Insurers urged to act in order to save the future of the London insurance market.
Michael Wade, crown representative for insurance in the Cabinet Office, pointed out several threats London faces as a global financial centre, particularly in the insurance market, including: lack of growth, surplus capital, other competing hubs, competition from local insurers and London's "adversarial" regulatory environment.
At a conference in London on the future of the UK insurance sector, organised by the Westminster Business Forum, Wade explained how surplus capital affected the city. Wade said: "You have a surplus of capital, particularly in the reinsurance areas, where prices are being driven down; too much capital chasing too little business."
On competition from other cities as aspiring insurance hubs, Wade explained: "The hubs are developing. That's been one of the most interesting aspects in the past 10 years. You have Zurich, Singapore, Dubai and many other aspirants to create insurance hubs worldwide."
Raising the question of the regulatory environment of the London market, he said: "Some would say here in London we are too bureaucratic and adversarial.
"If you want to set up in Bermuda, you are offered lunch with the regulator and you are set up in a few weeks. That is not always the case in London."
In order to retain London's reputation as a financial hub, Wade stressed the quality of underwriting. Wade said: "It's not about a price war. The quality, therefore analytics and modeling expertise, these are absolutely fundamental."
Wade also urged insurers to actively promote London overseas. He said: "Even if your product is good, you can't compete unless you promote London. You have got to be out there promoting the London market. It will not flow naturally to London."
Meanwhile, a report on London's insurance market has found the regulatory burden in London puts the city at a disadvantage, with London's costs 9% higher than its peers in 2013.
Published by the London Market Group (LMG) and the Boston Consulting Group (BCG), the report London Matters: The Competitive Position of the London Insurance Market addressed the current issues London faced as a global hub.
Interviews with more than 120 market participants also revealed customers preferred buying insurance in their local market or region where underwriting expertise was available locally.
Pia Tischhauser, senior partner and BCG's global lead for commercial insurance said: "This study provides a broad view of the challenges and opportunities for London market participants. The growth of regional hubs such as Singapore, Zurich and Bermuda is challenging the traditional structure of the global insurance industry and London's role within it."