy. Every enterprise involves some degree of risk, and so business managers will require access to relevant, globally recognised insurance solutions to mitigate the risks.
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