Thursday, 8 September 2011
London market bigger than thought but Europe is still only 17 per cent of total
The London company market is significantly larger than previously suggested by market statistics and bigger than many market commentators suspected according to an International Underwriting Association (IUA) report published this week. The report shows that in 2010 the market was worth at least £12.6bn net of commissions or £16.4bn gross.
UK companies purchased the largest share of risk transfer premium at 45% of the total. Other countries in the European Union accounted for only 17% of business, whilst US clients bought 13% of the cover and the rest of the world purchased the remaining 25%.
Figures from the first comprehensive measure of premium income generated by insurance and reinsurance companies operating in the UK capital also includes breakdowns by line of coverage and method of placement. By line of business property accounted for 31.3% of premium at £3.96bn, with casualty £3.5bn and a 27.7% share. Professional lines premium stood at £1.99bn, or 15.8%, marine at £1.86bn (14.8%) and aviation at £1.32bn (10.5%). In terms of EU business property premium stood at £698m, casualty at £488m, professional lines at £200m, marine at £312m and aviation at £386m.
These results show that more than 80% of the London company market’s premium is accounted for by direct and facultative business, with less than 20% written as treaty contracts.
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IUA Chairman Stephen Riley commented: “Questions about the size of the company market in London are frequently asked by a wide range of interested observers. But until now the best answers were only ever a rough estimate based on a limited amount of centrally processed business.”
“The IUA has now completed a major statistical survey clearly demonstrating what we have always suspected—that the London company market is substantially bigger than previously stated.“
IUA Chief Executive Dave Matcham said: “Our survey has revealed some very interesting, and one or two rather surprising, features of the London company market’s profile. The exercise has shed a welcome new light on the various business models operating in the City.”
There are many difficulties in compiling reliable aggregate figures for this sector and questions over what actually constitutes London market business.
But according to Mr Mathcam ‘a reliable benchmark has now been established that brings us much closer to the truth about the size and nature of our market than we have ever been before.’
The IUA said that the statistics survey will become an annual exercise and the association is establishing a committee of member representatives to oversee this task.
Some premium still remains unaccounted for and future reports will seek to enhance both the quality and scope of data, including perhaps overseas agency business controlled by London and more specific classes of business.
The London company market comprises companies from the London market outside of Lloyd’s.
These figures omit business written by overseas agents or branches that are controlled by London operations. Because some firms that assume risks against the capital of a parent company’s capital may not specifically record premium income as ‘London market’ an absolutely definitive answer on its size can never be reached. But this effort by the IUA is the most complete on record.
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