Lloyd’s of London will announce on Thursday that it has picked Brussels as the base for its new EU subsidiary to secure a European foothold after the UK’s departure from the EU.
The announcement by the world’s biggest insurance market will be made alongside the insurance market’s annual results, a day after Theresa May triggered article 50 to kickstart the process of leaving the EU.
Lloyd’s is expected to shift up to 100 jobs initially to Brussels from London, where it employs about 600 people. It has a global workforce of 900. It will hammer out the details of the move with regulators over the coming months, to ensure the new EU hub is up and running by the time the UK leaves the EU in two years’ time.
Lloyd’s headquarters will remain in London, but chief executive Inga Beale will regularly visit the new Brussels hub, alongside the market’s other overseas offices. The new subsidiary is set to be similar to its Dubai office, which serves clients in the Middle East and north Africa, and its China company based in Beijing, which operates with 26 underwriting divisions.
Lloyd’s is the first major UK financial institution that has chosen the Belgian capital as its EU base. The final choice came down to Brussels and Luxembourg, from a shortlist of European cities that at one time also included Dublin and Malta.
The decision was made by the Lloyd’s franchise board, which supervises and regulates the market, on Tuesday and was ratified by the council – its governing body – at a meeting a day later. Lloyd’s declined to comment.
Founded in 1688, Lloyd’s is the world’s oldest insurance market, where insurers do business via brokers. It began as a coffee house in the City where merchants and shipowners met.
The market’s chairman, John Nelson, told the Press Association last week that there had been “a lot of enthusiasm from a number of EU countries for Lloyd’s to come to their country”. He added that the reputation for regulation was an important factor in the selection process.
Lloyd’s wants to ensure that it can still serve its European clients. Its business with continental Europe amounts to nearly £3bn a year, or 11% of its premiums.
Nelson said Lloyd’s had no option but to take swift action. “We decided to move quickly and decisively because we are a market. And if our stakeholders felt that we weren’t going to be in that position, then you can imagine that the business might have walked – and the answer is, it hasn’t, and they’ve been consulted all the way through.
“Some of our managing agents, some of our big insurance companies are not taking decisions at the moment. They will have to fairly soon. But we have to. We have no choice,” he said.
Lloyd’s has been lobbying the UK government to safeguard passporting rights – which allow UK banks and insurers to conduct business in the other 27 EU states – for the organisation and its 97 syndicates.
Nelson said last week: “By going ‘onshore EU’ we might create more of an opportunity for ourselves in terms of increasing our franchise in the EU, which would be good. That’ll be a long-term aim rather than something that’s going to happen overnight.”
Frankfurt is becoming the preferred destination for many investment banks looking to move staff from London. Japanese banks Nomura and Daiwa are reportedly leaning towards the German financial centre.
Goldman Sachs, which employs 6,000 people in London, has said it would move hundreds of bankers to Frankfurt and Paris, while HSBC is on course to switch 1,000 investment banking jobs from London to the French capital. It already has a sizeable presence in France after buying Crédit Commercial de France in 2000.
American insurance giant AIG announced earlier this month that it would set up a new EU subsidiary in Luxembourg, where it already has a branch, to serve EU clients after Brexit.
Others like JP Morgan have not yet decided on a location – its chief executive Jamie Dimon has warned that up to 4,000 of its 19,000 UK staff could be relocated.