The EU’s insurance and pensions regulator has ordered every U.K.-based underwriter to transfer policies held by European clients to units on the continent. While the bulk of those total liabilities — the potential payout of all the policies, an industry gauge of scale — has moved or is moving to Belgium, Luxembourg, Ireland and elsewhere, about 5 billion pounds will still be in Britain if Brexit happens Oct. 31, according to the Bank of England’s Financial Stability Report in July.

Lloyd’s of London, the world’s biggest insurance market, stands out as a laggard: About 3 billion pounds is in policies written there over the 25 years before it opened a Brussels subsidiary at the beginning of 2019. If Britain leaves the EU without a comprehensive agreement, Lloyd’s wouldn’t be able to guarantee that it could legally pay claims on those European policies. The institution says they will all be transferred to the continent by Oct. 31, 2020.

A Lloyd’s spokeswoman said EU member states have measures in place to ensure that 90% of the policies can pay out even after a disorderly Brexit. And Lloyd’s has told its syndicates — the insurers that underwrite policies on its trading floor — to honor all claims for continental clients following a no-deal divorce.

The longer-term impact of the shift will be both practical and symbolic, and it matters because London still accounts for as much as one-tenth of the world’s insurance and reinsurance market. Brexit has been chipping away at that role, and the decline could steepen.

A chaotic departure from the EU is looking more likely after Prime Minister Boris Johnson asked Queen Elizabeth II to suspend Parliament until mid-October, making it harder for opposition politicians to block a no-deal Brexit. That prospect has convulsed the pound: The currency has weakened more than 8% against the dollar since its mid-March peak, when an accommodation with the EU seemed more likely.


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