The London market has long enjoyed a leading reputation for its expertise and ability to handle specialist risks. However, it is coming under pressure as the growth of other international markets and globalisation lead to increased competition.
In the London Market Group’s report London Matters: The Competitive Position of the London Insurance Market, it lists a range of threats to London’s preeminent position, including globalisation; lack of representation in emerging markets; regional hubs providing alternatives; and the rise of analytical underwriting techniques.
Nick Peck, Chairman of JLT Specialty’s Cargo team, agrees that globalisation is a challenge: “The world has become a smaller place and is now full of multinational companies who are much more aware of relevant markets that can tender globally. They will go to a global broker who will suggest several markets that might be relevant to that type of business, rather than being inhibited by something being a London risk or a New York risk. Everything is open season for business of any size and scale.”
Domestic marketplaces are also increasing competition. “For example, markets in the Far East having to go to London for reinsurance is a thing of the past because regional Far Eastern markets now have the relevant expertise to raise their own capacity without the need for facultative support from London or elsewhere,” says Nick.
Despite increasing competition, the London market offers a range of unique benefits to clients.
The experience of London market practitioners sets it apart as a hub of knowledge and expertise. This in-depth knowledge and an entrepreneurial approach mean that the market can cater to specialist risks that may not find a home elsewhere. Nick says: “When you come to Lloyd's, you get easy access to the market’s entrepreneurial spirit. If you come with a new risk and a new industry, you will find underwriters in the Lloyd’s building and surrounding companies who will strive to understand what the client needs and offer terms.”
Even though the market offers very high quality service and expertise, it is able to offer very competitive pricing. “A result of a very soft market which has become the norm – rather than just a cycle – is that an awful lot of expertise and coverage is given at usually very competitive rates,” says Nick.
The engagement of people working in the market is a key differentiator. “In many markets, an underwriter is a salaried employee used to following underwriting guidelines, and their career path will generally take them into a senior position in a large corporation,” says Nick. “In the Lloyd’s market especially, underwriters might get into very senior positions, but they tend to keep that deep streak of wanting to stay in touch with the business and engage with clients.”
The face-to-face nature of the London market is a distinctive feature. “The absolute fundamental that needs to be retained is the ability to place business physically and interactively face to face, and also to ensure that ability is not lost to the claims process,” states Nick.
“No one would dispute the enormous efficiencies that are bought in by properly run and resourced IT programmes, but the human interaction is what really needs to be protected and cherished.”
This interaction brings real benefits. “Underwriters generally all know each other and can share knowledge. Equally, if a broker wants some advice, they can go to the market and chat to underwriters they have a good relationship with. So on all sorts of levels, there is a very intimate relationship between underwriters and brokers that is ultimately extremely good for clients.”
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For more information please contact Nick peck, Chairman of JLT Specialty’s Cargo team on +44 (0)20 7466 6511