In the absence of clarity as to what a future trade deal will look like between the United Kingdom and the European Union, affected insurers have accelerated their plans to establish new EU subsidiaries, according to a briefing from ICMIF Supporting Member A.M. Best. These subsidiaries will ensure that these insurers are able to underwrite EU business post-March 2019 or after any formally agreed transition period. Small insurers that do not have the resources to create additional companies are forming relationships with local carriers that can front business for them in the EU according to the briefing.
The Best’s Briefing, “Insurers Step up Brexit Plans in Absence of Clarity” examines how insurers in the U.K. that currently access business in the other 27 EU countries are putting in place arrangements to ensure that they are able to provide insurance services in the EU post-Brexit. The ability to continue to conduct cross-border business is a particular concern for Lloyd’s, the London market and other U.K.-based commercial insurers. It is less of an issue for retail insurers as they principally underwrite domestic business.
Catherine Thomas, Senior Director, Analytics, said: “Insurers are also addressing the possibility that, in the absence of a political solution, companies in the U.K. that currently make use of passporting rights will not be able to service claims on existing EU policies after Brexit. As a contingency, a growing number of companies are exploring potentially expensive Part VII transfers of existing EU business to their newly created subsidiaries.”
The briefing states the rationale for domicile choice has been driven by the specific considerations of individual insurers, including proximity to clients and the ability to attract talent, as well as the local tax regime. The domestic regulator has also been important, particularly its approach, expertise and accessibility. However, the principal driver of domicile choice, according to the briefing, has been whether there is an existing operation, such as a branch, in a particular location.
Yvette Essen, Director of Research, said: “To date, Luxembourg and Ireland have emerged as the most popular locations for a new EU subsidiary. However, no single city appears likely to challenge the position of London as Europe’s principal (re)insurance hub. London is likely to remain one of the world’s leading insurance centres, supported by its pool of underwriting talent and access to related services.”
To access a complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=276577.
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. A.M. Best is also a longstanding Supporting Member of the International Cooperative and Mutual Insurance Federation (ICMIF). Visit www.ambest.com for more information.