30th September 2021
This article was first published in Insurance Day.
The FCA estimates the authorisation process for new insurtech ventures takes between three to four months – in reality it is taking up to 12 months
Chris Butcher, CEO of Intermediary Services examines the continued attraction of London and the UK for insurance start-ups and how COVID has driven a renewed interest in InsurTech operations.
If the market needed any indication of the appeal of the UK for new insurance entities, then it only had to attend this month’s Managing General Agents Association (MGAA) conference. The event was packed with attendees there to discuss how they could forward their aims of setting up a new entity or driving the growth of their current operations.
It came as the Chair of the International Underwriting Association (IUA), Rob Kuchinski, praised London as the home of innovation and highlighted there was a stream of capacity looking to establish itself in the market amid hardening rates and new risk opportunities.
He said new capital coming into our market is a healthy sign and London remains a popular location for international business, with investors ready to back new ventures in our sector. I agree. “The continuing growth, both in London company market premium income and IUA membership, are clear indicators of this vitality. Together with Lloyd’s and an incredible array of broking talent, London remains unrivalled globally as the go-to market for transacting just about any type of re/insurance transaction our global customers’ demand.”
We are seeing a new wave of growth but not only from those who are seeking to create new entities to access niche markets. There is a real momentum from the other end of the spectrum, as some of the major underwriting entities look at how best to access new risks.
We have been in discussions with an ever-growing number of parties, many of which have been keen to look at the risks which have emerged since the COVID-19 pandemic and view London both as a valid and relevant home for their new operation.
As the world emerges from the pandemic, we are already seeing a sizeable increase in the desire to create new managing general agents (MGAs) and broking entities. The capacity providers are keen to examine how they can utilise their dormant capital, while for many the COVID restrictions have provided the opportunity to consider how they wish their future careers to develop.
This growth and investment is not restricted to those who have prior experience in the London market. Our discussions are not limited to those in London and the wider UK markets, but also those internationally who are keen to look to create new ventures.
London’s major attraction is its history and reputation for innovation. It encourages its companies to look to new risks which is why we are seeing a focus on insurtech business, many targeting the emerging risks that COVID have created with the move to more remote and online working.
There is a view, backed by years of evidence, that London is more willing to consider underwriting approaches which fall outside of the traditional models. Indeed, the success of recent underwriting entities that have looked to change their structure and operation to an entirely digital system has prompted those who are looking at how technology can enhance both underwriting and operational resilience.
London’s efforts on process reform has also encouraged insurtechs to look to the UK as a home, as have the risks.
During the pandemic, firms emerged that were looking to technology to create new ways of doing business. These firms are now looking for insurance that fits their specific risk profiles. All too often those risks are outside of the traditional classes and will come without the lengthy claims data that provides underwriters with additional confidence around pricing and terms.
To many insurtechs these are the risks they understand and will seek to underwrite. For the established (re)insurance entities they see the opportunity to access these new risk classes with innovative products on a limited basis at a time when a hardening market is delivering technical premium levels.
The issue for many is the speed with which they will be able to get to market. While the Financial Conduct Authority (FCA) estimates that the authorisation process is between three to four months, in reality authorisation is taking up to 12 months.
It leaves MGAs, brokers, capacity providers and investors often frustrated that they are unable to operate and many of the discussions we have will include options as to how entities can operate, whilst the authorisation process is completed. It may mean a period as an authorised representative which not only allows the entity to open for business but can also offer access to terms of business agreements from day one.
The attraction of London and the UK is clear and shows little sign of waning. It is home to capacity that is looking for new ways of doing business and accessing new risks. It’s also keen to engage with insurtechs that have a clear plan as to the risk it will seek to underwrite, and the benefits technology can bring. The challenge, for insurtechs or brokers is to move from proposal to operation as swiftly as possible.
For more information, please contact Chris Butcher, CEO of Intermediary Services on firstname.lastname@example.org
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