Lloyd’s will plough on with its contingency plans to open a subsidiary within the EU regardless of the UK government’s position on Brexit, the corporation’s CEO Inga Beale said.
Ms Beale’s comments followed the landmark speech given by UK Prime Minister Theresa May in which she laid out her government’s strategy for Brexit negotiations.
Given Ms May’s hard line approach it now seems more unlikely that the financial services industry will be easily granted some form of exemption from the loss of passporting rights under Freedom of Services.
This means that UK-based insurers underwriting EU risks clearly need a backup plan. The obvious option is to create a subsidiary within the EU that is capitalised and managed according to Solvency II and other EU rules.
This will theoretically enable insurers and reinsurers currently based in London to retain the bulk of their activity such as underwriting, claims and processing in the UK, but source the business within the EU from the subsidiary office.
Lloyd’s made it clear very soon after the referendum result last summer that it intended to set up an EU subsidiary to protect its position. Reports based on anonymous sources within Lloyd’s suggest that the market has five places under serious consideration. These are reportedly Frankfurt, Paris, Dublin, Malta and one other, possibly the Netherlands. Luxembourg seems unlikely given the recent bad press generated by the domicile.
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