UK Marine Insurers Prepare for Brexit
North P&I Club and subsidiary Sunderland Marine said Monday that they are preparing to launch an Irish division in order to ensure that they continue to have access to European markets after Britain exits the EU. The two marine insurers join a growing number of UK financial institutions that are taking steps to insulate themselves from the risk of losing their European accounts after the Brexit process finishes in 2019.
Like many British financial institutions, North and Sunderland Marine rely on EU "passporting" rights to insure client risks that are within the European Economic Area. Details of the future UK/EU trading relationship and its implementation are under negotiation between the EU and the UK government. However, North expects that its passporting rights will ultimately be lost, either immediately or at the end of some agreed transition period.
On Monday, EU lead Brexit negotiator Michel Barnier took a hard line on passporting rights, saying that "Brexit means Brexit" for every industry. "On financial services, UK voices suggest that Brexit does not mean Brexit. Brexit means Brexit, everywhere," he said. "The legal consequence of Brexit is that the UK financial service providers lose their EU passport."
Given the possibility that passporting rights could be lost as early as March 29, 2019 – the date of expiration of a two-year notice period – North's board voted early this month to establish a subsidiary insurance company in Dublin to underwrite all of its future European Economic Area business, beginning on February 20, 2019.
North's reasons for choosing Ireland include the regulatory, legal and taxation framework, which is similar to the UK system that North currently uses; a mature regulatory system with experience in the supervision of Solvency II insurance companies; a strong talent pool; easy travel to and from the home office; and the ability to conduct business in English.
The move echoes an earlier announcement from Lloyd's London that the storied British insurer will set up a Brussels subsidiary to handle its future European accounts. Lloyd's said that it chose Brussels for its robust regulatory framework, its central location in the EU and its international talent pool.
“It is important that we are able to provide the market and customers with an effective solution that means business can carry on without interruption when the UK leaves the EU," said Lloyd's CEO Inga Beale in an announcement in March.