27 May 2022Reinsurance

LMG creates 5-point London insurance plan

The London Market Group (LMG) has published a five-point plan to improve the London insurance market.

According to the LMG the market a vital part of the UK economy and a major contributor to making the UK the most globally connected financial centre, providing services around the world.

However, as the LMG stated: “The London Market cannot rest on its laurels and must continue to fight to maintain its leading position.”

The five points include ensuring that the London Market remains the most attractive home for large risks through an international competitiveness duty for UK regulators, recognising the size and sophistication of the risks and buyers involved, reforming the Solvency II regime to attract foreign re/insurers, gaining access to emerging markets and finally developing and promoting a UK captives market.

Looking at this last point, the LMG said that in order to develop new products to attract new buyers to the London insurance market, a much greater focus on an activity-specific model of regulation is required. This approach should also be capable of responding to changes in business models or the development of new industry sub-sectors or investment types. A failure to do this could mean London continuing to lose out to other centres in relation to reinsurance, captives and alternative risk transfer products.

It added: “A committed and proportionate regulatory regime is now the biggest factor in domicile selection for captive insurers. An ambitious regulatory model for captives, combining a proportionate risk-based solvency regime with London’s global reinsurance market, would make the UK a unique and attractive location for captives.”

According to the LMG to make this a success it is now important that Government and the regulators work together to develop the necessary legislative and regulatory changes required to create an attractive UK captive regime. In order to progress this further the LMG would welcome the formation of a joint working group between industry, HM Treasury and the PRA to formalise the dialogue already underway and work towards implementing these proposals.

It added: “Ultimately we believe the best way this can be achieved is to create a new class of insurer – captives – and develop specific guidance for captives which focuses on reduced prudential risk assessments, a swifter approval process, reduced reporting requirements, lower capital requirements and reliance on wider group functions such as auditing etc.”