Lloyd’s will soon unveil a new operating model for Europe that will see a “big investment” in the continent, according to its chief of markets Patrick Tiernan. He described the move as the “launch” of Lloyd’s’ European business rather than a rebuild.
Speaking at a press event yesterday, Tiernan said Lloyd’s is “on track” to deliver its new operating model for Lloyd’s Europe by the end of the first quarter.
“The completion of this build phase will allow us to focus on servicing new and existing customers. We look forward to complimenting the existing market with innovative and specialty insurance products, for which Lloyd’s is valued throughout the world,” he said.
“I see this as less of rebuilding Lloyd’s – it’s launching our European business. This is a big investment in the European customers of Lloyd’s, and Amelie Breitburd [Lloyd’s Europe chief executive and director of Lloyd’s in the EMEA region] and the whole team in Lloyd’s Europe are thinking about how we will do things differently and how we can be increasingly relevant across the continent of Europe and Ireland,” Tiernan added.
Lloyd’s’ operating model in Europe has experienced regulatory challenges following Brexit and the adoption of Recommendation 9 by European regulatory body EIOPA.
The recommendation, which is EIOPA’s interpretation of the EU’s Insurance Distribution Directive (IDD), said intermediaries carrying out distribution activities to EU policyholders seeking cover for EU risks must be established and registered in the EU. The interpretation also affected the administration of Lloyd’s’ legacy business that was going to be transferred to Lloyd’s Europe under its ‘Part 7’ scheme.
The loss of passporting rights following Brexit meant that UK insurers like Lloyd’s were no longer able to underwrite EU risks directly from London. In order to service EU customers post-Brexit, the market therefore established Lloyd’s Insurance Company (Lloyd’s Europe), an insurance and reinsurance subsidiary based in Brussels and authorised and regulated by the National Bank of Belgium (NBB). Lloyd’s Europe has 18 branches across the EEA and a branch in the UK.
However, soon after establishing Lloyd’s Europe, the market was forced to amend its plans in order to comply with European regulation. In March 2020, the market said Lloyd’s Europe would no longer be able to accept new business from UK-regulated brokers and coverholders, where both the risk and policyholder are located in the EU. The change was effective from 1 October 2020.
Lloyd’s said at the time that EIOPA’s interpretation was “contrary to previous understandings of the IDD”. It noted that many UK brokers would find it difficult to continue operating in the EU. It added that Recommendation 9 would mean a number of UK coverholders and brokers would have to cease dealings with Lloyd’s Europe for EU risks and clients.
“From 1 October 2020, if you are a UK-authorised broker you will only be able to place business with Lloyd’s Europe if the policyholder is not from an EU member state or the risk location is outside the EU. Coverholders similarly can only bind risks if these requirements are met,” Lloyd’s said in 2020.
Lloyd’s said it made the change to ensure that Lloyd’s Europe remained compliant with the requirements of the Belgium Financial Services and Market Authority and the NBB in their adoption of EIOPA Recommendation 9.
But Lloyd’s is now set relaunch its European business under a new model that will hopefully better deliver for EU policyholders.