London Market Group Launches Template for Free Trade in Financial Services

The London Market Group (LMG) launched a paper outlining an ambitious approach to free trade in financial services, using the forthcoming UK-Switzerland trade discussions as a template for an approach to other third countries.

The LMG is asking the government to consider whether the UK Prudential Regulation Authority (PRA) could authorize Swiss activity in the UK on a “light touch branch” model, for Swiss firms writing global risks in the UK. (Editor’s note: An LMG representative explained that the LMG is creating a template for the UK in all its post-Brexit negotiations with other countries that have strong financial services industries).

The LMG suggested there should be no requirement to gain formal authorization for the branch, but that a notification to the regulator would be made instead.

The key characteristics would be:

• The branch would write global risk only, not UK risks for UK policyholders
• It would have the ability to sign contracts in the UK on behalf of its Swiss parent insurance company
• Its balance sheet would remain in Switzerland and there would be no requirement to localise assets in UK as liabilities are located outside the UK
• The UK would allow home state regulation of the Swiss branch by the Swiss Financial Market Supervisory Authority (FINMA).

“The upcoming negotiations present a great opportunity not only to deepen trade ties with a valued trading partner, but to deliver an agreement which could provide an exemplar for future financial services-based trade agreements,” said Malcolm Newman, sponsor of the government workstream.

“Cross-border exchange between Swiss re/insurers and the UK to a large degree focuses on the non-life and wholesale insurance markets and we believe that more can be done to enhance the trading relationship with Switzerland,” he said.

“Such an arrangement would provide Swiss insurers with greater access to London’s international ecosystem and bring them closer to the global risks written in the world’s largest specialty market,” Newman continued.

“Swiss firms could use this opportunity to expand their underwriting capabilities in the UK, to take full advantage of being part of London’s global market. The arrangement would allow their underwriters to be closer to the UK broker and give them greater access to the London Market eco-system,” he said.

The LMG brings together the specialist commercial re/insurance broking and underwriting communities in London. It is supported by the International Underwriting Association of London (IUA), Lloyd’s of London, the Lloyd’s Market Association (LMA) and the London & International Insurance Brokers’ Association (LIIBA).

Source: London Market Group (LMG)

Topics New Markets London