LONDON — The tiny state of Luxembourg is fast becoming the go-to destination for UK insurers looking to set up subsidiaries in the European Union after Brexit, with several more firms eyeing the country as a possible location, the head of the country’s finance lobby claimed.
Nicolas Mackel, the head of Luxembourg for Finance, a lobby group promoting Luxembourg’s credentials as a financial centre, believes that more insurers will announce plans to open EU offices in the state, but says Brexit does not mean a battle to “catch them all,” alluding to popular game series Pokemon.
Quoted in The Daily Telegraph, Mackel said that he expects “at least two or three more insurance companies” to announce a new Luxembourg office by the summer, but admitted that he has been surprised by the interest in the country as a location for insurers looking for a new EU subsidiary. As many as 2,000 jobs could be created, Mackel said.
Last week, Hiscox — the firm well-known for covering high net worth clients — became the third major insurer to announce a new EU office in Luxembourg, following global giant AIG and the fellow US insurer FM Global into the country.
In announcing its decision on May 9, Hiscox cited Luxembourg’s “pro-business position, strong financial services experience and well-respected regulator,” adding that it is also “close to many of our major markets.”
Several UK-based ship insurers are reportedly making plans to set, while Royal Sun Alliance (RSA) is “still exploring its options,” but is expected to announce a new EU base.
While much of the focus on the future of the City of London since Britain voted to leave the EU has been on banks, insurers are also set to be heavily impacted by the expected loss of financial passporting once Britain leaves the European Single Market.
The passport is a system of common financial rules that allow UK based financial firms to access customers and carry out activities across Europe. The Financial Conduct Authority (FCA) said last year that 5,500 UK companies rely on passporting rights, with a combined revenue of £9 billion.
Without it, doing business in the EU from London will be very tricky, so plans are being put in place for establishing or extending European offices to cope with the looming rule changes.