As sponsor of the London Market Group’s government relations work, McGovern told The Insurer TV’s Leading Voices that this would “absolutely be a step forward”.

“Now, they are consulting on that being a secondary objective. We would, of course, prefer the objective to be a primary objective, but what is more important is how those objectives get embedded in the system; how the approach of our regulators will change as a consequence of having that secondary objective; and how do we create the right level of transparency and accountability without interfering with the importance of regulatory independence,” he said.

McGovern’s comments follow the recently launched parliamentary inquiry into commercial (re)insurance regulation in order to assess whether the current UK supervisory regime impacts the competitiveness of the London market.

The House of Lords Industry and Regulators Committee said its inquiry will explore the extent to which UK regulatory policy is “well-designed and proportionately applied” and the possibilities for optimising policy following Brexit – all of which has been welcomed by the London Market Group and the market more broadly.

“The government is clearly determined to help create the conditions to allow financial services including the London market to grow and remain competitive and that’s a great ambition to have,” said McGovern.

“I think what this exercise does is it allows us to conceptualise it with the London market and global market in which we compete, and it allows us to get into a dialogue with senior policy makers about how to bring that growth and competitiveness objective to life and how we’re going to measure success when that objective becomes part of the statutory regime,” he added.

London can’t be complacent

Despite the London market representing more than 20 percent of the City’s overall contribution to UK GDP and boasting a market size of over $110bn of premium – a total that makes it bigger than all of its closest rivals combined – its growth trajectory has been slowing and is behind that of Bermuda, Zurich and Singapore.

The London Market remains the largest global (re)insurance hub with $110bn of GWP in 2018

“We haven’t been growing as fast as some of those other insurance and reinsurance centres and whilst we are the largest, we can’t be complacent about that future success,” McGovern told Leading Voices.

“At the end of the day, the London market is an international market. We’re competing for business, talent and capital in a global marketplace where all of those things are all highly mobile. So having a business environment that enables the London market to be successful is absolutely critical,” he added.

Significantly, the inquiry will present an opportunity to investigate the reasons why there are no UK-domiciled reinsurers or UK captives, raised McGovern.

“There are some important questions that I think do need to be asked and answered as part of this review and as part of understanding the impact of the current regulatory environment, and the extent to which it is hampering the ability of the London market to really fulfil its full potential.

“I guess one of those questions is around why we do not currently have a domestic, commercial reinsurance industry in the UK and neither do we have a UK-domiciled captive industry,” said McGovern.

“And I guess for us, those potentially are indicative of a UK regime that isn’t appropriately recognising the particular features of reinsurers and captives, their business models and what’s appropriate in terms of how to regulate those businesses as opposed to the broader commercial and personal lines insurance industry,” he added.

Double-edged sword?

As with any inquiry, there is always the potential risk of unintended consequences emerging from the process, but in this case, McGovern thinks not.

We welcome the open dialogue,” he said. “I don’t think we go into this believing there is a downside risk for the industry here. The nature and tone of all of the conversations we’ve had with senior policymakers within the government, with senior parliamentarians is all around how do we help the industry take more opportunity.

“So I think the context is the right context. And we should be confident about what the London market can offer and welcome the opportunity to have that dialogue about setting the market up for success in a post-Brexit world,” he said.

Lords members have published a call for evidence and invited written evidence from interested individuals and organisations by 11 February 2022.