Inga Beale, CEO
A tit for tat trade war has kicked off between the US and China. In the global economy we should be breaking down barriers to international trade not introducing new tariffs in an attempt to protect home grown industries. This is the antithesis of a global economy. To be successful companies need the freedom to trade with the world openly.
And as we seek to establish a more global post Brexit Britain, it’s important that we are able to expand on our existing business relationships with the rest of the world and forge new partnerships. This week’s Commonwealth Heads of Government summit offers us an ideal opportunity to do just that.
We live in a digital age so this can’t be about planting flags. The internet has opened up new opportunities to reach customers practically wherever they are. Most truly international companies still prefer to have a local presence of some sort, but not everyone needs to build a physical presence worldwide to reach customers anymore. In fact, online platforms offer advantages over traditional distribution networks, combining ease of use for the customer with cost efficiencies.
But this can’t be just one way traffic. International trade is about mutual respect and a growth dividend for all. As Britain looks to refresh ties with the 52 other heads of Commonwealth nations this week we would do well to remember that.
In the insurance sector we need capital to flow quickly and easily both ways across borders in order to spread risk and pay claims quickly. This benefits both sides. A good example of this is the recent decision by General Insurance Corporation, India’s state backed reinsurer, to create a syndicate at Lloyd’s. The first to be fully backed by capital from India.
Not only does this offer one of India’s largest insurance groups the opportunity to diversify its international business and grow in new lines of specialty risk, where Lloyd’s thrives, but it also improves our ability to access and understand India’s market and the needs of customers there.
Furthermore, our research suggests a 1% increase in insurance penetration is linked to an average increase in per capita GDP of around $6,000. So by diversifying risk between our countries we are helping to strengthen both our economies – and in so doing we build and preserve common wealth.
The mutual benefits of diversification are self-evident when it comes to insurance, which helps protect people against unexpected shocks. Take natural disasters, which affect 28 million people in the Commonwealth each year, causing almost $8 billion in losses, according to the UK government. By transferring these risks onto the balance sheet of an insurer, and away from the government or the tax payer, we can help build up resilience to extreme events, like a terrorist attack or a crop devastating drought, particularly in fragile economies.
Going back to the example of India again, the rising threat of natural disasters posed by climate change combined with a generally low level of insurance makes things like crop insurance – which helps protect against seasonal variations in crop yields – a top priority.
Last week, Swiss Re, a big global insurer, said that 2017 was the single worst year ever for natural catastrophes. In 2017 losses to the insurance sector amounted to $144 billion, it said, significantly more than the previous ten year average figure of $58bn, and 2016’s figure of $56bn. No wonder that countries like India are looking to ensure they are fully protected against major catastrophes in the future. And UK insurers can help.
The Lloyd’s market has been successful over the years because of its global outlook and its appetite for new risks. This is where the world comes when it wants to find someone with the expertise and financial strength to underwrite a complex risk.
We have also benefitted from Britain’s role as a leading advocate of free trade and major international player with a global outlook. We can’t lose sight of this. Retreating into protectionism is not the answer.
For Britain to continue to succeed post Brexit we need to reach out to the global marketplace, which is why I look forward to next week’s summit and even closer ties with our Commonwealth nations.