Modernisation and associated costs the ‘biggest challenge’ for London Market: BLM
The main challenges in the re/insurance market are modernisation and the associated costs, according to Damian Cleary, partner and head of London Market at BLM.
Speaking to Baden-Baden Today Cleary said his firm had continued to experience a low-return financial environment, weak investment yield and historically low pricing on the sales side.
“The supply chain of insurance and reinsurance is long and thus expensive, requiring change. Coinciding with the high capital expenditure of resulting innovation and modernisation, the returns of which will take time to feed through, and significant loss creep of major events (hurricanes Harvey, Irma, and Maria, Typhoon Jebi and major cyber attacks such as the NotPetya malware), balance sheets are coming under strain and equally severe scrutiny by the regulators,” he said.
He pointed to advances in technology as part of the solution to cutting costs, saying products and tools that help reduce the cost of doing business in the market were “very likely to be analytics-based”. This type of technology can leverage data, which he called “a very valuable commodity produced by every insurance and reinsurance business”.
He added that the London Market needs to demonstrate that it understands global clients’ risk exposures and needs to provide the right price and good value.
Cleary said he expected some movement on rates and changes in terms and conditions but only in specific classes of risk affected by major loss experience in the last two underwriting years, such as natural catastrophe and energy, construction and D&O.
However, he said: “The overall soft market continues, which suggests any tightening of terms or increase in rates will be challenging.”
Ahead of the annual event in Baden-Baden Cleary said he expected delegates would be debating how to reconcile the high regulatory burden and cost of doing business in the London Market with capturing emerging and local markets.
