Written submission from London Market Group (UKT0028)

Introduction

The London Market Group is the only body which speaks collectively for all practitioners in London’s commercial (re)insurance market, representing the views of insurance brokers, those insurers and reinsurers operating within Lloyd’s, and branches of overseas insurers and reinsurers operating in London – reflecting the full extent of the market.

Within the financial services sector, the commercial (re)insurance subsector is an area where the UK is a genuine world leader. The London insurance market, made up of 350 commercial (re)insurance businesses, is a major employer of nearly 60,000 professionals, two thirds of which work in the City of London. Its businesses earn over $160bn and make an economic contribution to the UK economy of £49bn every year – equivalent to paying the annual salaries of all NHS nurses and midwives in the UK three times over[i].

The strength of the London market is that it is truly international. It attracts insurance and reinsurance business from 200 territories around the world, supporting national insurance markets where risks are too big or too specialised for the local market.

Growing the London market’s share of the global (re)insurance market is a priority. However, while the London market is undoubtedly growing, so are its competitors. For instance, Bermuda has seen 39% growth from 2020 to 2022 while London grew by 32% in the same period. London’s share of the global market has only grown slowly in the last decade.

This submission

The United States, India and the European Union all represent significant markets for cross-border (re)insurance trade, although the measures specific to commercial (re)insurance included within deals that the UK has in place with all three are limited. This response addresses all of the Committee’s questions comprehensively within the relevant jurisdiction, rather than responding to each individually

In many jurisdictions – including those identified with the UK’s Trade Strategy[ii] - significant non-tariff barriers exist which affect the London market's ability to trade effectively and efficiently in those jurisdictions. These include:

• For brokers and intermediaries, there can be requirements to establish operations in-country.
• The use of prudential carve-outs in trade agreements can limit cross-border trade in insurance.
• For reinsurers, countries also adopt requirements to collateralise or localise assets, preventing the global reinsurance market from easily transferring  risk on the basis of a competitive, level playing field across borders.

While we are strongly in favour of the pursuit of Free Trade Agreements (FTAs), they frequently include standard terminology and prudential carve-outs, relating to insurance and financial services, which are restrictive to cross-border trade in (re)insurance. Their pursuit must therefore run in parallel with a renewed focus on overcoming key trade barriers by using the existing tools available to the UK Government and financial regulators, such as Financial and Economic Dialogues, High Level Talks and Regulatory Working Groups.

While we support the pursuit of Free Trade Agreements (FTAs), these agreements often contain standard provisions and prudential carve-outs, particularly in relation to insurance and financial services, that can restrict cross-border trade in (re)insurance. To ensure meaningful progress, FTA negotiations must be complemented by a renewed emphasis on building relationships at the regulatory level. The UK Government and its financial regulators have a valuable opportunity to address key non-tariff trade barriers by leveraging existing mechanisms such as Financial and Economic Dialogues, High-Level Talks, and Regulatory Working Groups.

Such forums provide good opportunities to reduce and remove non-tariff barriers to trade in those countries, such as mandatory cessations and restrictions on foreign ownership.

We welcome that this was acknowledged within the Government’s recently published Trade Strategy, which also announced new tools such as the Ricardo Fund, which could help to remove non-tariff barriers if used effectively by the financial regulators.

Response to the Committee’s questions

The United States (US)

Insurance trade by UK brokers and insurers in the US is predominantly undertaken through Surplus Lines business, i.e. insurance that is not available from the US licensed market. As long as the client meets the relevant criteria under the relevant state law, they are free to purchase insurance from any non-admitted insurer, regardless of whether the insurer is authorised in the US. This has allowed UK brokers and insurers to operate cross-border within the US; with some US states then having in place further exemptions for certain types of insurance cover and clients, which allow for reduced regulatory oversight from US regulators.

London market brokers and insurers can also only offer cover if a risk has been rejected by three separate domestic insurance companies. This ensures domestic insurers are protected from undue competition but enables those local customers with large or complex risks to access brokers and (re) insurers who have been vetted by the regulators and are specialists in their fields.

Insurance trade with the US is aided by the UK-US Covered Agreement. This has ensured continuity for UK insurers and reinsurers operating in the US market post-Brexit. The Agreement removes local reinsurance collateral and local presence requirements for US and UK reinsurers operating in each other’s markets and ensures that UK insurance groups operating in the US are subject only to UK prudential supervision at the group level.

Existing arrangements, including those provided by the UK-US Covered Agreement[iii], provide highly favourable access for the London market. The benefits brought by the UK-US Economic Prosperity Deal are therefore minimal to the London market, as would likely those introduced by a full FTA. However, with North America representing the largest share of London market business (at 40% of gross written premium for the London market in 2022, growing 37% in the last decade[iv]), even small increases in market share would be sizeable.

India

There is no specific data available for the value of the trade in commercial (re)insurance between the UK and India, however insurance penetration level is still only around 3-4% in India, as compared to approximately 7% in the rest of the world and an average of 13-15% in developed countries. This indicates a huge potential for further growth.

The UK-India CETA contains two major limitations on the ability of the London market to invest and grow in India. The first is that the agreement places limitations on the types of business the London market can undertake in India and the second locks in India’s foreign ownership restrictions on UK companies.

The CETA places binding limitations on the London market for risks related to maritime shipping, commercial aviation, space launching and freight, including satellites and goods in international transit. These limitations are part of India’s Schedule of Specific Commitments under the Financial Services chapter of the treaty. They reflect India’s decision to retain regulatory control over high-risk and strategic insurance sectors.

These are all risks where the London Market has world leading expertise that could aid the development of the Indian economy and the growth in trade between the two countries. We appreciate that the FTA reflects a phased approach to liberalisation. While life insurance and general lending services are liberalised, non-life insurance for these strategic sectors has been excluded to reportedly allow time for regulatory alignment, capacity building and risk assessment. The UK Government, in its continuing financial services and regulatory dialogues with India, must seek to reduce these limitations on the ability of the London Mmarket to trade with India.

One of the key barriers to further trade with India has been the country’s restrictions on foreign ownership of companies. However, in recent times have been positive reforms taking place to reduce those restrictions. In 2015, the Foreign Direct Investment (FDI) cap was raised to 49% from 26%, allowing increased foreign participation while ensuring that control remained with Indian promoters. In 2021, the FDI limit was further increased to 74%, permitting foreign players to hold a majority stake while, mandating that key management personnel and directors be Indian residents. In February 2025 the Indian Government announced, as part of its 2025-26 Budget, its intention to further extend the foreign direct investment limits to 100% under certain circumstances[v].

The LMG understands that during negotiations of the UK-India CETA, the UK asked the Indian Government for this new liberalised approach to be reflected in the market access provisions of the Agreement. However, this was rejected by the Indian Government who argued that it is still in the process of establishing the various regulatory criteria and eligibility that may be required to secure the 100% threshold. Therefore, the new UK-India CETA - through Annex 9A - restricts UK ownership of insurance businesses in India to 74%. This is concerning, as it potentially leaves the UK in a worse position than other countries seeking to operate within the Indian market, once the FDI cap is lifted.

As the trading relationship between the UK and India continues to develop under the FTA provisions, the LMG would like to see an ongoing dialogue as to when the new liberalised provisions on foreign ownership can be applied to UK businesses.

European Union (EU)

The EU economy heavily relies on the capacity and expertise of the London market. In some instances, the insurance European companies require would not be available in other insurance centres. This includes cover for aviation, shipping and marine, major infrastructure, supporting major EU banks to protect loan and investment portfolios against political and credit risks, natural catastrophe and public entity liability insurance.  

In 2022, 10% of the London Market’s income was derived from Europe, a reduction from 12% in 2020. Nevertheless, we still consider appropriate access to the European market to be a priority for the UK economy.

The UK-EU TCA has very limited provisions regarding trade in financial services. The lack of financial services trading provisions within the UK-EU Trade and Cooperation Agreement (TCA) has meant that companies have had to restructure in order to continue serving clients within the EU. The UK’s withdrawal from the EU has necessitated firms to open a subsidiary in one of the 27 nations. These subsidiaries have established branches in the UK in order to introduce business to insurers based in London. The EU policyholder/EU risk business will now be introduced in London via the UK branch of the EU entity. The business stays with the same insurer, it is just written in an EU state rather than London. Despite there being no specific provisions, significant EU business is still serviced by London market expertise but through the UK branch of the EU subsidiaries of broking firms and placed with EU insurers that have a branch in London.

The forthcoming UK-EU TCA Review presents an important opportunity to raise issues affecting the operation of the London market. These include:

1. Reform Mutual Recognition of Qualifications: The UK Government should prioritise negotiating a framework for the mutual recognition of professional qualifications with the EU that enables professional and regulatory bodies to more easily reach balanced agreements with their regulatory counterparts. Mutual recognition for the London market CII qualification would make the mobility and secondment of UK nationals to EU subsidiaries easier and aid the flow of insurance trade.

A potential model is the UK Agreement on the Recognition of Professional Qualifications with Switzerland. Article 2.7 of the Agreement allows individuals to make an application to the relevant authority to have their qualifications recognised. This provides clear timeframes for each step in the process and offers the potential for sector specific annexes, such as Annex A which provides a streamlined recognition process for lawyers.

2. Expand and improve the UK-EU data sharing agreement:

The UK should examine the case for a permanent Treaty-based commitment, with appropriate enforceable obligations, on cross-border data flows. This would remove the uncertainty of reviews of the data adequacy relationship.

This would mirror the UK and the EUFTAs with Japan (Article 8) and include commitments from the UK and EU to allow the transfer and processing of financial sector data between the UK and EU. This would give businesses more certainty about their ability to store data in the most commercially sensible locations in the UK or the EU.

3. Greater certainty for business mobility: The UK should seek to negotiate with the EU a broader range of activities for short-term business visitors (STBV) and allow work (including work paid by the client in the host state) on a short term basis without the need for a work permit or economic needs test or indeed the need for a visa, provided that the activity is permitted under Annex 21 of the TCA. This would benefit clients and consumers in the host state by ensuring that they have access to a service that would not be provided without the ability of the service provider to receive payment.

We would encourage the UK Government to use the TCA review to loosen restrictions on intra-company transferees in both directions, so as to support secondments and longer-term intra-company working arrangements. For example, the UK and EU might consider committing to allow intra-corporate transferees (at specialist and senior personnel level) to reside in each other’s market, extending the current TCA cap of three years to five years.