HIS Fairplay has published the below report indicating that London Marine insurers look to European bases after a hard Brexit outcome appears likely after Theresa May’s speech on 17 January;
UK prime minister Theresa May’s speech on the country’s strategy for its departure from the European Union is set to prompt a move by marine insurers to establish new operations outside of London.
May said on Tuesday 17 January that while the UK will seek a trade deal it will not remain part of the single market and the EU customs union. The passporting rights that allow London marine insurers access to write business across the EU member states will end as a consequence.
The London market had fought to put those passporting rights at the heart of any Brexit deal, but the news that they are to end has allowed underwriters to prepare for the UK’s departure in 2019.
The Lloyd’s market has said it will announce the preferred site for a new European subsidiary next month with Paris and Frankfurt seen as the two leading options.
Protection and indemnity clubs have already been working with advisers to identify the most suitable jurisdictions for European operations and the expectation is that those plans will now be intensified following May’s speech.
However, market analysts believe that the plans laid out in Tuesday’s speech will also have a benefit for the market.
Ivor Edwards, corporate insurance Partner at law firm Clyde & Co, said, “Her specific focus on maintaining freedom to provide financial services across borders and talk of a phased approach will be welcomed by insurers and other financial services firms, all of whom crave clarity, stability and a sense that their interests are being represented. On that basis, many will simply be relieved that the phoney war is nearly over.”
He added, “The insurance industry in the UK is large and robust and will survive Brexit. But it won’t be unaffected or remain unchanged. Whatever the precise outcome of negotiations, insurers won’t wait and see. Planning for Britain’s exit from the EU is well under way as insurance carriers believe they need to take concrete steps for all eventualities by setting up carrier companies in EU27 countries.
“It’s not only UK-based companies that are affected and who are making plans. There are over 500 general insurance companies headquartered in continental Europe who passport into the UK that need to take steps too.”
Sian Hill, head of Brexit for Insurance, KPMG UK, said, “Theresa May has made her intentions quite clear. Through the past months of uncertainty, UK insurers have been preparing for this outcome and putting plans in place for life after a ‘hard Brexit’. It will throw up challenges but opportunities could also arise from increased competition and a need for new products.”
One Lloyd’s underwriter told IHS Fairplay, “The speech was watched by those in the market yesterday and the view is one of relief that we now know what we are facing. The challenge now is to get everything into place for the day the UK leaves the EU. However, we are pleased that there was mention of a transitional phase rather than a single big bang cut-off date.”
SOURCES: HIS FAIRPLAY / JON GUY | IMAGE: AP