UK insurance and investment group Royal London will incur more than £21m (€24m) in costs for transferring £1bn (€1.1bn) in assets to Ireland as it pre-empts the fallout from Brexit.
Royal London is the UK’s largest mutual life and pensions company. It has about 8.8 million policies and funds under management of £114bn (€130bn).
About 500,000 policies are being transferred to Ireland, as well as 1,300 bonds that were sold in Germany under the Scottish Life International brand.
Royal London, which received court approval in London this week to transfer the assets to a subsidiary in Ireland called Royal London Insurance, will split the cost of the move to Ireland between two main funds – the Royal Liver Sub-Fund and the Royal London Main Fund. Royal London acquired Royal Liver in 2011.
There had been some objections to the manner in which the costs would be split between the funds, but the judge hearing the matter said that while the costs are high, they were an “unavoidable consequence” of the need to provide service continuity for transferring policyholders post-Brexit.
Some policyholders had also questioned whether the costs would negatively on the future profits of the policies being transferred to Ireland.
But the judge said that new reinsurance agreements are designed to “essentially produce the same results” for the with-profit policyholders in the transferred business as if they not left Royal London.
Royal London, whose CEO is Phil Loney, has capitalised its new Irish subsidiary with a €40m cash injection. It will employ about 20 people at the Irish office.
Justice Richard Snowden said that Royal London has not decided to implement the scheme to transfer assets for its own commercial purposes.
“It has been forced to do so by the continued uncertainties over Brexit,” he said.
“In the absence of any agreement between the UK and the EU in relation to the ability of UK institutions to conduct financial services businesses in the EEA [European Economic Area] after Brexit, the board of Royal London have taken the entirely reasonable decision to propose the scheme to be certain that their EEA policyholders will be able to be serviced after the UK leaves the EU,” the judge added.
The effective date of the transfer of the Royal London assets to Ireland is expected to be today. For accounting and reporting purposes, it will be deemed to have taken effect on January 1.