The Ukraine conflict has given London the chance to show its strengths as a maritime insurance centre, despite concerns over its dwindling market share.
The UK’s capital city has been losing business to competition from Scandinavia and the Far East over the past decade.
Figures from the International Union of Marine Insurance show that hull insurance premium income has been falling in the Lloyd’s of London market since 2013.
The decline was accelerated by Lloyd’s decision to force syndicates to cut their unprofitable business lines under the Decile 10 initiative in 2017, which hit London’s marine insurers hard.
The performance of non-Lloyd’s of London underwriters — known as the company market and represented by the International Underwriting Association, better known as the IUA — has been more stable and rallied last year.
The IUA’s figures show that the London company market’s marine premium in 2022, in all insurance lines, totalled £5.1bn ($6.4bn), up from £3.8bn in 2021.
Christopher Jones, director of legal and market services at the IUA, said the figures reflect the hard market.
“It is evident that a key driver behind the premium growth of the last 12 months across most classes of insurance has been rising prices for existing business and the marine classes appear to have mirrored this trend,” he said.
Most London underwriters may feel the increase is still not enough to cover the risk but it does at least help to reaffirm the capital’s status in the sector.
“Premium increases are not a measure of profitability and should also be considered in the context of a longer-term trend of arguable rate inadequacy, particularly in the hull market,” Jones said. “The premium levels do, however, confirm the company market as a substantial centre of insurance and reinsurance expertise.”
Other sectors of marine insurance in London, like the offshore energy business, remain strong with the capital accounting for more than half the sector’s premium income, according to figures from professional body IUMI.
War risk protection
London’s marine war risk insurers have come under focus following the outbreak of conflict in Ukraine that led to close to $1bn of ships trapped in ports.
London’s direct insurers and reinsurers have generally performed on claims related to the Ukraine conflict, which broker Miller estimates ended up costing the market in the region of $400m.
The London market also responded first to provide cover for the United Nations’ Black Sea Grain Initiative.
Broker Marsh combined with underwriter Ascot Insurance to put the first cargo war risk insurance package together for the programme.
New initiative
The same pairing is now working towards establishing insurance for a new initiative to export Ukraine grain following the collapse of the Black Sea grain corridor.
Marcus Baker, global head of marine and cargo at Marsh, said it is the spread of legal, technical and security expertise in the capital that has helped put the deals together.
Asked if London is the best market to put together such a deal, Baker said: “Without question. I don’t think there is anywhere else in the world where there is the same level of appetite for business and technical knowledge within 15 minutes walk of my office.”
Some would argue that in the post-Covid world, where remote working is more common, the notion of a physical cluster of associated businesses is less meaningful.
Yet — although London is being outpaced in the marine market on premium by other regions — all the major marine insurance players still feel the need to be represented in the capital.
London has become a hub for insurance capital and underwriting capability sourced from around the globe.
Even the Scandinavian players that have been most active in taking over London’s market share, including Gard, the Norwegian Hull Club, Skuld and the Swedish Club, have all set up shop in the city.
The London market has highly influential bodies such as the Joint War Committee, which designates high-risk areas for additional war risk premiums.
Then there is the Joint Hull Committee, which establishes warranty schemes for hull insurance that have become critical to underwrite the business.
The International Group of P&I Clubs also recently worked closely with the London market on developing more cooperation on salvage.
Jones points to the other challenges London’s marine insurers are facing such as geopolitics, supply chain congestion and inflation, while it also has to increasingly cope with environmental, social and corporate governance issues and technological challenges.
He believes that the knowledge base in London puts it in a good position to see off these challenges.
“London continues to show the technical innovation and expertise to meet these challenges and its contribution is ever more important in uncertain times,” Jones said.
