London market still battling business lost to Brexit, expects bleeding to continue

The London Market has already lost business to Brexit and is holding out chiefly to retain "some" of its 13% EU insurance market share and the bulk of its EU-based players after the transition period, a chief industry representative has said.

"There's undoubtedly been a reduction in the income and we expect that to continue," Caroline Wagstaff (pictured), CEO at London Market Group (LMG), said in her recent testimony to the House of Lords commission hearing on insurance regulation.

UK-based London Market players "all took early decisions" to secure EU residence to serve European clients. That process has been "expensive and complicated, but they are up and running."

The LMG won't yet venture a forecast for business lost to those new EU units, in part given a seeming run-up in business for London from North America, she said.

"The early signs are that there are some business losses …. now written in the EU itself, because it has to be there," Wagstaff said. "We are going to have to unpick the numbers as we are seeing new business from markets like the US."

But the London market's to-date 13% European market share is on the line. "We think some of that will still come to London," she said.

European insurers participating in the London market are also to be fought for. Players who have already faced down the process for domiciling their units in the UK "have not spoken positively" of the process, Wagstaff warned Lords of the regulatory hurdles.

"They don't have to go through that; they could just take their business back to their domestic market," she said. "It would be nice to keep them here."

Wagstaff warned against building any preference for domestic capital or domestic players into the new environment, citing reinsurance as a key example of foreign names and foreign capital securing the strength of the London market.

"I think we are less worried that they are domestically based," Wagstaff said of London Market players. "Quite a lot of the capital for the London Market doesn’t come from the UK, quite a lot comes from overseas. But it is a thriving ecosystem and we have to compete for that capital to want to come here."

Comments came as the House of Lords Industry and Regulators Committee launched its inquiry into London market regulation with an interview of the leaders of the London Market Group and the London & International Insurance Brokers’ Association (LIIBA)

The Committee has said it hopes to explore the extent to which regulatory policy is well-designed “and proportionately applied” as well as options for post-Brexit tweaks, the committee said in its recent call for opinions.

Market players and industry insiders have until February 11 to put forward their views.

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