The head of one of Japan’s biggest insurers said the Brexit vote had not dulled his company’s appetite to invest in London as the city’s attractions stretch beyond the business it does with the EU.
“London has so many strengths in terms of licences, information and underwriting expertise,” Kengo Sakurada, chief executive of Sompo, told the Financial Times.
Mr Sakurada did not see the Brexit vote as a reason to move business away from the Lloyd’s of London market. “I’ll continue to put more resources and capital into Lloyd’s because it gives us access to other developed markets.”
Only 4 per cent of Lloyd’s premiums could be affected by the Brexit vote, he said.
There have been fears that Lloyd’s, which uses the EU’s passporting arrangements, could lose out if free trade between the UK and the EU is restricted.
Speaking on the BBC’s Today programme on Monday, Lloyd’s chairman John Nelson emphasised the importance of overseas capital to the market. “Eighty-five per cent of capital in Lloyd’s comes from outside the UK, and 16 per cent comes from Japan,” he said.
On Sunday, the Japanese government warned that some of its companies could move their European bases away the UK unless there was a very “soft” exit from the EU.
Mr Sakurada said a “hard” Brexit would be “disastrous”. However he added that, for Sompo, the big attraction of operating in Lloyd’s was its links with developed markets outside the EU. “By 2025 the insurance market size in developed markets will be 1.6 times larger than it was in 2015,” he said.
In 2014 Sompo bought Canopius, a Lloyd’s insurer, for £600m. Last year it tried to buy Amlin, another Lloyd’s underwriter, but was outbid by Japanese rival Mitsui Sumitomo, which ended up paying £3.5bn.
Overseas expansion is a big part of Sompo’s strategy. Operations outside Japan account for 12-15 per cent of the group’s profits but Mr Sakurada wants that to rise to 25 per cent by 2020.
Acquisitions will have to do a lot of the heavy lifting, said Nigel Frudd, head of Sompo’s global M&A activity. “To get to where we want to get to, you have to do M&A — you can’t do it by organic growth,” he said.
Sompo is interested in specialist commercial insurance businesses, arguing that the world’s retail markets are already too competitive.
It plans to reinvest some of the profits it makes overseas back in Japan. Mr Sakurada’s strategy is to diversify away from Sompo’s core insurance businesses by moving into adjacent sectors such as care homes and roadside services.
Source: FT