Lloyds of London, a long-time player in the insurance market in Britain, has decided that Brussels will be its headquarters for its European Union subsidiary. The reason cited for choosing Brussels was its strong regulatory framework.
This decision comes right after a day when British Prime Minister Theresa May executed Article 50 which signals the two-year countdown to Brexit. Lloyds was very vocal about its need to have an EU subsidiary once Brexit becomes a reality.
Lloyds of London Chairman John Nelson said, “We are a market, we are unique, we are not like an insurance company-we needed to find a regulator with the resources and the bandwidth to regulate the Lloyd’s market.”
Nelson said the Brussels office would employ staff in the fields of compliance and information technology. The Brussels subsidiary would also have its board of directors.
Lloyd’s has 700 employees in London and will commence their Brussels office starting January 1, 2019. Around 100 jobs from London could be shifted to the Brussels office.
Lloyd’s chief executive Inga Beale said, “I am excited about the opportunities this venture will offer the market by providing that important European access efficiently.
Lloyds Company said, “The company will be able to write risks from all 27 European Union and three European Economic Area states after the United Kingdom has left the EU, providing our customers and partners continued access to the innovative solutions of the Lloyd’s market.”
11% of Lloyd’s business comes from Europe excluding Britain. For 2016, Lloyd’s had a pre-tax profit of 2.1 billion pounds. However, stiff competition and natural catastrophes led to sharp drop in its underwriting profit from 2 billion to 500 million pounds. Claims skyrocketed due to wildfires in Canada, and from Hurricane Matthew. Fortunately, Lloyds enjoyed an increase in investment returns as well as Forex gains as a result of the collapse of the British pound due to Brexit.
Beale said that until 2019, there would be no major adjustments in its existing insurance policies. Beale said, “It is not crucial that the UK government and the European Union proceed to negotiate an agreement that allows business to continue to flow under the best possible conditions once the UK formally leaves the EU. I believe it is important not just for London but also for Europe that we reach a mutually beneficial agreement.”
Aside from Brussels, Lloyds was also considering Luxembourg, Dublin and Malta for its EU subsidiary office. The final shortlist was between Brussels and Luxembourg.
U.S. insurer AIG has decided it will set up its EU hub in Luxembourg while Lloyd’s insurer Hiscox will decide whether its EU office will be in Malta or Luxembourg.
Sarj Panesar, global head of business development for insurance at Societe Generale Securities Services, said, “The next question is how many of the other UK-domiciled insurers and reinsurers will follow. We can expect some to join Lloyd’s in Brussels.”
Lloyd’s started in 1688 in Edward Lloyd’s coffee house. It now houses over 80 syndicates in modern London. These syndicates offer specialist insurance and reinsurance in almost everything including athletes’ legs and offshore oil rigs.