Managing Director & Partner
An Interview with Nicolas Aubert, London Market Group Chairman
London is one of the world’s most important insurance centers, with written and managed premiums of $91 billion in 2015—higher than those of Switzerland, Bermuda, and Singapore combined. London-based insurers also make a significant contribution to the economy of the UK capital, where they employ 35,000 people and account for 10% of GDP.
It’s no surprise that people would want to know how the sector is doing. So what does the latest report card show?
It’s a bit of a mixed bag, according to a joint report by The Boston Consulting Group and London Market Group. The report, London Matters 2017, shows that London Market insurers have held onto their share of global market premiums. That’s the good news. The bad news is that the insurers’ share of emerging-market premiums has slipped, partly because London’s insurers themselves have at times been hesitant to make bids in these less predictable markets. There are also issues with London insurers’ efforts to increase the diversity of their management teams and with the possible impact of Brexit in the next few years.
These were some of the questions that BCG’s Paul Clark had for London Market Group’s Nicolas Aubert when they sat down to talk recently. Following is an edited and condensed version of their conversation.
London insurers have actually held or increased their share in many of their traditionally strongest markets: North America, the UK, and also the specialty class of business where London has long excelled. However, many insurers are actually reducing premiums in those markets and focusing more on profitability. In that light, do you see the apparent strength of the London insurers as a true strength, or is it actually a weakness?
You always need to be in alignment with the rhythms of the market. Not following the market trends from a revenue point of view is a challenge if you see some markets having the potential to significantly grow and you don’t pursue that. So I would say it's a balance.
The most striking finding of the report was that London insurers are actually losing volumes in emerging markets, despite the fact that those markets are the fastest growing now and quite likely into the future. Many insurers cite the perceived lack of profitability in emerging markets as being the main reason they don’t push harder there. Should they be more aggressive?
I strongly believe that we cannot miss the opportunity of the emerging markets. I don't think it’s too late; I think this is just the beginning. We probably missed the first engagements, but we’ve got an opportunity not only to recover but to thrive over there.
Just think about the fact that by definition within those markets, there is an enormous investment in terms of infrastructure. So, when you think about energy, when you think about marine, when you think about aviation, when you think about the maturation of the financial institutions of those markets, those are products, those are services, those are business lines where we’ve got a very strong relevance.
So, I think not only we can do business over there, but we are also I think fit from a value proposition point of view to help even the countries within those markets further develop and become more and more mature.
London insurers have clearly struggled with diversity; you can just look at the number of female executives within the London market compared with other comparable industries such as banking. What practically do you think London insurers can do to improve their levels of diversity?
Diversity—or lack of diversity—is a real problem. For me the answer is relatively simple. It’s about making sure that we assess and identify the female talent in the organizations. We should not do that only at the senior level. We should do that across a significant number of managerial layers so that we build a bench; we build scale and numbers.
The second thing is making sure that we have a development plan for those talents so that they can be supported on an accelerated professional growth track.And finally, we just need to make sure that companies are enforcing the fact that when there is a promotion round, when there is an opportunity, this bench that would have been identified and developed is taken into consideration on a mandatory basis.
Incidentally, the challenge is the same across other forms of diversity.
There’s so much talk at the moment about Brexit, so I’d be remiss in not asking your view on that, particularly given your unique perspective as a Frenchman working in London. To what extent do you see Brexit as being a challenge and a threat to the London markets versus an opportunity?
I mean, we need to be honest. Brexit is obviously a big, big challenge, and we are just seeing now a certain number of players taking decisions on what could be their proposed organizations for the future. The great thing is that at the moment, it’s quite obvious that our clients overall are very confident that we will find the right solutions to make it work.
Brexit is obviously, and has already been, an enormous opportunity to strengthen our relationship with government and Parliament. They needed to learn from us. They needed to get information from us on how to engage in negotiations, for example, and what were the key metrics for our business. We’ve been working a lot with them, so we are much closer than before Brexit to the decision makers, and they understand what we can do for the British economy.
It’s interesting: you actually sound quite positive about Brexit. Do you think it’s possible that the benefits of Brexit outweigh the risks for London?
Brexit has been voted for the referendum. We need to get on with it! There is a risk, but I think that instead of lamenting the risk, we should focus on the opportunities. The more we do that, the more we’ll be successful.
The research discussed in this interview is summarized in the BCG article “London Insurers Excel at Home but Struggle in Emerging Markets” and in London Matters 2017.