One year after the Brexit vote, Luxembourg has succeeded in attracting many large insurance companies from London in the relocation race between major European financial centres.
On Tuesday, the insurer Liberty Specialty Market announced the implementation of part of its activities in the Grand-Duchy. This is the sixth insurance company to choose Luxembourg after AIG, Hiscox, FM Global, RSA, and CNA Hardy since the British referendum.
These "big insurers announced their decision to come to Luxembourg for their post-Brexit operations with activities that we did not really have yet", explains to the AFP the director of Luxembourg for Finance, the agency for the development of the financial centre, Nicolas Mackel.
But "it is not a race", says Luxembourg Finance Minister, Pierre Gramegna. The minister called for a "constructive and pragmatic" approach of the Grand-Duchy in the process of relocating companies from London.
"Those who thought that financial institutions would close in London to relocate thousands of employees elsewhere were mistaken," he said.
Gramegna had already reassured worried MPs in Parliament last week that Luxembourg was looking at a "few hundred" new jobs coming to Luxembourg as a result of Brexit, not thousands like other financial centres in Europe. He had also added that Luxembourg was looking at qualitative growth and that it was aiming to diversify its financial activities.
In total, 21 companies announced the relocation of part of their activities to Luxembourg in the wake of the British vote, according to a report from KPMG. The document ranks the Grand-Duchy far ahead of Ireland (14), Germany (8) and the Netherlands (4).
Stability and AAA rating
The second largest financial centre in the EU behind London, Luxembourg is also attractive due to its AAA rating with most rating agencies, its sovereign debt which is 22.1% of GDP and its growth of 3.7% in 2016, according to the National Statistics Institute, the Statec.
In recent years, Luxembourg has also been diversifying its financial activities and has increased its positioning in certain financial niches such as Chinese, Islamic and green finance, but also in FinTech.
At the same time, Luxembourg's financial centre maintains its more traditional activities, namely investment funds, insurance and asset management.
Luxembourg also wants to keep good relationship with the City of London, Gramegna said on Tuesday, and that the country was not - and didn't need to be - overtly aggressive in trying to lure business out of London.
In a longer-term perspective, Gramegna stressed that Luxembourg should negotiate common rules and a transitional period, considering the importance of the UK as a trading partner for the Grand-Duchy as it is the seventh largest supplier to the country and the fifth largest importer of Luxembourgish services. For the financial sector, the flow between the two countries amounts to more than €10 billion per year.