Insurance Jottings
UK Financial Sector Wants Deeper EU Access Than Non-EU Countries After Brexit
Britain’s financial sector needs stability to secure its future, along with deeper access to the European Union market after Brexit than what non-EU countries normally get, a senior industry official said on the 30th January.
Britain is due to leave the bloc on the 29th March but has yet to agree the terms of its divorce after parliament two weeks ago rejected the deal negotiated by Prime Minister Theresa May with the EU. On the 29th January parliament told Mrs May to renegotiate aspects of her deal, although the EU has ruled out any changes.
“We want markets to continue to operate smoothly, without disruption,” said Paul Manduca, chairman of TheCityUK’s advisory council told the promotional body’s annual dinner.
“As we get closer to the 29th March the need for clarity is becoming ever more urgent.”
Mr Manduca, who also chairs insurer Prudential, said the financial sector wants market access for both Britain and the EU that has more “depth and certainty” than the bloc’s existing “equivalence” trading regime.
The EU is Britain’s biggest financial services customer.
“Any new arrangements should be as robust as the EU regime which we have helped build as members. But we must also have the flexibility to ensure our regulatory system reflects the unique aspects of the UK economy and the global opportunities ahead,” Mr Manduca said.
TheCityUK had proposed “mutual recognition,” a broad form of EU market access based on each side accepting each other’s rules.
Brussels rejected this proposal and instead offered equivalence, a patchier, less predictable system of market access whereby the EU alone decides if a foreign financial firm can serve customers on its turf in limited areas of finance.
Many banks, insurers and fund managers in London have instead opted to open hubs in the EU by March to avoid potential loss of access to continental clients.
Mr Manduca said that creating a stable and welcoming business environment and a globally competitive tax system will provide firms with the confidence they need to invest in Britain.
“We know markets take a long time to move elsewhere, but alongside the risks associated with Brexit, the large financial centres in Asia are rapidly emerging as genuine contenders to compete with us and New York,” Mr Manduca told the event, which was attended by British finance minister Philip Hammond.
(Article dated the 31st January)
Travelers gains approval for Brexit subsidiary in Dublin; names CEO
Property/casualty insurer Travelers Europe has set up a new subsidiary in the Republic of Ireland in response to Brexit, which will be led by James Liston as CEO.
The insurer said that it has received all approval from the Central Bank of Ireland and the new subsidiary is expected to commence writing business at the end of March 2019.
Based in Dublin, Travelers Insurance DAC will enable the company to continue to serve its customers and broking partners in Ireland and across Europe when the UK exits the European Union, as is currently planned on the 29th March.
Travelers said its significant UK-based operations, comprising its general insurance business and its Lloyd’s syndicate, will continue to operate under the existing UK licences.
“During the Brexit negotiations, our priority has been to ensure that we are positioned to continue meeting the needs of our policyholders who have assets and business across Europe,” said Matthew Wilson, CEO of Travelers Europe.
“The authorisation of our subsidiary means it will be business as usual for our customers and brokers, and we will continue to deliver the expertise they have come to expect from Travelers.”
Switzerland and UK agree post-Brexit pact
The UK and Switzerland have signed a deal to ensure insurance businesses from both the countries can continue to trade freely with each other after Brexit.
Existing EU trade rules will be replicated in the new UK-Swiss Direct Insurance Agreement, which was signed in Davos on the 25th January.
The deal, agreed by UK chancellor Philip Hammond and president of the Swiss Confederation and head of the Federal Department of Finance Ueli Maurer, will come into force when the UK leaves the EU on 29th March 2019.
Under the arrangement firms will still be able to branch into each other’s jurisdiction as both countries continue to recognise each other’s insurance regulations.
The UK government’s Treasury said: “It will therefore ensure continuity for UK and Swiss insurers to access each other’s markets both now and in the future, consistent with the terms of the original EU-Swiss Direct Insurance Agreement.”
Switzerland is important to the UK, the Treasury said, because in 2016 investment in the UK’s financial services sector by Swiss businesses was more than £11 billion “making the country one of the world’s largest investors in UK finance – second only to the USA”.
ABI and Swiss Re warn of Brexit threat to London
Although much has been done to ensure a smooth Brexit transition for the UK insurance sector, leaders in the industry warned that EU subsidiaries could take business from London “very quickly” after Brexit.
Speaking in a panel discussion at the Fitch Ratings Insurance Roadshow in London on the 24th January, Olga Tschekassin, economist at Swiss Re, noted that many UK businesses had set up branches as subsidiaries in the EU, which “in general is great for preparation” ahead of the Brexit deadline on the 29th March.
But,” she said, “what does it mean for the market and in the future? UK or EU business which has been written from the UK has moved to the EU branches. If you think about how much effort companies have put into setting up the branches it is very difficult to imagine, even if we get a close alignment with the EU, that those branches will not take over the EU business as well as the UK work.”
UK insurance businesses have been working to minimise the disruption to clients in the last two years and will continue to do, said Huw Evans, director general of the Association of British Insurers. But he questioned whether the UK could remain as central as it has been in the global insurance market.
“Most of these EU subsidiaries are there to ensure disruption to customers is minimised and have taken huge amounts of investment to set up over the past two years, they will develop a life of their own. They will be fully staffed and the people will live there and naturally they will want to make a success of it,” he said.
He went on to suggest that it will sap business away from London “very quickly”.
(Article dated the 25th January 2019)
According to The Times newspaper, financial services have already moved £800 million in assets including staff into the EU. The paper also noted that many American and Asian financial companies have used London as their gateway to the EU, propelling Britain’s status as Europe’s financial centre. No single European city has so far emerged as a rival because businesses are choosing different countries to move jobs to. The Times quoted a local expert who maintained that European competitiveness is undermined and jobs and economic activity will be sucked out of Europe entirely to places like New York, Singapore and Hong Kong.
North P&I Club secures Dublin nod for Brexit hub
Mutual marine liability insurer North P&I has received authorisation from the Central Bank of Ireland (CBI) to operate from Ireland, allowing it to implement its Brexit contingency plan.
The insurer has received approval to set up as a non-life insurance business in Ireland which will allow it to continue its European operations in the event of the loss of existing EU financial services ‘passporting’ rights when the UK leaves the EU on 29th March 2019.
The company’s head office in Dublin will be managed by a team of senior executives who have transferred from North’s UK headquarters in Newcastle. A total of eight people will be based in Dublin by mid-2019.
The company has appointed David Bruce, formerly North’s group financial controller, as the subsidiary’s chief executive officer. Richard Bracken has been named head of underwriting, and Geoff Potter as risk & compliance officer.
The board of North of England P&I DAC will include chairman Pratap Shirke, Paul Jennings & David Bruce as executive directors, Caitríona Somers & Rachel Panagiodis as independent non-executive directors, and Peter Johnson & Alexander Lynch acting as non-executive directors.
North said from the 20th February 2019, members and policyholders with an EEA (European Economic Area) place of management will be insured by North of England P&I DAC and all documentation for EEA insurance business (including certificates of entry and blue cards) will be issued and administered by that company.
The changes will apply to all classes of business previously underwritten by North and its subsidiary Sunderland Marine, including P&I, FD&D (Freight, Demurrage and Defence) and Hull. Members and policyholders with a non-EEA place of management will continue to be insured by North and Sunderland Marine.