02 September 2019

Bloomberg: Great Brexit insurance migration shifts $75 billion from London

As much as 61 billion pounds of business is shifting to rival financial centers in the European Union as a consequence of Britain’s vote to leave the bloc. And it’s happening regardless of the divorce terms.

The EU’s insurance and pensions regulator has ordered every U.K.-based underwriter to transfer policies held by European clients to units on the continent. While the bulk of those total liabilities -- the potential payout of all the policies, an industry gauge of scale -- has moved or is moving to Belgium, Luxembourg, Ireland and elsewhere, about 5 billion pounds will still be in Britain if Brexit happens Oct. 31, according to the Bank of England’s Financial Stability Report in July.

Lloyd’s of London, the world’s biggest insurance market, stands out as a laggard: About 3 billion pounds is in policies written there over the 25 years before it opened a Brussels subsidiary at the beginning of 2019. If Britain leaves the EU without a comprehensive agreement, Lloyd’s wouldn’t be able to guarantee that it could legally pay claims on those European policies. The institution says they will all be transferred to the continent by Oct. 31, 2020.

A Lloyd’s spokeswoman said EU member states have measures in place to ensure that 90% of the policies can pay out even after a disorderly Brexit. And Lloyd’s has told its syndicates -- the insurers that underwrite policies on its trading floor -- to honor all claims for continental clients following a no-deal divorce.

The longer-term impact of the shift will be both practical and symbolic, and it matters because London still accounts for as much as one-tenth of the world’s insurance and reinsurance market. Brexit has been chipping away at that role, and the decline could steepen. [...]

Insurance companies that have yet to move their European business from the U.K. need explicit permission from authorities in each of the 27 other EU countries to service clients there. Absent those approvals, the insurers can’t legally pay claims or provide other services.

A spokeswoman for the European Insurance and Occupational Pensions Authority said the regulator would provide a country-by-country update soon. [...]

Full article on Bloomberg

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