Lloyd’s chooses Brussels as EU hub

Lloyd's will establish a new European subsidiary in Brussels to protect its EU business after Brexit. The announcement came just one day after the UK triggered Article 50 of the Lisbon Treaty that marks the start of a complex two-year negotiation on leaving the EU. Lloyd’s Brussels platform is intended to head off potential loss of passporting rights as the UK leaves the EU. In the absence of a new legal entity, loss of passporting rights would leave Lloyd’s unable to issue policies directly in Europe that accounts for £2.93bn, or 11, of its gross written premium. Lloyd’s said the new company will be ready to write business for the 1 January 2019 renewal season. It will write risks from all EU and European Economic Area states. Inga Beale, chief executive of Lloyd’s, said: “It is important that we are able to provide the market and customers with an effective solution that means business can carry on without interruption when the UK leaves the EU.” Lloyd’s also reassured buyers that, for now, it is business as usual at the 329-year-old insurance market. Despite the triggering of Article 50, the UK remains a full member of the European Union for at least two more years. As such, there is no immediate impact on existing policies, renewals or new policies, including multi-year contracts, written during this period of time, it said. The announcement on Thursday ends months of speculation over the possible location of the Lloyd’s planned EU hub. Brussels was chosen from a shortlist of six locations that included Luxembourg, Dublin, Frankfurt, Malta and Paris. Earlier this week Reuters reported that Lloyd’s had narrowed the field to Brussels and Luxembourg. Lloyd’s said that it opted for Brussels because of its strong regulatory framework. Dublin was the early favourite, but it is thought that Brussels and Luxembourg offered more flexible capital requirements, allowing Lloyd’s to reinsure more business back to London. “Brussels met the critical elements of providing a robust regulatory framework in a central European location, and will enable Lloyd’s to continue to provide specialist underwriting expertise to our customers,” said Ms Beale. Lloyd’s will of course need to staff its EU office, but it does not expect to transfer a large number of employees from London. The insurance market is likely to use the platform to push its brand in Europe. The decision to locate a subsidiary in Brussels is a positive sign of Lloyd’s commitment and ambitions in Europe, according to Andrew Holderness, global head of the corporate insurance group at law firm Clyde & Co. “The selection of Brussels as the location for its European subsidiary sends out a strong signal of intent that Lloyd’s is not only committed to protecting its existing EU business, but that it has ambitions to use this move as a springboard for further advances in the EU continental market,” he said. “Situated at the very heart of the EU, Brussels is a prestige location and while some of the other candidate cities looked good on paper in terms of more favourable regulation and tax treatments, Lloyd’s final decision will in part have been influenced by the capital efficiency of the proposed structure with the business being reinsured back into the London market,” he added. Earlier this year, Lloyd’s representative in France, Guy-Antoine de la Rochefoucauld, told CRE that Brexit could be “a real opportunity for Lloyd’s to improve its footprint in Europe and to be better recognised as a partner in Europe”. Speaking at the AMRAE conference, he said that Brexit will not affect the London-based insurance market’s ability to provide insurance to French companies. Lloyd’s is committed to bringing more capacity and service to the French market, he added. The decision by Lloyd’s is now likely to be followed by other London market insurers. At the start of March, AIG, which currently has its EU headquarters in London, said that it is setting up an additional subsidiary in Luxembourg. Lloyd's insurer Beazley has confirmed that it will open a subsidiary in Dublin, while Hiscox is said to be considering Luxembourg and Malta. Luxembourg and Dublin have both said that they have had a number of enquiries from London-based insurers. Lloyd’s intention to establish a subsidiary in Brussels is part of a contingency plan to deal with the risk of a hard Brexit, or the UK’s failure to get a favourable trade agreement. London market trade bodies are pushing for a trade deal that includes insurance, as well as regulatory equivalence. "It is now crucial that the UK government and the EU proceed to negotiate an agreement that allows business to continue to flow under the best possible conditions once the UK formally leaves the EU,” said Ms Beal. “I believe it is important not just for the city but also for Europe that we reach a mutually beneficial agreement. We stand ready to help and support the government as best we can,” she added. In March, the London Market Group (LMG) said that a trade deal that provides mutual benefits to both the UK and the EU is within reach. It would like to see a deal that gives EU and UK insurers, reinsurers and brokers continued rights to undertake cross-border activity. This week the British Insurance Brokers’ Association (BIBA) also urged its government to pursue a free trade deal. BIBA said that 5,727 EU-based insurance intermediaries possess passports to trade in the UK, which demonstrates the genuine need for mutual market access.

Lloyd’s chooses Brussels as EU hub

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