Lloyd’s to create EU unit in 2017

Lloyd’s of London is set to create a subsidiary elsewhere in the EU in 2017 as a response to uncertainty created by the EU referendum.

The result of negotiations to leave the EU could make it more difficult for UK businesses to access markets in the EU. Market participants fear that the UK may lose its passporting rights to do business in the EU without having to create a subsidiary.

In 2015, the EEA (European Economic Area) accounted for £2.93 billion or 11 percent of Lloyd’s gross written premium. Lloyd’s has said that 4 percent of its £26.6 billion global gross written premium is likely to be affected by the UK’s withdrawal from the EU’s single market.

In order to secure access to the EU market, many re/insurers are looking at creating a subsidiary elsewhere in the EU and transfer business to the new unit.

“Following the referendum we committed to looking at the options that would allow the Lloyd’s market to continue trading seamlessly with the EU. This included establishing a subsidiary model amongst others,” a Lloyd’s spokesperson said.

“We will continue to develop our plans on creating a subsidiary and will provide a detailed update to the market on the progress we have made early next year.

Potential locations for such a subsidiary are Dublin, Frankfurt and Paris, all of which have been lobbying to attract business from the UK after the Brexit vote. The move is set to cost Lloyd's tens of millions.

The Financial Times had reported first that Lloyd’s is set to choose a destination from a short list of five cities and is likely to put a proposal to its members by February 2017. Lloyd’s could not confirm which cities are included in the list.

After a subsidiary has been created, syndicates will decide on how much business they will want to transfer to the new location and seek regulatory approval for the move.