June 2016
Lloyd’s has identified that 4 percent of its global gross written premium (GWP) is likely to be affected by the UK’s withdrawal from the EU single market.
In documents outlining Lloyd’s proposed plan following a UK exit from the European Union, the Corporation said that approximately £800mn ($1.1bn) of GWP would be affected.
This comprises cross-border, non-marine, aviation and transport business, Lloyd’s said.
The European Economic Area (EEA) accounts for 11 percent, or £2.9bn, of total Lloyd’s GWP. Of this total, £1.1bn is reinsurance, which is expected to be largely unaffected.
Around £557mn is marine, aviation and transport (MAT) and a further £1.2bn is non-MAT, of which around £800mn is written cross-border.
Lloyd’s total GWP is £26.6bn, 47 percent of which comes from the US and Canada.
CEO Inga Beale today (30 June) told managing agents that Lloyd’s would push for a passporting system similar to what it has today during discussions with the UK government.
Lloyd’s is engaging with the UK government at all levels on gaining similar passporting arrangements, as well as entering into discussions with regulators across the continent, according to the documents.
The Corporation is also maintaining a dialogue with the market, industry, coverholders and customers while conducting further analysis of the EEA territories and their impact on Lloyd’s.
During the two-year negotiation period following the triggering of Article 50, the UK will continue to be a full member of the single market.
This means Lloyd’s and the Lloyd’s market will continue to be subject to Solvency II, and no existing policies or renewals written while the UK is an EU member will be affected by the referendum.
Policies – including multi-year policies – are still legally binding and claims will be met, regardless of when the UK formally leaves the union.
The documents stressed the Lloyd’s remains well capitalised to pay any major claims and will not be adversely affected by the fluctuations in sterling due to its good currency matching discipline covering assets against claims reserves and capital against exposures.
Lloyd’s confirmed the vote to leave the EU also had no impact on its financial strength, and that Standard & Poor’s had affirmed the marketplace’s A+ rating.
More than 50 percent of funds at Lloyd’s are held in US dollars. The Central Fund’s investment portfolio contains unhedged US dollar exposure that will move in step with regulatory capital requirements, Lloyd’s said.
While investment volatility is to be expected, the Corporation said portfolios of the Central Fund and syndicates operating at Lloyd’s are generally conservative, with the majority of assets being high quality fixed interest and cash.
“Lloyd’s is well placed to retain its position at the heart of the global insurance industry,” the missive concluded. “We will still be able to attract the talent and push forward the innovation that drives the market’s approach to the risks countries, businesses and entrepreneurs need solutions for. As London’s new relationship with the EU develops, Lloyd’s will continue to thrive.”
