Go to

September 2020

Insurance in the aftermath of Brexit

Back to Leo Mag

After the United Kingdom voted to leave the European Union in 2016, a number of insurance companies decided to set up an entity in Luxembourg in preparation for Brexit. Insurance companies such as AIG, Sompo International and Liberty Mutual Insurance Europe ensured that they would be able to continue to service their customers with minimal disruption. LFF caught up with their CEOs to hear the stories behind their new Luxembourg bases.

EU market

Thomas Lillelund, CEO of AIG Europe S.A. ,

With half a billion citizens, the EU is an important and mature insurance marketplace for international companies. There is a large market for goods and services, including financial services; they go hand in hand. But most importantly, the single market with one currency for most of the countries and a common set of rules makes doing business easier and more cost effective. The ‘freedom of services’ regime allows insurance companies to trade seamlessly across borders and offer their products to clients, wherever they are in the EU. The EU’s appeal for insurers is reinforced by its economic strength and geopolitical stability.

The EU counts for nearly a third of global Insurance premiums and is an integral part of AIG’s international business. It is a sizable and influential market, with a deep pool of expertise and talent, along with a sophisticated and mature range of clients and policyholders with a complex and extensive variety of insurance needs. The Single Market enables firms to access clients across the region, trading seamlessly across borders under a common rulebook. The EU’s strategic importance is unquestionable

quote

“Our priority in response to Brexit was to ensure that our clients had the certainty they needed that AIG would be ready for any Brexit outcome.”

Thomas Lillelund, CEO of AIG Europe S.A.

New opportunities

quote

The relocation process went smoothly – we were well prepared. From an immigration point of view, work permits and visas were secured and we were able to seamlessly relocate staff.

Thomas Brazil CEO, SI Insurance (Europe), SA (SIIE)

Europe is a key market for insurance companies seeking both growth and diversification. The agriculture market, specifically crop insurance, has experienced significant growth in recent years, as European farmers as well as Agricultural focused businesses are encountering a variety of challenges, notably from evolving and increasingly unpredictable weather patterns. Hail, frost, drought and excessive rain can all contribute to significant damage and loss of agricultural production for producers who are unprepared for these eventualities. Sompo International is addressing these challenges through product innovation such as parametric policies whilst simultaneously trying to increase the take up of existing insurance products.

Penetration rates for crop insurance remain stubbornly low in Europe despite government subsidies and recent claims experience. Sompo International is committed to this market and currently active in Italy, Germany, Portugal and France. We are diligently working to improve upon and deliver crop insurance, and other products, that better meet client needs whilst growing our presence across the Continent,” recounts Thomas Brazil, CEO, SI Insurance (Europe), SA (SIIE).

The United Kingdom’s decision to leave the EU forced most London based insurance companies to consider the best way for them to keep a foot in the European single market. Their main concern was to ensure that they were able to provide certainty to their customers. Solutions tabled by companies varied considerably but most of them chose to either strengthen their existing EU presence or redomicile in continental Europe.

quote

“If you wish to adapt, you can have the best ideas as a company, but they can only materialise if you have the support of your regulator and a legal framework that lets it happen.”

Dirk Billemon, General Manager, Liberty Mutual Insurance Europe (LMIE)

Thomas Brazil CEO, SI Insurance (Europe), SA (SIIE)

“The UK’s departure from the EU was actually “business as usual” for us with limited impact to our activities. We chose to redomicile our company to Luxembourg while maintaining all our EU branches. This meant absolute continuity of cover for our clients, with no need to transfer cover and no issues on our ability to service and pay our claims on our policies,” stated Dirk Billemon, General Manager, Liberty Mutual Insurance Europe (LMIE).

London is still seen as a centre of expertise and most industry stakeholders expect London to remain a global centre for insurance particularly, be it because of Lloyds being in the City or the technical financial knowledge that will remain there for the time being. The London insurance market has been operating for a very long time and has proven to be resilient, transforming and changing itself many times.

A new home

“Our priority in response to Brexit was to ensure that our clients had the certainty they needed that AIG would be ready for any Brexit outcome. We were one of the first companies to announce that we had chosen to locate our HQ in Luxembourg, as the hub for existing network of branches across the region. We took a comprehensive approach, transferring EEA policies to our new Luxembourg entity and establishing a clear framework for how we would address multi-jurisdictional EU/UK business. As a result, our clients knew that they had service coverage and ability to pay their claims, so the transition was extremely smooth. This enabled us and our clients to move on from Brexit very quickly and focus on our strategic priorities for the European business,” explained Thomas Lilllelund, when describing the incorporation of the new company in Luxembourg in 2018.

When insurers looked for a new continental base for their EU operations, Luxembourg was regularly placed at the top of the list of possible options. The CAA being a respected regulator, both on a European and international level, was a strong reason for professional organisations to consider Luxembourg in the face of the uncertainty and disruption of Brexit. The established relationship and strong historical ties between the Grand Duchy and London were also useful.

“It is important to have a regulator who knows and understands your business, especially your future needs. If you wish to adapt, you can have the best ideas as a company, but they can only materialise if you have the support of your regulator and a legal framework that lets it happen,” observes Dirk Billemon.

quote

Having a regulator that is well-respected throughout the European and London markets and conducts dealings in English has been incredibly helpful, especially as we set up SIIE. Having regulatory partner that shares your passion and high ethical standards is the foundation for the strong working relationship we have built with the CAA.

Thomas Brazil

“Having a regulator that is well-respected throughout the European and London markets and conducts dealings in English
has been incredibly helpful, especially as we set up SIIE. Having regulatory partner that shares your passion and high ethical
standards is the foundation for the strong working relationship we have built with the CAA,” recalls Thomas Brazil.

The local Luxembourg market offered access to many different skills sets too. The ability to hire fluent Italian speakers for your Italian farmer clients can be a challenge if one does not have access to an international community, and Luxembourg’s cosmopolitanism helps in that respect.

“Luxembourg rose very quickly to the top of the list – for AIG following a thorough evaluation process. It is close to our clients at the heart of Europe, with an insurance focused, expert and robust regulator, a stable economic and political environment (not to be taken for granted in a world of change and disruption), a predictable legal environment, excellent English language skills(important for international companies) and a strong financial services talent base,” emphasised Thomas Lillelund.

Whether moving a company or setting up a new one, all companies needed to consider their strategic approach to staff. Who would be relocated and when? Moving a company, moving clients or moving staff is an onerous process that needs careful management.

The relocation process went y smoothly – we were well prepared. From an immigration point of view, work permits and visas were secured and we were able to seamlessly relocate staff. We also found great new office space that will grow with us as we continue to expand our business in Europe. Equally important was our ability to recruit well-qualified people locally that not only understand the environment in Luxembourg but also have a good understanding of the neighbouring countries,” says Thomas Brazil.

Dirk Billemon, General Manager, Liberty Mutual Insurance Europe (LMIE)

The future

Speaking to the CEO’s of these three insurance companies, it has become clear that Luxembourg is now home to three more world-class insurance experts that offer a full range of specialty insurances from property, energy, cyber, accident & health, crop, aviation, car and life insurance. Without a doubt there will be challenges to navigate arising from the COVID-19 crisis. Insurance is becoming largely more risk adverse than in 2019 but Sompo International, Liberty Mutual and AIG are all well positioned to partner with their clients to address these challenges and look to the future.

We have enjoyed strong growth over the past few years in both our insurance and reinsurance business. Continental Europe is certainly an important growth market for us, and we will continue to invest and developing products adapted to the European market. Even through the challenges of COVID-19 we see continued momentum in EU as we review our mid-year financial results,” concludes Dirk Billemon.

quote

We have enjoyed strong growth over the past few years in both our insurance and reinsurance business. Continental Europe is certainly an important growth market for us, and we will continue to invest and developing products adapted to the European market. Even through the challenges of COVID-19 we see continued momentum in EU as we review our mid-year financial results

Dirk Billemon

Their new home enabled LMIE to set up a platform to reach the whole of the continental European market and the opportunities this market offers them.

With exceptional financial strength, solid ratings and teams of underwriters, claims and actuarial professionals that understand the risks faced by the local and global markets- -we are committed to the European market today and into the future. I believe there are a lot of opportunities for us to grow, especially in Europe. As a company, we have been very prudent through what we term as the soft market environment of the last few years. We are well-positioned to take advantage of an improvement in the industry, while some of our peers are actually having to step back,” says Thomas Brazil.

Times may be uncertain but the captains of these three latest arrivals to Luxembourg are confident they are best positioned to navigate these unprecedented challenges from their new Luxembourg continental base, whatever the future holds.

“We continue to build on the strong foundation established in 2019 and are maintaining that momentum, discipline and market leadership in 2020, focusing on underwriting excellence, operational efficiency and delivering value for our customers. We are well-positioned to provide the technical expertise, innovative problem-solving and claims service our clients distribution partners need in this challenging time,” stated Thomas Lillelund.