Why London is not fashionable

London is in danger of falling even further out of favour as a place to do business for the insurance industry. This week, after announcing its annual results, Brit Insurance said it is moving headquarters to the Netherlands.

Brit cited London’s fiscal instability as the reason for its move. “We have said for quite a while that the fiscal instability of London, i.e. our inability to plan long term around tax is a big issue. We have tried to get more certainty and we just don’t get what we require. What we need to be certain is that the overall tax rate for the company is competitive with our competitors based in Bermuda, Switzerland, Dublin or elsewhere and we believe that the combination of the infrastructure, regulatory regime, fiscal stability and business outlook for the Netherlands is a good place to put our company headquarters,” said Dane Douetil, chief executive officer of Brit Insurance Holdings PLC.

Jonathan Drake a partner at law firm Ashurst speculates on further reasons for Brit’s move to the Netherlands: “If you set up in Holland you have access to the rest of the EU via insurance passporting. It does have a stable legal system and a favourable tax regime.”

Brit’s intention to move to the Netherlands comes after Beazley moved its headquarters to Dublin, and Hiscox’s move to Bermuda. The Association of British Insurers (ABI) criticised the government for not doing enough to make the UK more competitive. “In 2006/07 tax year the UK insurance industry contributed £9.7bn in taxes, of which £2.9bn was corporation tax, the third highest of any sector,” said the ABI. “The decision by Brit Insurance to leave the UK, the second insurer to do so in a month after Beazley, shows the government cannot take for granted the UK’s position as a global leader in insurance. It is vital the government acts now to ensure the UK is an internationally competitive location.”

Drake feels it unlikely that another insurer will follow Brit’s footsteps soon, but he warns that insurers are now constantly reviewing their reasons for staying in London. “Certainly this issue has been pushed up in the agenda over the last two to three years,” he said.