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Sean McGovern, Lloyd’s chief risk officer and general counsel, says that the best interests of the Lloyd’s market are served by the UK remaining in the EU.
Speaking to Lloyd's Market magazine, McGovern, who oversees legal, government and regulatory affairs and risk management for Lloyd’s says that European business is important to Lloyd’s and that an exit from the EU would result in a loss of business.
Some 15 percent of premium income within Lloyd’s comes from the EU market, excluding the UK.
“We access EU countries using the fundamental freedoms of the single market, including the freedom to provide services cross-border and the freedom to establish in member states. We simply have to comply with the regulations of our Home State regulator in the UK,” McGovern says.
According to Lloyd’s, if Britain were to leave the EU and be outside the single market, it would become a ‘third country’, which would result in the loss of Lloyd’s’ current automatic right to do business throughout the Union based on an EU passport. Instead it would have to negotiate new license arrangements with individual EU members, and “it is unlikely there would be any centralised process for this”, says McGovern.
“You normally can’t do business in a country without being established there, including holding some level of capital and reserves locally, and reporting and filing with the local regulator," he says.
McGovern says that the process of setting up in other EU member states would mean a significant and costly upheaval for Lloyd’s and a period of uncertainty and disruption, possibly resulting in the loss of business.
“One can surmise that brokers, and clients of brokers, may find other carriers during that time, and there is a risk that, even if we could secure licenses, they may not return.”
McGovern also points out that such relationships already exist: “A number of businesses within Lloyd’s do have insurance companies outside the market and they may well choose to write insurance through another part of their group.”
A number of Bermuda players have Lloyd’s syndicates and use the market’s international licenses to write international business. Changes to the UK position vis-à-vis Europe would undermine this capability and by extension the value of the London market.
The current Conservative government in the UK has said that if it wins the next election with a majority it will call an ‘in or out’ referendum on Europe.
Lloyd's, EU, London, insurance