By Inga Beale, Lloyd's Chief Executive
With the passing of one year since Article 50 was triggered, and one year to go until the UK formally leaves the EU, the future of Britain’s financial services sector’s relationship with the single market remains worryingly uncertain.
Our preferred option for the separation is continued, uninterrupted cross-border market access between the UK and the EU so that we can continue serving our customers as we have done for hundreds of years. We are in frequent communication with the UK government proposing these considerations are reflected in the eventual agreement.
Although the proposed political deal on transitional arrangements will avoid a looming cliff edge for businesses at the end of March 2019, knowing the details of a longer term partnership remains critical to financial services and the insurance sector. Our message is clear: we continue to move ahead with our plans to have our Brussels subsidiary ready to write EU27/EEA business from January 2019.
In May 2017 I stated that the uncertainty around what the future holds in terms of trade across Europe was pushing companies to move forward with their contingency plans to provide continuity of service to customers via alternative means. One year into the two-year withdrawal process triggered by Article 50, contingencies are fast becoming certainties. It is very clear that, regardless of what is decided in the political arena, companies must take their futures into their own hands, and Lloyd’s is no different.
One of the major concerns is the fate of existing policies issued both in the UK and also across the EU27 after Brexit. We intend to ensure that all contracts entered into by the Lloyd’s market with EU27 customers will remain fully serviced in the future both pre and post Brexit. However, European regulators must agree on how these policies will be handled.
Transferring these contracts to new entities would be an unnecessary expense for all, and certainly doesn’t benefit the end customer. With an estimate of 6 million UK policyholders and 30 million policyholders across the rest of the EU likely to be affected, this is an urgent and critical issue that needs a resolution.
As an organisation that prides itself on managing risk, we have found ourselves managing the potential risks that may arise as a result of Brexit. Scenarios as broad as a deal is agreed to no deal, soft Brexit to hard Brexit, Customs Union to World Trade Organisation rules, mean that this is a very uncertain time. We have therefore focused on providing certainty for our customers and partners.
Sectors like insurance face greater challenges than most. To provide our products we rely on local licences from regulators in each jurisdiction we operate in. In one year, the UK will leave the EU and we may not be licensed to operate in the EU27. That is why we are setting up our subsidiary in Brussels, which will be operational in January 2019, enabling Lloyd’s to continue providing insurance for all our customers in the EU27/EEA area.
However, we also see this as an opportunity, not just a risk that needs to be managed. The EU is an important market for Lloyd’s, and our customers will continue to have access to our specialist, innovative policies, and benefit from the security of the Lloyd’s market. We believe that being at the heart of Europe will deliver many different advantages for our customers and provide an opportunity for us to continue to grow our business in the continent.
As we know customers value local knowledge and risk understanding, Lloyd’s Brussels will offer EU27 customers a locally staffed, locally regulated and locally capitalised insurer. Lloyd’s will be more accessible than ever to our EU27 customers.
For those looking to cover large complex risks, access to substantial limits backed by the financial security, expertise and know-how of the Lloyd’s market will continue. Meanwhile, Lloyd’s Brussels is expected to increasingly cater for less complex risks within the local markets - helping these markets grow and develop.
For hundreds of years, people around the world have turned to Lloyd’s for innovative and specialist solutions. Lloyd’s has always been seen as a marketplace that is constantly changing and adapting. And this is the approach we are taking now. Working with the latest technology, expertise and talent in the market, Lloyd’s will continue to deliver re/insurance products to all customers in the most streamlined, efficient and cost-effective way possible.