Insurers moving little personnel out of the UK in Brexit move
Insurers based in the UK are creating new entities in the EU to ensure access to the market after Brexit, but the move is set to involve low numbers of staff, Standard & Poor’s suggested in a May 16 briefing in London.
Brexit has been a great disruption for insurers in terms of cost and management time, said Mark Nicholson, director insurance ratings at S&P. Insurers are following the logic of a “hard Brexit” and setting up subsidiaries on the continent, he explained.
Lloyd’s of London, for example, has selected Brussels as its new EU hub location.
American International Group (AIG) has announced its plan to locate an insurance company in Luxembourg.
After a majority in the UK voted in favour of leaving the EU in a June referendum, the re/insurance sector in the UK has been particularly worried about the possibility of losing its passporting rights. The mechanism provides a company authorised in one member state the ability to conduct cross-border business without being required to apply for any additional authorisation or hold assets locally.
Frankfurt, Luxembourg, Paris and Dublin have been lobbying to attract business from London.
There are around 700 insurers in the UK using the passport option, Nicholson said.
“When we talk to insurers about them relocating to different centres, generally the number of personnel tends to be relatively low,” Nicholson said.
Lloyd's, for example has said that the headcount for its new EU operation will be in the “tens, not the hundreds,” with some people moving from London and some recruited locally.
While some legislative developments in the UK such as changes to the taxation on the life side and on the non-life side on competition or whiplash in motor might be slowed as the government tackles Brexit, a Scottish independence referendum may cause some major disruptions in the sector if it results in a majority for the separation.
The impact would be particularly felt in in the life sector, according to S&P. “If you have existing life companies having to split their back books with potentially different currencies or different tax systems, that could be extremely fiddly indeed,” Nicholson said.
Did you enjoy reading this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.