Lloyd’s chief executive Inga Beale says move will ensure business can carry on without interruption when UK leaves EU
Lloyd’s of London aims to have a new Brussels office up and running by the middle of next year, after the insurance market failed in its efforts to secure “passporting” rights for financial companies to conduct business across the EU after Brexit.
The world’s biggest insurance market confirmed on Thursday it would set up a subsidiary in the Belgian capital, which would allow it to continue underwriting insurance policies from all 27 EU and three EEA states after the UK leaves the union.
Lloyd’s has been lobbying the UK government to guarantee passporting rights, which allow UK banks and insurers to do business in the rest of the EU, but felt that “the chances are lower than they were” and decided it could wait no longer.
Inga Beale, the Lloyd’s chief executive, said this would ensure that business can carry on without interruption when the UK leaves the EU. The move, which was announced alongside the group’s annual results, came a day after Theresa May triggered article 50 to kickstart the two-year process of leaving the EU.
Beale said Lloyd’s had plumped for Brussels because of its “really robust reputation for regulation”, access to multilingual talent and the ease of travelling there from London. Another factor was the likelihood Belgium will remain in the EU – which was one of the factors that counted against Paris, she said.
The new subsidiary will have its own board and employ about 60 staff initially, including people already working in Germany and Italy. About 10 to 20 staff will be based in Brussels at the start, including the chief executive of the new business. Beale said the “odd job” might move from London – for example, people who have European roles.
Beale explained that because it took time to set up a new company and many commercial insurance policies were renewed at the start of January, Lloyd’s had to act now to ensure its Brussels subsidiary was up and running by the middle of next year. But if passporting rights were guaranteed, “we would not require an EU subsidiary”, she said. It would also benefit EU firms doing business in Britain.
She warned that though the UK was expected to leave the EU in two years, there would be “years and years of negotiations and planning to do”.
Lloyd’s employs about 700 people in London out of global workforce of 1,000.
Beale said Lloyd’s had picked Brussels out of a long list of options that included Dublin and Malta, and stressed that it was “not a simple decision”. The Belgian capital trumped Luxembourg, where a number of global insurers have a presence, because Brussels has a bigger domestic insurance market, among other things. But she did not expect Brussels to become a specialist centre for insurance – London will retain that crown.
Special tax deals did not play a role in the insurance market’s decision, she added, saying: “Tax wasn’t one of the key factors.”
At Lloyd’s, 11% of premiums are with EU clients, but only half of that – about £1.5bn – is at risk from Brexit. Only simple insurance products will be affected, but not big reinsurance contracts and specialist insurance such as marine and aviation, Beale said.
Other UK insurers are preparing to shift operations to continental ###a href="https://www.theguardian.com/world/europe-news" data-link-name="auto-linked-tag" data-component="auto-linked-tag" class="u-underline">Europe. “Some will go to Dublin and Luxembourg, some may even go to Malta,” Beale said.
Royal London Mutual Insurance Society will turn its Irish business into a regulated subsidiary so it can continue to sell products across Europe after the UK loses access to the single market, its chief executive, Phil Loney, said on Thursday.
AIG, the US insurance company, announced this month that it would set up a subsidiary in Luxembourg, where it currently has a branch. Goldman Sachs is to move move hundreds of bankers to Frankfurt and Paris, while HSBC wants to switch 1,000 investment banking jobs from London to the French capital.
Beale stressed it was crucial for the UK and the EU to “negotiate an agreement that allows business to continue to flow under the best possible conditions once the UK formally leaves the EU”.
Lloyd’s reported a £2.1bn pre-tax profit for 2016, the same as in 2015. It had £2.1bn of major claims, the fifth-highest since the turn of the century, mainly because of Hurricane Matthew, which hit the Caribbean and the east coast of the US, and the Fort McMurray wildfire in Canada.
A lower underwriting result was offset by significantly improved investment returns, driven by a downward yield shift in bond markets, and foreign exchange gains, mainly caused by the pound’s slide since the Brexit vote.