A number of UK insurers and reinsurers have established new EU hubs to ensure continuity post-Brexit amid a real lack of clarity, with the new domicile of choice being driven by specific considerations, according to A.M. Best.
UK insurers and reinsurers continue to move forward with their post-Brexit plans amid ongoing confusion and a real need for continuity as the March 2019 deadline fast approaches.
According to A.M. Best, the rationale for domicile choice varies, and while Luxembourg and Ireland have emerged as the most popular locations for re/insurers’ new EU subsidiaries, no single city looks likely to challenge London as Europe’s main re/insurance hub.
“Domicile choice has been driven by the specific considerations of individual insurers, including proximity to clients, the ability to attract talent, an existing presence in a location, as well as the local tax regime. The domestic regulator has also been important, particularly its approach, expertise and accessibility,” explains A.M. Best, in a recent note on insurers Brexit plans.
The ratings agency states that one of the main drivers of domicile choice has been whether or not the company has an existing operation in a region, as can be seen with both Amlin and QBE, who both selected Brussels, where they have an existing presence.
The same applies to Aspen, Beazley, and XL, which all chose Dublin, underpinned by the fact they have a presence there already. While Chubb chose Paris for the same reason, and Markel selected Munich.
A.M. Best expands on this, highlighting sound rationale for such an approach: “Where companies have established branches or a material presence in a particular market, it is usually because they believe it will help them access attractive business. In addition, they will already have underwriting talent and infrastructure in place at that particular location, and they will usually have a relationship with the local regulator.
“These are important considerations in view of the operational and capital costs they will incur in establishing an additional subsidiary.”
However, in a situation where a company does not have an existing EU operation, Luxembourg is proving to be an attractive domicile, which A.M. Best says is aided by the country’s regulator, the Commissariat aux Assurances, being viewed as business friendly and efficient.
But regardless of the location of the new subsidiary, A.M. Best says that it expects these operations to be small relative to the insurer or reinsurer’s UK operations.