BORIS Johnson has written to the chief executive of Prudential in a bid to convince the insurance giant to keep its headquarters in London, City A.M. has learned.
The Mayor sent the letter to Tidjane Thiam last Friday, following the revelation that Prudential was considering moving its headquarters to Hong Kong to avoid tough new European rules for insurers known as “Solvency II”.
Johnson, who is campaigning to be re-elected in May, said he was “extremely concerned to learn that a change of domicile was under review” and promises to “lobby both in Brussels and London to ensure that Solvency II does not cause European insurers to relocate outside the EU”.
Chief among Prudential’s concerns is that it could be forced to raise a large amount of expensive capital against its US business, Jackson Life, because the EU is afraid that American regulators are too lax. That would make it much harder to compete with its US-based rivals.
In the letter, Johnson promises to push for so-called “equivalent status” for US regulators, meaning Jackson Life could be capitalised according to looser American requirements so that Prudential is on a level footing with its US rivals.
He also says he will campaign for “proper transitional arrangements” once the rules come into effect from 2013, allowing Prudential and others to raise capital over time or to divest their US businesses without becoming forced sellers.
Last week, Prudential – which generates almost half of its revenues in Asia – admitted that it was considering changing its domicile, but it is not thought to have any plans to quit London imminently.
Prudential’s departure from the UK would be a major blow for the chancellor George Osborne, who has overhauled the corporation tax regime to convince companies to stay in the UK. WPP, which relocated from London to Dublin in 2008, has said it will return as a result of the reforms if it secures shareholder approval.
Johnson also uses the letter, which was sent to Prudential chairman Harvey McGrath as well, to “remind” Thiam of the “many advantages of being based in London”.
“An increasingly favourable corporation tax regime, a thriving social and cultural scene (second to no other city on the planet), and the most qualified and internationalised workforce of any major city in the world.”
A spokesman for Prudential said: “We have received a letter from the Mayor of London. Of course we would be pleased to discuss with the Mayor our concerns about the unintended consequences of Solvency II.”
The Treasury said in a statement: “The UK government remains committed to securing the best possible outcome for the UK insurance industry under Solvency II. This includes achieving clarity on the timeline for implementation as well as the final shape of Solvency II requirements – particularly on equivalence and the Matching Premium.”