Chief Executive’s Report
The global insurance and reinsurance industry is a competitive and ever-changing environment. Last year, far from receding, the pressures and challenges facing IUA companies ratcheted up several notches. Technological change, the UK’s decision to leave the EU, cost pressures, sluggish investment returns and regulatory reform are all demanding that firms adapt and transform.
Throughout the last year, therefore, the IUA’s agenda has been full, as we assist our members in responding to many external risks and opportunities. That membership continues to grow as, since last year’s annual report, we have welcomed the Norwegian Hull Club, General Insurance Corporation of India and Barents Re into the association fold.
Last year’s IUA annual general meeting took place on 29 June. Just six days earlier, of course, the UK voted to exit the EU and this decision has had a dominating influence on our work ever since. A separate and full account of our Brexit activities, therefore, has been included on page 4 of this year’s report. Suffice to say, the implications are a major distraction for just about all our member companies.
In any other year, the conclusion of a reinsurance trade deal after more than ten years of hard lobbying by industry representatives would be the standout agenda item. The announcement of an agreement between the EU and US (reported in the Public Policy chapter on page 6) was still great cause for cheer, but again unrelated political developments had knock-on effects for our industry.
The election of Donald Trump as US president signalled a potentially more protectionist approach to international trade and, at the time of writing, there is uncertainty about whether the agreement will be signed and enacted.
Our annual survey of company premiums (see page 8) revealed a slight decline in gross income from the previous 12 months. Among the factors cited by members to account for this trend were declining rates leading both to lower premium for business written and some business being declined altogether. In some cases firms are writing more business through their Lloyd’s platform, whilst other have reorganised so that international offices are no longer overseen by the London operation. Another challenge, which we expect to be even more prevalent in this year’s data, is the impact of exchange rate changes.
London Market Growth Agenda
The IUA continues to cooperate closely with Lloyd’s and brokers to promote the London Market with a forceful, unified voice. Under the umbrella of the London Market Group, our joint efforts last year continued their focus on four workstreams. Firstly, the plan to raise our profile with Government meant that a programme of meetings was already in place prior to 23 June and these subsequently proved crucial for Brexit conversations. Discussions about establishing London as a hub for insurance-linked securities transactions have also progressed well and were referenced by the Chancellor of the Exchequer in his Autumn Statement. Draft regulations have since been published and we look forward to a new supervisory framework becoming reality as quickly as possible.
Meanwhile, around 80 research interviews were conducted in order to help establish a compelling proposition for publicising the London Market story to international clients. Feedback received has been used to devise a series of marketing proposals and a working group is now focussed on putting these into action.
The third LMG workstream, market modernisation, is discussed in detail on page 9. The IUA has continued to fund projects on behalf of members through dividends received from our shareholding in Xchanging Ins-sure Services. Work has begun, however, on developing a more sustainable future funding model based on firms’ usage of the various new systems.
Finally, a series of initiatives is being pursued to help improve the London Market’s talent pool by building a diverse, dynamic workforce. Following the publication of a market talent survey in early 2016, a social media campaign has been launched. This aims to promote our industry as an exciting career choice to young people and those who will influence them in their employment choices. An Instagram page has already directly recruited its first new employee to the London Market.
In addition to the new member companies welcomed over the past 12 months, we have continued to deepen our relationships with existing members. Regular face-to-face meetings have been initiated to discuss IUA services and support the activity reports we produce, showing how individual firms use association resources. This reporting function is set to be enhanced further during 2017 as we upgrade our website to provide members with 24/7 online access to engagement data.
More and more employees from across member companies are being added to our database and around 3,000 individuals now subscribe to our monthly newsletter. Close to 900 individuals are also participating in the various market groups we run discussing underwriting, claims, legal and regulatory and market modernisation issues.
2016 was a year of significant change for the IUA secretariat. Whilst enjoying our new offices at Number 1 Minster Court, we were sorry to bid farewell to Nick Lowe at the end of the year as he retired. Nick, our Director of Government Affairs, had worked for the association since its formation in 2001 and prior to that for the IUA’s predecessor organisation LIRMA. He was responsible for legal and regulatory workstreams, establishing strong links with a wide range of UK, European and international industry and governmental bodies.
Our team has now been restructured with other directors taking on various responsibilities. We have also recruited one new staff member to improve our engagement in market modernisation projects and will make any further necessary adjustments to ensure our services to members remain of the highest possible quality.