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Lloyd's Of London Chairman - Brexit Will Hurt Business | IAC Recruit

By Money Market | 18th May 2016

Lloyd's Of London Chairman - Brexit Will Hurt Business | IAC Recruit

A topical Brexit article written by Money Market UK magazine which says that Lloyd’s, which groups more than 80 insurance syndicates in the City of London, is making contingency plans for setting up offices elsewhere in the European Union. 

About 90 per cent of its capital and core business comes from outside the Uk.

Lloyd’s, which groups more than 80 insurance syndicates in the City of London, is making contingency plans for setting up offices elsewhere in the European Union in case of Brexit.

Specialist insurance market Lloyd’s of London would be less appealing to investors outside Britain if the country voted to leave the European Union, its chairman John Nelson said on 23 March, as the group reported a drop in profit last year.

Lloyd’s, which groups more than 80 insurance syndicates in the City of London, is making contingency plans for setting up offices elsewhere in the European Union in case of Brexit, Nelson added.

Lloyd’s has seen investment into the syndicates from the United States and Asia in recent years. It also writes insurance for businesses worldwide, specialising in sectors such as marine, energy and aviation.

“About 90 per cent of our capital and business comes from outside the UK,” Nelson told Reuters by phone.

“It would diminish our attraction as a market to invest in if we were not part of the EU.” Britons vote in a referendum on EU membership on 23 June. A decision to leave would make it harder to sell insurance into the bloc without a local presence, Nelson said.

“We would have to restructure bits of our business, which would probably mean more representative offices to qualify within the EU, which would be expensive,” he said.

Lloyd’s of London reported a 30 per cent drop in pre-tax profit in 2015 to £2.1 billion, hit by a fall in investment returns and pressure on prices.

Why should be worried?

Investment returns dropped to £400 million from 1 billion in 2014 and the trend was likely to continue, Nelson said.

“In the industry generally, you will see a new norm of low investment returns.” Negative interest rates in the euro zone have encouraged some insurers to take riskier investment bets such as property or emerging market debt.

Nelson said Lloyd’s needed to keep most of its assets in liquid investments and had limited scope to diversify.

The market’s return on capital fell to 9.1 per cent from 14.1 per cent a year earlier, and its combined ratio, a measure of underwriting profitability, weakened to 90 per cent from 88.4 per cent in 2014.

A level below 100 per cent indicates a profit. Gross written premiums rose 6 per cent to £26.7 billion.