A report by the International Underwriting Association has indicated that London has cemented its status as a leading global insurance hub, as City insurers wrote a total of £39bn of gross premium in 2010, a third more than previously estimated. Jeremy Irving, insurance partner at international law firm Eversheds, discusses London’s position and the impact that Solvency II regulations may have on this:
The new analysis from the IUA is to be welcomed for providing more detailed evidence of the essential role that London plays in the UK and global economies and insurance industries. The large premium volumes passing through the London Market are testimony to the trust which insureds and reinsureds around the world place in the numerous – and often highly specialised – London Market brokers and risk-carriers, and the technical strength and personal immediacy of the relationships between these entities.
“Solvency II however raises some difficult questions for London’s position. On the most optimistic view, the greater resilience which Solvency II requires should enhance the attractiveness of London Market security. However, Solvency II requires substantial costs in terms of increases in capital holdings and the infrastructure and personnel for risk management – the latter may well be exacerbated by an increasingly intrusive regulatory regime, especially in the UK. The growing costs could lead to industry consolidation, potentially reducing the numbers and specialism of insurance businesses. If so, London will need to work hard to maintain the features which currently make it so attractive.
“The UK as a whole has been at the forefront of preparing for the implementation of Solvency II. It is possible to discern an increasing risk that Solvency II will be significantly delayed, or perhaps implemented differently from the manner originally planned – possibly with some jurisdictions or risk-carriers having longer to prepare. This creates the possibility that in the short or medium-term, the costs of doing business in London could be higher than other EU locations, let alone outside the EU.”
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