Lloyd’s of London, the insurance market founded in the British capital in 1688, plans to open a European Union hub in Brussels following the U.K. vote to leave the bloc.
The company expects the office to be open by the beginning of 2019, it said in a statement on Thursday. Headcount for the new operation will be in the “tens, not the hundreds,” with some people moving from London and some recruited locally, Chairman John Nelson said in a Bloomberg TV interview.
British companies and international financial firms are considering how to continue serving European clients should the U.K. withdraw not just from the EU, but also from its single market and customs union. Inga Beale, chief executive officer of Lloyd’s of London, said in January she would push ahead with plans for a European headquarters outside of Britain after U.K. Prime Minister Theresa May stated the case for a so-called hard Brexit.
“Brussels’ position as a financial center is improving, which could inspire other insurers and specialized financial institutions for which Brussels already has a strong tradition,” Belgian Finance Minister Johan Van Overtveldt said, according to Belga newswire.
Belgium’s regulatory regime and an existing insurance talent pool in Brussels influenced the company’s decision to place the hub in Brussels, which is “at the heart of the EU,” Nelson said in the interview. Lloyd’s of London took a close look at five or six countries, he said.
American International Group Inc., the global provider of commercial property-casualty coverage, said on March 8 it plans to open an insurer in Luxembourg to write business in the European Economic Area and Switzerland after Brexit. AIG currently writes business in Europe from a single insurer based in the U.K. Lloyd’s of London insurer Hiscox Plc. has said it will choose between Malta and Luxembourg, while Beazley Plc has said it will turn its Dublin-based reinsurance operation into an insurance subsidiary.
As a market for risk coverage, Lloyd’s of London doesn’t underwrite insurance itself, but rather through about 100 registered syndicates. About 11 percent of its volume come from EU countries outside of the U.K. and Lloyd’s of London will still be able to underwrite some of that business from the British capital, Beale said.
Full-year pretax profit was unchanged at 2.1 billion pounds ($2.6 billion), Lloyd’s of London said Thursday. The company’s return on capital was 8.1 percent compared with 9.1 percent a year earlier, while gross written premiums increased to 29.9 billion pounds from 26.7 billion pounds in 2015.
Setting up a hub on the continent may have unexpected benefits for Lloyd’s of London, allowing it to expand into EU markets more deeply, Nelson said.
On Brexit “we’re very pleased that the country is getting on with the negotiations” of leaving the bloc, Nelson said. “If uncertainty persists, it will almost encourage businesses to leave London.
“I personally believe that London will remain the major financial center for Europe,” he said. “It’s certainly going to remain the major financial center for Lloyd’s.”