What’s behind the growth of London’s treaty reinsurance market?
What’s behind the growth of London’s treaty reinsurance market? | Insurance Business Asia
Reinsurance
What’s behind the growth of London’s treaty reinsurance market?
Trends affirm confidence in the London market
Reinsurance
By
Mia Wallace
A recent report from the International Underwriting Association (IUA) detailed the growth of the treaty reinsurance being written in the London company market.
New figures revealed that premiums rose by over 25% in 2023, with the sector generating premiums of £10.889 billion, up from £8.248 billion in 2022. The report also revealed that the 2023 £10.889 billion aggregate total for treaty business written by London companies, represents a tripling of the market’s size since 2010.
In discussion with Re-Insurance Business at Rendez-Vous de Septembre (RVS) in Monte Carlo, Scott Farley (pictured), director of communications at IUA highlighted that the total for direct and facultative contracts written by companies in London was £32.106 billion in 2023, up 9% from last year. Treaty business, however, expanded at a much faster pace and now represents the highest proportion for treaty recorded since IUA first started collecting data in 2010.
Top takeaways from the IUA’s latest market update
Digging into some of the key takeaways of the report, Farley noted a lot of the movement around treaty reinsurance in the London company market is due to restructuring and not necessarily new business. “We break premium down into that which is actually written in London and that which is written elsewhere, but overseen and managed by London operations.
“The latter has actually gone down, as far as treaty is concerned, and the business written in London has gone up by about a third. But if you combine those two numbers together, the overall market is still up by 12%, which is still quite significant. It’s higher than the direct and facultative space and a couple of percentage points higher than the market as a whole.”
Understanding the restructuring of the market
What’s interesting about the restructuring that has gone on behind the scenes of this increase is how it indicates confidence in London as a global hub for insurance and reinsurance. Most of the companies which IUA’s data represents have invested significantly in London, he said, which includes London offices and top London talent, and they’re clearly keen to make the most of those resources and utilize them fully.
As to what’s driving that confidence, he highlighted that many of these businesses have dedicated growth plans for their London operations. That’s not just in treaty reinsurance, he said, but also across direct and facultative insurance, and across multiple classes of business. There are numerous examples of firms with plans to hire new underwriters, and to grow the size and scale of their operations – particularly as businesses look to take advantage of some favorable market conditions.
Profitable growth – a key theme for the market
Strong growth has been a dominant feature in recent editions of the London Company Market Statistics Report, he said, and it’s a theme that is continuing this year as multiple different classes of business continue to benefit from a strong pricing environment. “We’ve seen premium levels go up significantly over the last few years, and that continued throughout 2023. There’s some anecdotal evidence of conditions maybe turning a little bit in 2024 and we’ll find out more about that next year when we survey for 2024.
“But certainly for most classes of business, it continued during 2023. As far as the treaty business stands, there are one or two classes of business where treaty is particularly strong. Motor is one which saw significant growth last year, with this business increasing by 44% to £3.346 billion in London premium in 2023, compared to £2.316bn in 2022. It now accounts for 8% of the market, up from a 6% share a year ago. In London, that is about 50% treaty and 50% direct and facultative business. And other classes of business which are less strong on treaty have not necessarily seen the same level of growth.”
It’s an interesting time to see the treaty trends shaping London, Farley said, not least because in the 14 years the IUA has carried out this flagship survey, it has seen the market evolve, slowly but surely. “It has always been the case that London business is generally around 75-80% direct and facultative placements and around 20-25% treaty. And that hasn’t varied hugely, there wasn’t some giant revolution in 2023. But it has crept up by another percentage point. Now it’s on 26%, which is its highest share since we started doing this.”
IUA’s full London Company Market Statistics Report is available to read today.
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