London company market premium rises despite Brexit fears

The London company market is in a strong position despite Brexit and the current COVID-19 pandemic. New data from the International Underwriting Association (IUA) shows that premium income grew by 10% in 2019, with £21.436 billion of commercial and wholesale risks underwritten by firms in the City.

The IUA also found that a further £6.197 billion was written in offices outside of London, yet overseen and managed by London operations. These two figures combined give an intellectual and economic premium of £27.633 billion last year.

Companies are experiencing strong rates of premium growth across a wide range of business lines, according to the report. Firms are developing growth areas such as cyber and transfers of business from Lloyd’s of London into the company market. Premiums written by the London company market increased by 8.1% to £28.437 billion in 2018, according to last year’s report, also published by the IUA.

Company restructuring, imposed by Brexit in 2019, promoted a significant decline in the “controlled” premium written in European offices. A total of £4.508 billion previously written in this manner is now recorded by continental operations instead.

Dave Matcham, chief executive of the IUA, said that growth has been noted particularly in energy, aviation, property and professional lines, although all classes benefitted from improved market conditions. Marine, professional lines and aviation recorded growth rates over the past 12 months of 11.3%, 15.8% and 37.3% respectively.

He also affirmed more business is being written through managing agents, with the amount of delegated authority premium up by 28%. He added: “Such restructuring has increased costs for IUA members, making them globally more inefficient and, ultimately, less able to offer a better deal for clients.”

Although the market has significantly changed during the last decade, it has registered substantial growth, going from a total of £19.620 billion in 2010 to £27.633 billion in 2020. The make-up of market participants has also altered with an increase in overseas capital, consolidation amongst the largest players and firms increasingly operating in both the Lloyd’s and company markets. The contribution of Lloyd’s only entities has fallen from 41% to only 12% while those with a dual platform have almost doubled their presence from 35% to 67% of total premium, the report notes.

This trend has been particularly pronounced in the marine and aviation sectors, according to the IUA, which are classes that saw their underwriting stance tightened by Lloyd’s, in an attempt to improve market performance. Marine premiums rose 11.3%, whereas aviation went up 37.3%. Combined, these two lines of business written in the company market is now almost exactly equal to that conducted at Lloyd’s.

Other under-pressure classes at Lloyd’s such as professional lines and property have also followed the upward trend. The former saw a premium growth of 15.8%, and, the latter, 14%.

Political risk, trade credit and standalone cyber premiums, broke down by the report for the first time, totalled £261, £243 and £253 million respectively.

Post Date: 19/10/2020

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