Our continued engagement with the insurance industry

The London Market expertise at work

London is home to the most dynamic and innovative insurance market. As an international centre for risk transfer, the London Market provides a deep pool of capital, enabling it to deliver solutions to a wide variety of insurance needs.

We have identified 5 risk themes where London Market’s expertise is indispensable and some examples on the expertise at work.

1. Natural Catastrophe

The London Market has been at the forefront of providing protection to businesses and households against extreme weather events including floods, hurricanes and wildfires. Globally there is a significant level of uninsured risk in the event of extreme weather. For example, over the last 10 years in the US, 42% of extreme weather and natural catastrophes were not insured; this figure was 70% for EMEA[1]. London’s unparalleled level of expertise offers solutions for climate risks that many domestic markets are unable to insure.

Example of the London Market at work – Lloyd’s syndicate in a box (SIAB):

• Wildfire is one of the most damaging natural disasters facing the US. Climate change and urban sprawl further exacerbate wildfire risk in the US. In California the situation is more severe. Following major insurance losses between 2017 – 2020 and 2021, the cost of property insurance in the state rose to the point that an ‘insurance crisis’ ensued.
• To provide insurance cover to commercial businesses in California who are unable to buy insurance through the usual channels because of the high level of risk they pose, Wildfire Defense Systems (WDS) has launched a syndicate at LIoyd’s.
• Founded in 2008, WDS is a private-sector wildfire service that protects properties. They work on behalf of the insurance companies who insure these properties, helping to prepare a property in advance of a wildfire by implementing mitigation tactics. Once they service a property, WDS has a more than 99% success rate that it will survive a fire, and they have tracked over 100,000 wildfire ignitions since 2013.
• Through their syndicate (Wildfire Defense Syndicate 1996) at Lloyd’s, they now provide insurance solutions through the Excess & Surplus Lines market for California commercial wildfire-prone properties.  
• The SIAB option was created by Lloyd’s to allow smaller, entrepreneurial businesses to establish an underwriting platform in the Lloyd’s insurance market without having to go through the same regulatory and financial conditions designed with much larger insurance businesses in mind.

2. Cyber

With nearly 600 cybersecurity product and service providers, London has a unique concentration of cybersecurity and underwriting expertise which makes it a natural hub for cyber risk. The cyber threat has been growing exponentially, and the cyber insurance market will grow with it as businesses integrate cyber insurance into their risk management tool kit. London, with its global outlook and experience of working with international firms, is the natural place to manage and place a risk that is inherently global in nature.

Example of the London Market at work – Insurance of large-scale cyber risk by a global insurance company:

• The customer was seeking to purchase a significant amount of insurance (£200m+).  This level of cover was not available in their domestic market, but is commonly accepted in the London insurance market where, by sharing risk, its financially strong and highly rated insurers can offer customers significant capacity.
• As primary insurer, Firm A was responsible for this negotiation but being in the London Mciyarket, the broker was able to negotiate cover for the rest of the risk with other insurers. ​
• A cyber insurance policy is a service-led proposition using a panel of London’s dedicated incident response specialists that are available 24/7 to assist clients with cyber claims.​

3. Geopolitics

Rising geopolitical uncertainty is exposing businesses to increased risk from conflict, transportation disruptions, raw material shortages, and sanctions. The London Market consistently leads the way in insuring emerging risks from geopolitical uncertainty and provides dynamic, innovative and tailor-made solutions in a fast moving and challenging geopolitical climate. London is the only market place with the appetite, knowledge and experience to take on global geopolitical risks at scale.

Example of the London Market at work – Ukraine and the Black Sea:

• Russia withdrew from a UN-brokered grain deal, forcing ships to follow an alternative Black Sea corridor with high security risks.
• London Market firms collaborated with the Ukrainian government to allow grain to be exported at a reduced insurance cost for the vessels and crew and estimates show that the facility has reduced premiums to below pre-war levels. The programme was then expanded to cover all non-military cargo shipping to and from Ukrainian ports.

4. Supply Chain

As supply chains have globalised, they have also become more complex and less transparent. Unfortunately, recent events such as Covid-19 and the war in Ukraine have shown these supply chains can become vulnerable to costly disruptions, not all of which are obvious or covered by existing insurance products. The London Market has a world-leading reputation for helping business understand, mitigate and insure supply chain risk. It already underwrites 43% of the global specialty marine, aviation and energy risk, and has the capability to expand its offering to provide protection to new areas of supply chain risk.

Example of the London Market at work – Supporting large scale construction projects:

• When building large scale international infrastructure projects, a specialist insurance solution is vital to protect business from risk exposure and consequential loss related to the cost, size and complexity of the assets, and the logistical challenges.
• Changes to the way governments and companies source their energy have created multiple challenges for the energy generation sector. As an example, the transformers they rely on to enable electricity to travel over long distances with greater efficiency and reduced energy loss can take six months to a year to repair or replace. This lead time is expected to increase, potentially causing unacceptable delays to a project.
• The Liberty Project Cargo Consortium was created to provide tailored risk management solutions as a one-stop shop for large-scale international construction projects, streamlining a complex set of logistical challenges with a singular focus, potentially reducing delays caused by damage during production, transportation and installation.

5. AI

AI provides an opportunity and a challenge to the risk capital market with underwriters and brokers increasingly developing use cases and implementing AI tools to increase productivity and streamline quoting, information gathering and analysis, as well as risk pricing. Equally, the deployment of AI across industries and businesses creates the need for new risk coverage (e.g. automated ships, or AI deep-fake fraud). London is an early innovator in the development and use of AI and as such allows invaluable access to its vast ecosystem of knowhow and R&D across tech, academia, finance and public sectors.

Example of the London Market at work - Cutting-edge AI-powered platform redesigning the way businesses manage global risk:

• Created through the combined capabilities of Marsh McLennan businesses Marsh and Oliver Wyman, Sentrisk platform uses advanced technologies such as supply chain mapping AI and geospatial satellite imaging. These powerful tools will enable organisations to map their supply chains more comprehensively than ever before and develop risk mitigation, transfer, and management strategies that more closely align to their business needs. 
• With the ability to analyse deep into a firm’s supply chain, Sentrisk overlays proprietary analytics to pinpoint low, medium, and high-risk vulnerabilities down to a site, supplier, or component-specific level. Users are provided with a comprehensive assessment of their supply chain risks, alerts of disruptions near critical assets, and access to risk advisory services from Marsh and Oliver Wyman.
• Current risks modelled include natural hazard, geopolitical, climate-related, and reputational risks as well as structural risks like single-supplier dependencies and geographic concentration.