Lloyd's of London intends to establish a subsidiary based in the EU in 2017, becoming one of the first major businesses in the City of London to have a concrete timetable on relocation plans in preparation for the U.K.'s departure from the EU, the Financial Times reported.
The insurance market will use the European subsidiary, to be chosen from a shortlist of five cities, to continue doing business in the EU through the so-called passporting system, according to the Dec. 15 report. The insurance marketplace is likely to table its proposal to members by February 2017 before seeking regulatory authorizations to set up the subsidiary.
Chairman John Nelson told the newspaper that Lloyd's needed to act sooner rather than later in response to Brexit, adding: "In common with other financial institutions, we need to put our plans in place -- at least on a precautionary basis."
However, Lloyd's may yet decide against moving parts of its business out of London if the U.K. and the EU were to reach a deal allowing British companies to retain access to the European single market, the FT said. The insurance market would prefer to keep its European operations in London, as setting up a new unit would mean tens of millions of pounds in costs, and the new subsidiary would have to be separately capitalized.
The U.K. chancellor, Philip Hammond, told members of Parliament earlier in the week of Dec. 12 that "thoughtful politicians" were agreed on the need for the U.K. to secure a transitional deal for businesses to ease the path to EU exit.
Sam Woods, head of the Bank of England's Prudential Regulation Authority, made a similar call Dec. 14, telling the House of Commons Treasury Select Committee that it would be important "to have some kind of clarity on the transitional [deal], and the sooner the better."