Rallying cry to restore UK’s status as premier international financial centre

The UK must fight to defend its position as a world leader in risk transfer, according to influential lobby group TheCityUK. In a new report, which calls on the industry, regulators and government to work together to achieve global leadership for the UK as an “IFC”, its authors identify protectionism as an obstacle. The UK’s share of global insurance premiums fell from 6.9% in 2010 to 5.8% in 2019, even as the value of UK insurance premiums rose from $300bn to £366bn. The report says the UK should focus on securing agreement from overseas regulators and governments to permit the transfer of more risks arising in overseas jurisdictions into the global insurance market: “This would significantly increase business volumes in the London insurance market. Trade partners would gain as their businesses would secure cheaper and more reliable risk management services.” Overseas obstacles are not the only factor, according to the report’s authors, who say the UK has itself imposed regulatory obstacles to new markets in alternative risk transfer. Although London has expanded its role in insurance risk securitisation under the Risk Transformation Regulations 2017, regulatory authorities are reluctant to cater for the special purpose vehicles that would help further development: “The result has been a shift of mobile capital to overseas markets, notably Bermuda, with adverse effects on the London insurance market and also wider UK capital markets.” The shift is happening at a time when global corporate clients need support from financial and related professional services businesses to manage a rising tide of risk issues relating to climate change, supply chain management, cybersecurity, reputation, regulation and geopolitics (including sanctions), the report says. For the UK to capture a growing share of these fast-emerging risk exposures, the industry and government need to work together to persuade overseas insurance regulators and government authorities of the merits of full, unimpeded transfer of such risks out of their jurisdiction. In the long term, the report says, the UK should pursue more multilateral agreement on cross-border insurance and reinsurance of large and/or systemic risks. Miles Celic, chief executive officer of TheCityUK, commented: “One of the greatest risks for any successful financial centre is complacency. Europe is littered with cities that were once the leading international centre of their day. The last decade has been one of growth for our industry, yet global competitors have grown faster. However, with the right strategy in place and a clear focus on delivery, the UK can pull away once again from its competitors.” TheCityUK’s wide-ranging report also recommends developing the UK as a global hub for data and technology by championing common-ground rules for digital trade and seeking targeted data transfer agreements. The UK should also aspire to be a world-leader in green and sustainable finance and the preferred partner for international businesses managing and financing the green transition. It should position itself at the heart of global ESG markets, partnering with other countries to create global ESG disclosure standards and more interoperability of ESG taxonomies, the report suggests.

Rallying cry to restore UK’s status as premier international financial centre

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