As the going gets tough in the UK, brokers are eyeing opportunities abroad. James Dean reports.

An expedition into Continental Europe may seem like a good idea in the current climate. As if the plummeting rates being experienced in most classes of business weren’t enough to contend with, there is the added worry of the credit crunch, which continues to knock banks and threaten the assets of every company in the financial services sector. If profits are to be maintained, they must be secured by other means. So should brokers be looking to operate in Continental Europe and, if so, what challenges will they face?

Since the implementation of the Insurance Mediation Directive (IMD) at the end of 2006, UK brokers registered with the FSA have been able to gain licences to trade in other EU member states. The licences have proved popular – there are already 400 UK brokers registered to operate in France alone.

But the UK is not alone in having uncertainties about whether brokers should be forced to disclose their commission. The IMD is currently under review, and last September, the European Commission decided that current legislation in member states does not always provide the customer with the transparent transaction they need.

The European Federation of Insurance Intermediaries (Bipar) represents 80,000 intermediaries through 47 national associations in 30 countries – including Biba in the UK. It works closely with its sister organisation, the World Federation of Insurance Intermediaries (WFII).

Nic de Maesschalck, director of Bipar, says: “We try to argue for a fair regulatory framework in which business can prosper in tandem with the necessary consumer protection.”

He adds: “ We have found that the exchange of information on markets and EU issues between new and more established EU countries has been highly beneficial to all parties.”

“Brokers are becoming increasingly important and their share of the non-life market is expected to continue to increase.

Lloyds report on Austria

Bipar is currently looking at the impact of the IMD and any potential changes to it, among other issues affecting insurance intermediaries. The IMD allows insurance intermediaries, on the basis of their registration in their home member state (in the UK, with the FSA) to do business in other EU member states. “We need a bit of regulatory stability for some years to come,” de Maesschalck adds.

Another recent EU initiative has also helped brokers work across the Continent. The new reinsurance Directive is now in play, allowing businesses to passport both reinsurance and run-off business around the continent more smoothly than before. Since Germany implemented the Directive, Deutsche Rück began the transfer of its run-off business to the UK – the first Germany-to-UK transfer of its kind, and a transfer that would not have been possible without the Directive.

Opportunities exist for transfers to flow out of the UK as well as mainland European states – and, clearly, experienced brokers are needed for these transfers to run smoothly. Dan Schwarzmann, partner in solutions for discontinued insurance at PricewaterhouseCoopers, predicts that while the UK remains the most likely destination for these transfers for the time being, Germany will soon be snapping at its heels– with Switzerland and France not far behind. And the fact that the European run-off market is expected to grow from its $204bn (£105bn) last year is not something to be sniffed at.

According to ratings agency Standard & Poor’s: “Well-established insurance domiciles particularly in Europe (Ireland, Luxembourg, and Switzerland) have significantly enhanced their competitiveness through competitive tax rates and the advent of European passporting. The growth of these domiciles highlight that market access, infrastructure, and talent are also important in choosing locations.”

These attempts to liberalise focus the mind on the strict tax regime in the UK, and the havens that Continental Europe has on offer. 2007 was still a good year for brokers, but the favourable conditions seen in the UK last year will not be repeated in 2008 – even in the absence of catastrophes. So as insurers begin to write business with greater caution – and the volume of business is restricted a little – expansion into Europe is one means of keeping profits growing.


According to a recent report by Standard & Poors, Bermuda may start losing out to markets such as Dublin, Luxembourg, Dubai and Zurich. The use of English as the primary language, the GMT time zone, a 12.5 per cent corporate tax rate, their common law systems and the quality and quantity of service support infrastructure are all attractive aspects of these domiciles.
Aside from these advantages, there also exist specific insurance opportunities in the Ireland. The Irish market can be divided into two distinct segments, domestic risks and foreign risks, says a recent Lloyds report. Domestic risks are characterised by strong price competition and falling rates, while foreign risks are growing amid fiscal incentives for companies to become established. Foreign risks account for 45 per cent of the Irish non-life market.
According to data from Swiss Re, Ireland ranks 14th in the world in terms of total premium volume 47bn dollars (23.5bn pounds) in 2006, up from 39bn dollars (19.5bn pounds in 2005. Life insurance makes up the majority, but total non-life premiums amounted to 10bn dollars (5bn pounds in 2006, with motor, fire & damage to property and liability the dominant lines of business.