The chairman of Lloyd’s has warned that the London-based insurance market could move some of its operations to other parts of the European Union if it loses access to the single market.
Speaking at Lloyd's annual dinner, John Nelson said passporting rights, which allow UK-based companies to sell services across the EU, were "fundamental".
Mr Nelson’s comments were made amid a growing debate on whether the UK should pursue a “soft” exit, in which businesses would retain access to much of the single market, or a more comprehensive “hard” exit.
Fundamental
“At Lloyd’s we are very much of the view that retaining access to the EU single market is fundamental, not just for Lloyd’s but for the City in general,” he said.
“If we are not able to access the single market, either through passporting rights or other means, the inevitable consequences for Lloyd’s – and indeed other insurance organisations – will be that we will transact the business onshore in the EU and that obviously will have an impact on London.”
The London commercial insurance market, which includes Lloyd’s, employs 50,000 people and contributes more than a fifth of the City’s gross domestic product. Mr Nelson, who is due to step down as chairman next year, stressed that Lloyd’s would continue be based in London.
Lloyd’s itself is not a company but a market where insurers sell policies to customers via brokers. Lloyd’s network of licences around the world – including passporting rights in the EU – mean it is a convenient place for insurers to do business.
About 11 per cent – or £3 billion – of the market’s premiums come from the EU, although not all of that is likely to be at risk if passporting rights disappear.
Contingency plans
Many of the insurers that operate at Lloyd’s have been drawing up contingency plans in the event that the UK loses access to the single market. Most are considering setting up new subsidiaries elsewhere, with Dublin a particularly popular alternative location.
Lloyd’s is also considering its options even though, since it is a market rather than a conventional company, its regulatory challenges are more complex. However, Mr Nelson said: “We are fortunate at Lloyd’s to have one of the most experienced teams in the world focused on acquiring and defending licences worldwide.”
Mr Nelson told the BBC's Today programme that the British government needed to make its position clear soon. "The insurance business is quite mobile," he said. "If there is uncertainty for a prolonged period of time the industry will vote with its feet. We'll be in that. If we don't see a clear direction of travel we'll have to invoke our contingency plans." – (Copyright the Financial Times)
