£7bn of London Market business directly impacted by Brexit

Overall premium income for the London company market in 2016 was £22.7 billion, a 2.9 percent increase on restated figures for 2015, a new report by the International Underwriting Association has revealed.

Gross premium written in London totalled £16.034bn, while a further £6.691bn was identified as written in other locations, but overseen and managed by London operations.

The IUA’s London Company Market Statistics Report 2017 also analyses income earned by branch operations in the London Market likely to be directly impacted by Brexit. A total of £7.38 billion is currently underwritten via such business models which face a change in their regulatory status as the UK leaves the European Union.

In addition, the report calculates that £1.5 billion of income from Europe is earned by London Market companies that are either UK headquartered or subsidiaries of parent companies in a third country outside of Europe.

Dave Matcham, chief executive of the IUA, said: “One of the most important outstanding Brexit questions for the London company market concerns the status of operations currently conducting business in the city as branches of either a continental European parent company or of a European subsidiary and with a parent elsewhere.

“These are popular business models and, without any transitional arrangements or a new trading agreement, their status must change. The Prudential Regulation Authority will need to supervise them either as subsidiaries or as third country branches. Any adjustment to a new framework will, of course, occupy time and resources and the process for change should, therefore, be laid out as soon as possible in order to provide a degree of stability and certainty.

“At the same time there is a significant amount of European premium currently underwritten by subsidiaries and UK domiciled firms under the EU’s financial services passport regime. Our survey clearly demonstrates the interconnected and mutually supportive nature of insurance business across the UK and other EU member states.”

Elsewhere in the IUA’s report, restated figures for 2015 show an overall premium total of £22 billion, indicating that over the past year the company market has seen a rise in income of £0.657bn or 2.9 percent.

This increase is driven by a growth in business controlled by London operations, but written elsewhere, although a significant part is due to better data collection, capturing some premium that was not identified in previous surveys. Exchange rate fluctuations have also been highlighted by a number of companies as a major factor in increasing premium volumes reported in pounds sterling for 2016.

A breakdown of income by class of business reveals that premium categorised as ‘other’ rather than in any of the main classifications rose from £1.04 billion to £1.4 billion over the past 12 months and has almost doubled since 2013. This suggests firms may increasingly be looking to grow their operations by participating in non-traditional lines of business, focussing on specialist classes and possibly developing more innovative new products.

A new feature of this year’s survey is a more detailed breakdown of liability business which reveals premium totals for public liability, employers’ liability, environmental liability and cyber.

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