Nurturing an opening on insurance business post-Brexit
As the UK and the EU laboriously move towards the triggering of Brexit which should happen sometime this month, the financial services in the City are preparing their postBrexit strategies.
Some speak of opening subsidiaries or offices in other parts of the EU so as not to lose passporting rights. The various capitals of Europe are engaged in a race to attract as many companies from London as they can, with Paris and Frankfurt being among the frontrunners.
There is a lot of literature on this subject at present and Malta sometimes features in them, but only as a minor player. It would seem, although this is so far rather anecdotal, that Malta’s niche is the insurance market.
On 21 February, for instance, The Guardian had a whole supplement on the subject and said that “Small, user-friendly Valletta, in Malta, fancies some insurance business”.
On 7 February, according to the Belfast Telegraph, Malta was in a shortlist of five jurisdictions for the relocation of Lloyds but the huge company seems to have decided on Luxembourg.
Experts have speculated that rival financial centres like Luxembourg, Dublin, Frankfurt and Paris could end up siphoning off some of the City's business as they court financial services firms ahead of Brexit.
Officials from the Paris region were wooing banks and fund managers in London at the Shard to talk about the benefits of moving to France.
It followed in the footsteps of German authorities who met with financial executives in Frankfurt at the end of January to set out guidelines for setting up shop in the country after Brexit.
A Lloyd's spokesman declined to comment on the likelihood of Luxembourg being chosen. “We are continuing to work through the process of establishing a subsidiary in the European Union and no decision has been taken on where that will be,” he said.
“We want to be able to provide our customers with a seamless access to the Euro- pean Union and vice versa – as we know businesses in Europe will want to be able to access the Lloyd’s market.”
Unlike some of its rivals, Luxembourg has adopted a fairly low-key approach in its attempts to lure jobs from London. “We don’t need to do anything more in particular,” according to Nicholas Mackel, chief executive of the industry promotion body Luxembourg for Finance.
“We are open for business as normal. We are not out to poach business, but we are talking to financial institutions and trying to help them find solutions.
“We have a very attractive environment with a good, wellestablished reputation, a strong ecosystem of service providers and a responsive, business-friendly regulator. We are not expecting entire banks to move here – at least not at the start – but we could see chunks of activity migrate here.”
Jean-Marc Goy, counsel for international affairs at Luxembourg's Commission de Surveillance du Secteur Financier, made it clear recently that it would be “totally unacceptable” to the country's regulators for financial companies to try and establish token offices in Luxembourg after Brexit.
“EU rules require substance in the jurisdiction where an entity is established and we in Luxembourg are very mindful that that substance complies at all time with the EU rules,” said Mr Goy. “It will depend on the size and the technicality of the activities being relocated, but one thing is for sure: it cannot just be a postal address or a letter-box entity. That would be absolutely unacceptable.”
It is unclear what is Malta’s strategy in this regard. Maybe Malta too has adopted a lowkey approach and is letting its obvious advantages work for it, such as air connections, an English-language workforce, and a good year-round climate.
These are still early days and meanwhile the companies must get a clearer idea what kind of Brexit there will be. But Malta will do well to prepare itself for this opportunity.