I do not. I have spoken to a wide range of stakeholders, including the London Market Group, Lloyd’s and the Association of British Insurers. I will make the point later that from their perspective, even free trade agreements are not necessarily the way forward.
Returning to the trend of the loss of global market share by UK commercial insurance, it is particularly important that the Government and industry consider the measures that can be introduced to reverse that trend, to encourage more trade and opportunities and, crucially, to promote the industry. It has long been argued in the insurance sector, and is something I have raised many times in this House, that our regulators should have a dual role—they should promote on the international stage. That would mirror what many of our competitors around the world already do, particularly in emerging areas.
We need domestic reform just to put us on a level footing with our competitors. UK regulators should have a regard for our international competitiveness. That means they would have to consider the impact of their decisions on the ability of UK-based financial services to compete on the international stage that we want to have access to. The sector has repeatedly made the point that progress does not necessarily rely on agreeing formal free trade agreements—they are not the be-all and end-all. The Government can make substantial progress now using some of the existing tools available to them such as financial and economic dialogues, which offer real benefits in shorter time frames. There would be an opportunity to turn them into bilateral agreements in future—the ABI highlighted that in relation to China and India in particular.
To remain internationally competitive, a future regulatory framework needs to be outcome-based. There is a view that trade should not be prevented by technical divergence between the UK and third countries if the outcome of the regulation is the same. So that we are not overtaken, it is important that Government, in partnership with organisations such as the LMG or the ABI, promote the unique benefit of access to our commercial insurance markets, given the significant economic and social benefits of expanding insurance provision and the growing protection gap challenge that many countries face.
I would like to draw the Minister’s attention to the London Makes it Possible campaign, run by the London Market Group. It is designed to promote London and the UK as the world’s pre-eminent insurance hub. It reminds countries around the world of the business range of risks we cover and is something that Government could get behind, to promote us. It has a fantastic website, where it is interesting to see some of the world-leading risks that we cover, and how our market is so different.
The expertise in this country enables us to place highly complex risks. The question is: where should we consider targeting? There are opportunities to grow the insurance trade in a number of developed and emerging markets. The ABI has identified 11 priority markets for future international trade, including China, India, Japan, South Korea, Canada, Switzerland and the United States. In addition, the LMG has identified its own target markets: the US again and the markets of the Association of Southeast Asian Nations, which have huge cyber-insurance opportunities. Latin America has one of the lowest insurance penetrations in the world, largely due to measures to shield those countries from international insurance markets. Although it is understandable why they may want to do that, those measures limit the pooling of risk and make the insurance of large-scale natural disasters next to impossible. Importantly, that puts up costs for consumers and reduces take-up.
I visited the US last year with the British-American parliamentary group, to discuss financial services post-Brexit. We went to Washington and New York to see at first hand how important our insurance industry is there. The US continues to be the London Market Group’s single biggest source of business. In 2017, Lloyd’s under- writers wrote approximately £13.5 billion of US business, contributing to a total of approximately £20 billion of London Market Group premiums. The US spend on cyber-insurance alone is expected to reach $6.2 billion by 2020. It also faces a growing need to strengthen resilience against natural disaster and to bolster federal and state insurance programmes. The three hurricanes in 2017 caused more than $217 billion-worth of damage, of which only $92 billion was covered by insurance.
The Government have already made important progress in negotiating and signing the UK-US covered agreement for reinsurance, which removes some collateral requirements and encourages regulatory dialogue between the UK and US. That is a very welcome step to developing a new post-Brexit trading relationship between the two countries. The UK is ready to take advantages of those opportunities. World-leading insurance expertise is already based in this country so it will be a critical industry for us.