BCG: London insurance market under significant threat

18 November 2014

The multi-billion pound London Insurance Market is facing significant threats as the global hub for commercial insurance, conclude The Boston Consulting Group and the London Market Group in their research. The biggest threats are a loss of market share in reinsurance, untapped emerging markets, and preferences of customers to buy insurances locally. These challenges could, according to the researchers, be met by emphasising the innovativeness and flexibility of the London market and by and investing in the marketing of its reputation.

Management and business strategy consulting firm The Boston Consulting Group (BCG), together with the London Market Group (LMG), recently released a new report entitled ‘London Matters: The Competitive Position of the London Insurance Market’. The report that addresses the current status and future prospects of the market is the result of an extensive market research into commercial insurance and reinsurance, for which over 300 interviews were done with customers and market participants around the globe. The overall conclusion of the consulting firm: London’s insurance market as the undisputed global hub for commercial insurance is under threat.

BCG and LMG release report London Matters

In 2013, the total world insurance market was had a value of £612 billion. The UK insurance and reinsurance market had a value of £69 billion and with a 10% share was the second biggest market in the world. Although the value of frontrunner US was significantly higher, with £122 billion, the market in the UK was a good second, as the value of the third and fourth market, Germany (£39 billion) and Bermuda with (£25 billion), were considerably lower. Of the £69 billion, around £45 was written in London and backed by London capital, which is almost double the size of Bermuda, and almost 11 times bigger than India (£4 billion). However, in their report BCG and LMG warn that the position of the London insurance market is at a tipping point. The analysis shows that London is only experiencing commercial insurance growth and is losing its share in reinsurance, which declined from 15% in 2010 to 13% in 2013.

Global commercial insurance and reinsurance industry


In addition to this, the London Market is relying heavily on the premiums of the UK, US and Canada, Europe and Australasia, where it has been increasing its market share, but has been facing challenges to enter the emerging high growth markets of Latin America, Asia and Africa. Between 2010 and 2013, London’s share of business in these markets declined by more than 20%, from 3.2% to 2.5%. According to the report, this could increasingly become threat to the global leadership of the London Market in commercial insurance as global risk pools shift to these emerging markets and almost half of future growth is expected to come from these markets.

Origin of gross written premium by location of the insured

A third challenge highlighted by the researchers is the fact that customers prefer buying there insurance locally. As capacity and expertise is increasingly available on the local level, this could put 30-40% of London premiums at risk, which accounts for £13-18 billion. Interviewees also pointed to London’s high expense ratios, high regulatory burden, and prolonged soft market cycle as other challenges to London’s position as global hub for commercial insurance.

According to the researchers, these challenges could be targeted by building on London’s reputation for innovation and flexibility and by meeting substantial unmet demand for new products and solutions for new risks such as cyber, supply chain and reputation. They also state that investments should be made in the marketing the strengths of the London Market, especially in the emerging markets,  in order to stimulate demand and to encourage brokers and carriers to invest globally instead of locally. “The London Market must grasp the opportunity that is most definitely in their reach. It has products and capabilities nobody else has, it can develop expertise that nobody else can, and it needs to be confident and coordinated in building and marketing these strengths to secure its future,” says Pia Tischhauser, Senior Partner and Global Lead for Commercial Insurance at BCG.