The global insurance services provider was originally looking at picking a post-Brexit subsidiary from a shortlist of five: Luxembourg, Malta, Dublin, Frankfurt and Paris. But last month, chief executive Inga Beale said Malta had been ruled out.Faced with the possibility of losing crucial licensing rights when Britain left the EU, Ms Beale said, “We’re going to be setting up a subsidiary somewhere else in the EU – a country that we hope will remain in the EU – and that is how we are going to provide seamless coverage to our customers.”

Luxembourg 'a favourite'

Lloyd's plans to make a final decision by the end of March but, according to reports, Luxembourg – a lynchpin of European unity – emerged as favourite during a recent board meeting in London.The Financial Times commented, “Lawyers say that establishing an EU base could be more difficult for Lloyd’s than for more conventional insurers because it is a market consisting of many underwriters, rather than a company.“Many of the insurers that operate at Lloyd’s are also looking for alternative bases in the EU. A large number of them are leaning towards Dublin because of its language, legal system and proximity to London.”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.

'Seamless access to the EU'

“We want to be able to provide our customers with a seamless access to the European 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, well-established 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.

'Not just a postal address'

“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.”Meanwhile, the post-Brexit uncertainty engulfing the financial sector has led to Luxembourg fund management company FundRock, which already has a UK operation, announcing it will open an office in Dublin to leverage on post-Brexit opportunities.In a statement, FundRock said, “Following the market uncertainty created in the investment management sector post-Brexit, FundRock is opening an Irish office to service their clients’ needs and capitalise on the significant rise in UK-based deal flows.”

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Chief executive Revel Wood added that the move to Ireland was a crucial part of the company’s long-term strategy. “This expansion into Ireland aligns with our ambition to offer service excellence to a global client base by providing a value-added solution for all their domestic fund management needs across Europe,” he said.Additionally, Japanese securities group Daiwa has said it was considering moving some of its 400-plus staff in London to either Dublin and Frankfurt if Brexit results in the UK losing the ‘passporting’ rights that enable financial firms to operate freely throughout Europe.Chief executive Takashi Hibino said in a briefing to journalists in Tokyo that, while London would remain the hub for most of the company's operations, a consulting firm had been employed to make contingency plans for moving some staff.

For related news and features, visit our Brexit section.

 

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