British ship insurer North is setting up a new European Union subsidiary in Dublin in case Britain loses access to the single market after Brexit, becoming the first of these specialised providers to announce such a move.
Insurers are making contingency plans after Britain’s vote to leave the EU means they could risk losing “passporting” rights that allow UK financial services firms to trade in Europe without the need for locally regulated entities.
Britain dominates the global marine insurance market and losing access to specialist Protection and Indemnity (P&I) clubs like North could weaken other parts of the country’s multi-billion pound shipping services sector.
North P&I club said in a statement on Monday that due to regulatory uncertainty “and a realistic prospect” that passporting rights could be lost as early as March 29, 2019, if Britain leaves the EU as expected, its board agreed that a subsidiary insurance company should be established in Ireland to underwrite all future business in the European Economic Area for North and separate unit Sunderland Marine with effect from Feb. 20, 2019.
“The decision to locate the subsidiary in Ireland follows an extensive horizon scanning exercise during which a number of possible locations were considered,” it said.
There are 13 major global P&I clubs, of which six are regulated in Britain and are estimated to account for over half the total market share of an industry that insures about 90 percent of the world’s ocean-going tonnage.
Many of these clubs - owned by shipping companies - have been an integral part of the City of London for nearly two centuries, insuring ocean going ships against pollution and injury claims, typically the biggest costs when a vessel sinks.
Hull and machinery cover, which protects vessels against physical damage, is provided separately by other marine insurers.
North, headquartered in the northern English city of Newcastle, said Dublin met its requirements due to having a similar regulatory, legal and taxation system to the UK as well as being an English speaking country with easy access to North’s UK office.
North, which is the first P&I club to announce its location for an EU subsidiary, said it expected to start implementing its contingency plans in the first quarter of 2018.
A North spokesman said it had 371 staff globally and the initial headcount in Ireland could be around six or seven, which was subject to change.
Europe represents over 40 percent of North’s global business, data from the company showed.
Dublin has emerged as the EU location for a number of players in the wider insurance market including specialist insurance groups Chaucer, part of Hanover Insurance Group , and Beazley.
Dublin is also favoured as an alternative base to London for insurers due to having low corporate taxes.
Earlier this year, shipping and insurance sources said other P&I clubs were exploring locations including Luxembourg and Cyprus
A study conducted by the City of London Corporation last year showed P&I clubs with a presence in the U.K. accounted for over 1 billion pounds ($1.32 billion) of UK gross earned premiums, out of a total of 7.5 billion pounds for the marine insurance sector in 2014.
($1 = 0.7577 pounds)
(By Jonathan Saul, Additional reporting by Carolyn Cohn. Editing by Jane Merriman)