Around £61bn of insurance to migrate from London after Brexit, report finds
London insurers are transferring as much as £61 billion of business to other financial centres in the European Union, as a result of Brexit.
That’s according to a report from financial newswire Bloomberg, which says the migration of business is going on, regardless of the divorce terms.
The UK is due to leave the EU on October 31. However, the terms on which it will do so are far from clear. This week’s turmoil in the House of Commons could see Brexit delayed again. It had initially been scheduled to happen on March 29. Members of Parliament have now moved to prevent a “no-deal” Brexit and many of them would like to see the UK remain in the EU.
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, said Bloomberg.
The EU’s insurance and pensions regulator (EIOPA) has ordered every UK-based underwriter to transfer policies held by European clients to units on the continent, Bloomberg points out.
It says that the bulk of the liabilities have moved or is moving to Belgium, Luxembourg, Ireland and elsewhere. However, about £5 billion will still be in Britain if Brexit happens on October 31.
Lloyd’s of London, the world’s biggest insurance market, stands out as a laggard, says Bloomberg. Some £3 billion is in policies written there over the 25 years before it opened a Brussels subsidiary at the beginning of 2019. If the UK 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. Lloyd’s has said the liabilities will be transferred to the continent by October, 2020.
Lloyd’s has told its syndicates to honour all claims for continental clients following a no-deal Brexit.
Insurance companies that have yet to move their European business from the UK need explicit permission from authorities in each of the 27 other EU countries to service clients there. Without such approvals, the insurers can’t legally pay claims.
A spokeswoman for the EIOPA said the regulator would provide a country-by-country update soon, said Bloomberg.
Scott Farley, director of communications at the International Underwriting Association (IUA), told Intelligent Insurer that the distinction between existing and new business was important.
He said: “On existing contracts it is true that many have been transferred to new or previously established European entities to ensure that they can be properly serviced post-Brexit regardless of the final outcome. While there is no pan-EU solution to dealing with any contracts not transferred, individual national regulators have outlined transition plans to ensure claims can continue to be paid.
Farley added: “For new business, in the event of a no-deal Brexit companies will rely on their own individual contingency plans for a continuation of their service to clients under World Trade Organisation rules. Where local domiciled branches and subsidiaries within the EU 27 are established a popular model is to reinsure business back into London operations. Many IUA members, however, are London branches of EU insurers and these will still operate as normal thanks to the Bank of England’s Temporary Permissions Regime.”
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