By Tyler Cichewicz
Lloyd’s of London syndicate, Hiscox Ltd., will consider establishing a company within the EU in order to lessen the effects felt after the UK’s vote to leave; Brexit.
Following the UK’s decision to leave the EU is uncertainty from UK based businesses, who fear they will lose their pass porting rights, which allow them to sell their products throughout Europe without bearing high costs.
Hiscox generates 20% of its total gross premiums from the EU.
Chief Executive Bronek Masojada says Hiscox is considering ten countries within the EU to plant a new company, but will not make a final ruling on that decision until the first quarter of next year.
Theresa May, Britain’s Prime Minister, has said that no terms between the UK and EU will be agreed upon until 2017. With that, all EU and UK trade agreements hold for at least two more years. This tentatively keeps markets stable for syndicates like Hiscox, but not knowing whether they can rely on the profits from the EU is reason to contemplate alternatives, like an EU based company.
Hiscox, as others were when the decision to leave came in, have been at work on contingency plans that will minimize their exposure from Brexit.
On Monday, July 25, Hiscox saw a 52% increase in pretax profit for the first half of the year. Almost half of their written premiums come from specialty insurance policies for small business and home owners. The largest portion of this increase comes from the U.S. where Hiscox saw profits grow to 32.8%.
Hiscox’s decision to establish a new company in the EU would be an attempt to retain their hold on the EU market. However, with contracts in limbo between the UK and EU for what seems likely to be the next year to two years, look for Hiscox and other Lloyds syndicates to rely more heavily on business with the U.S. as it is less expensive and speculative alternative to the EU market.
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