On the surface, the London Market enters 2021 looking very different to its 2020 version. Underwriting rooms lay empty, offices unoccupied, pubs eerily quiet. But beyond the physical stillness, this world leading hub has not paused for breath. Digital systems and solutions have taken centre stage as the London Market has responded to a seismic shift in working patterns and insurance risks.
As this report demonstrates, the impacts and related losses of the COVID-19 pandemic touched almost every sector within the London Market, either directly – with business interruption becoming mainstream news – or indirectly – such as the reported insolvencies brought on or accelerated by the pandemic’s effect. As we enter 2021, there has been a shift towards more positive messaging; the Supreme Court has provided a degree of certainty by expediting the FCA test case and the global vaccine roll out is hoped to revive stuttering economies and industry sectors. But the long-term COVID-19 impacts will continue to be felt for months, if not years to come.
Amid the COVID-19 challenges, the UK/EU transition period came to an end and the new Trade and Cooperation Agreement came into force on 1 January 2021, bringing with it new regulations to grapple with and unresolved issues to be negotiated.
As well as these headline topics, cyber risks continue to increase and ESG issues sit high on boardroom agendas, with climate related risks leading the charge with an increased sense of urgency.
2021 promises to be a year dominated by evolution, transformation and resilience, and against this background we offer our predictions on some of the London Market’s priority areas.
Unsurprisingly, ‘infectious diseases’ was a new entry in the top five risks by likelihood in this week’s World Economic Forum’s Global Risks Report. The other risks, equally unsurprisingly, were all climate related: extreme weather, human environmental damage, biodiversity loss and natural resource crises.
Pandemics were previously considered a ‘low likelihood’ risk. It is now, somewhat reluctantly, accepted that as well as dealing with the long term impact of COVID-19 (which is considered in more detail in our recent report), pandemic risks cannot be excluded from future strategic planning, and the London Market is uniquely placed to respond to such challenges.
While the streets of EC3 were empty, innovation, technological initiatives and digital solutions came into their own, evidenced by new products, such as insurance cover for the global transportation of the COVID-19 vaccine launched using Lloyd's new "syndicate in a box" process. These innovative responses will be key to ensuring the most important of intangible business assets – its reputation.
2021 is also likely to bring with it a change of political emphasis, including a greater collaboration between business and government. Following messages of ‘taking back control’ and ‘cutting red tape’, government will be looking to the private sector to tell them how they can benefit from this new regulatory landscape. New committees made up of prominent business leaders have already been formed and we expect to see a slew of consultations and calls for evidence as the government seeks input into how to thrive in a post Brexit world.
Alongside these headline dominating events, business, environmental and societal drivers continue to rise in their influence and, as such, are front and centre of all strategic business planning.
This is evidenced by Lloyd’s publishing its first Environmental, Social and Governance Report in December 2020, setting out its ambitions on embedding sustainability into its business activities, and the IUA placing climate change risk as the key focus area of its 2021 business plan. With Glasgow hosting the United Nations COP26 conference in November, we can expect to see an increase in political and business initiatives to tackle the associated risks.
The physical London Market may never look quite the same again, but it is well placed to reassert its ability to adapt and manage the constant evolution of global risk. Against this background, we consider the key priorities for the London Market in 2021.