U.S. commercial property insurer FM Global is planning a European hub in Luxembourg following Britain’s decision to leave the bloc, the head of its European division told Reuters.
The mutual insurer, which earned $5.5 billion in gross premium last year, plans to continue many business operations in Windsor, west of London, but has also set up a Luxembourg-based subsidiary, FM Insurance Europe, S.A., to issue policies in the EU and other countries, said Chris Johnson, an executive vice president in charge of FM Global’s European business.
The move follows that of U.S. insurer American International Group Inc, which last month said it would keep its main European headquarters in London and open a subsidiary in Luxembourg to cope with Brexit.
The Lloyd’s of London insurance market, meanwhile, chose Brussels for its subsidiary.
They are among a number of insurers that had set up regulated subsidiaries only in Britain, through which they have been able to sell insurance policies across the European Union from one EU country, using so-called passporting rights.
But insurers and other financial services firms no longer expect to be able to retain those rights after Brexit, and have started planning EU subsidiaries, so they can continue to sell into Europe.
Luxembourg and Brussels, along with Frankfurt, Paris and Dublin are touting themselves as an alternative base for firms wishing to retain access to the EU after Brexit.
Johnston, Rhode Island-based FM Global, which insures one in three of the Fortune 1000 list of largest U.S. companies, chose Luxembourg for regulatory expertise, understanding of global business, and talent base, Johnson said in an interview at a risk management conference in Philadelphia.
“We wanted a country that was used to a multinational environment,” Johnson said. “If you can’t hire accountants, insurance professionals and lawyers, you’re in a world of hurt.”
Other considerations included being allowed to hold board meetings in English and have board members who are also policyholders, Johnson said.
FM Global employs roughly 200 people in the UK, Johnson said. The plan, if finalized, will require duplicating roles to continue serving UK clients while also issuing coverage throughout Europe. Clients whose coverage extended throughout the EU will now also need separate UK coverage, he said.
The Luxembourg subsidiary would require adding new staff, including its board, managing director, and other key positions, but would not be a large-scale move from Britain, Johnson added.
Regulators require firms to employ staff needed to run a business, such as IT, compliance and finance, in any subsidiary, consultants say. FM Global’s plan is subject to regulatory approval. In December, Luxembourg regulators issued preliminary approval for FM Global to set up the unit, but not to conduct business, Johnson said. A timeframe for final approval is unclear.