Insurer Lloyd’s threatens to quit London
Fears are growing that London’s status as a financial centre will be undermined by uncertainty following the Brexit vote.
September 6, 2016
Three and a bit centuries after Edward Lloyd’s coffee house became a hub for maritime information in the City of London, insurance brokers may have to pack up and go elsewhere.
Speaking last night about the impact of Britain’s decision to leave the European Union, John Nelson, chairman of Lloyd’s, proclaimed that “we are not simply Lloyd’s of London, we are Lloyd’s. We are local to the territories and cities we now operate in.”
His warning further stoked the debate about passporting rights, which give banks and insurers the opportunity to do business anywhere in the EU without having to meet local regulations or hold capital or incorporate locally. Mr Nelson said unless a clear direction of travel was established towards passporting, that “would mean business leaving London more quickly than the renegotiation timetable”.
His comments, in his last speech as chairman of the insurance market, are the strongest sign yet that London’s status as a financial centre will be undermined by uncertainty over financial passports after the Brexit vote.
“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,” he said at the Lloyd’s City dinner.
Many companies, including those from outside the EU, such as Swiss Re, use London subsidiaries to gain access to the EU through Lloyds because they do not enjoy the benefits of passporting. The insurance industry fears that such transactions could move to cities such as Dublin or Paris.
Charles Portsmouth, an insurance specialist at Moore Stephens, the accountancy firm, said: “It possibly means capital and jobs moving to a different location in Europe.”
Mr Nelson told BBC Radio 4’s Today program that Lloyd’s would feel no impact itself. “The loser will not be Lloyd’s or the industry; sadly, it will be London. There will be bits of business where it will be better for us and more efficient for us, if we don’t get single market access, if we write it in the EU. Insurance business is quite mobile. If there is uncertainty for a prolonged period of time, then the industry will vote with its feet and we will be in that.
“If we do not see a clear direction of travel, we will have to invoke our contingency plans and that would mean business leaving London more quickly than the renegotiation timetable. ”
Prime Minister Theresa May signalled last week that she would place control on immigration above participation in the single market. Philipp Hildebrand, a former head of the Swiss central bank, warned the government against using Switzerland’s relationship with the EU as a template. “We have not been able in any way to regain any sovereignty on immigration. And we have no financial services agreement, despite the fact that we’ve negotiated for ten years,” he told the FT Weekend Live Festival. “Don’t believe you’ll get anything else.”
Philip Hammond will hold formal talks with City bosses tomorrow amid the intensifying debate about passporting. The chancellor will meet chairmen including Douglas Flint, of HSBC, Sir Gerry Grimstone, of Standard Life, and Baroness Vadera, of Santander UK, according to Sky News.