Market Overview

Best's Briefing: Insurers Step up Brexit Plans in Absence of Clarity

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In the absence of clarity as to what a future trade deal will look like
between the United Kingdom and the European Union, affected insurers
have accelerated their plans to establish new EU subsidiaries, according
to a briefing by A.M. Best. These subsidiaries will ensure that
they are able to underwrite EU business post-March 2019 or after any
formally agreed transition period. Small insurers that do not have the
resources to create additional companies are forming relationships with
local carriers that can front business for them in the EU.

The Best's Briefing, "Insurers Step up Brexit Plans in Absence of
Clarity" examines how insurers in the U.K. that access business in the
other 27 EU countries are putting in place arrangements to ensure that
they are able to provide insurance services in the EU post-Brexit. The
ability to continue to conduct cross-border business is a particular
concern for Lloyd's, the London market and other U.K.-based commercial
insurers. It is less of an issue for retail insurers as they principally
underwrite domestic business.

Catherine Thomas, senior director, analytics, said: "Insurers are also
addressing the possibility that, in the absence of a political solution,
companies in the U.K. that currently make use of passporting rights will
not be able to service claims on existing EU policies after Brexit. As a
contingency, a growing number of companies are exploring potentially
expensive Part VII transfers of existing EU business to their newly
created subsidiaries."

The briefing states the rationale for domicile choice has been driven by
the specific considerations of individual insurers, including proximity
to clients and the ability to attract talent, as well as the local tax
regime. The domestic regulator has also been important, particularly its
approach, expertise and accessibility. However, the principal driver of
domicile choice has been whether there is an existing operation, such as
a branch, in a particular location.

Yvette Essen, director of research, said: "To date, Luxembourg and
Ireland have emerged as the most popular locations for a new EU
subsidiary. However, no single city appears likely to challenge the
position of London as Europe's principal (re)insurance hub. London is
likely to remain one of the world's leading insurance centres, supported
by its pool of underwriting talent and access to related services."

To access a complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=276577.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
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ALL RIGHTS RESERVED.

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