Discussions have intensified between Lloyds of London, the Malta Financial Services Authority and a local law firm as the island emerges as a favourite location for a post-Brexit subsidiary of the insurance firm.
Lloyds made it clear some months ago that it wanted to open an office in another EU member state as soon as British Prime Minister Theresa May set article 50 in motion to negotiate Brexit – meant to be by the end of March.
Lloyds chief executive Inga Beale had originally said the company was considering Dublin, Paris and Frankfurt but by October, she said that Malta and Luxembourg had been added to the list.
Sources said Lloyds sent a delegation to Malta last month, as a result of which the island was put in pole position.
“Lloyds is considering opening a subsidiary, which could take the form of protected cell company, a structure which has already proved to be very attractive for insurance companies,” sources told The Business Observer.
Although a number of City of London companies have said they would review their options in the light of the Brexit vote, Lloyds was the first high-profile one to say that it would take action as soon as article 50 was invoked, before the ‘shape’ of post-Brexit UK was known.
The issue is passporting – which means having the ability to conduct business from one jurisdiction in all the other member states.
Ms Beale said that Lloyds would lose about £800 million in premiums if it lost these passporting rights, around four per cent of its total. In 2015, the EEA accounted for £2.93 billion or 11 per cent of Lloyd’s gross written premium.
“We are clear that Lloyd’s wants to maintain its access to the single market under the same passporting regime that we currently operate in,” the company said in a briefing note on its website.
Lloyds intends to keep its 328-year-old base in London but it would most likely move its top management to the new subsidiary, which would have to be capitalised separately, running into tens of millions.
The other – clearly more costly option – would be to have a branch in each of the member states, which sources said had been put on hold in December.
“The impact on Malta of having such a prestigious brand come here cannot be underestimated. It would be a game changer in terms of attracting other big names,” the sources said.
Ms Beale, who has led the firm since 2014, wrote about the impact of Brexit in The Financial Times just after the referendum, noting that the London insurance market was the largest global hub for commercial and speciality risk – controlling more than £60 billion of gross written premium.
“It is a diverse market made up of more than 350 companies, contributing more than 20 per cent of the City’s GDP and employing 48,000 people,” she said.
Sources said that Lloyds would continue to talk to the UK government about maintening ease of access to the EU market, sending the message that it was “happy to work with it” in any way possible.
Lloyds made a profit in the first half of 2016 of £1.46 billion. It has a general legal representative in Malta, Lloyds Malta Ltd, with lawyer Louis Cassar Pullicino as its director.