It was not long after the dust of the UK’s dramatic vote to leave the EU had settled before European cities began their campaigns to lure UK-based businesses into their jurisdictions. Among them were Paris, Dublin and Berlin, offering new homes to companies in banking, financial technology, and more, betting on the possibility of restricted business for the UK if post-Brexit laws alter its access to the EU single market. Cologne has been less prominent on the radar, but some in the city’s financial services sector believe it could benefit too.
“Cologne is now a very attractive insurance location for British companies wanting to re-orientate following the Brexit vote in the country’s recent referendum,” remarks Henriette Reker, Cologne’s mayor. Since the end of the Second World War, Cologne has been a capital for insurance services. The city's insurance sector employs about 25,000 people across more than 300 insurance and banking companies and 5,500 insurance intermediaries.
“We expect in Cologne that Brexit will have a tremendous influence on the financial industry in Great Britain – not only in the banking institutions but also in the insurance industry,” says Werner Görg, president of the Cologne Chamber of Commerce and Industry (CCI) and supervisory board chairman at major German insurance group Gothaer. “Barrier-free access to the EU market is crucial – Cologne could be the region in central Europe which attracts most UK [insurance] companies for their mainland European hub." According to the CCI, 231 British companies are already in the region. "In case they are willing to leave London, it would be wonderful if they considered coming to Cologne.”
Not everyone in Cologne’s insurance community agrees. Mehrdad Pirozraam, partner at InsurTech.VC, a venture capital firm investing in disruptive insurance technology startups, believes it is unrealistic to try to compete with London. Rather, he says, Cologne should focus on what it is good at and aim to collaborate with the global finance capital. “I want to do something together with London,” he says, “because everything else is not realistic. Financial power and all the investments needed to develop these companies are much stronger in London.”
Insurance technology, or insurtech, is a concept similar to fintech – Mr Pirozraam describes it as the disruption and innovation of the insurance business via technology. One Cologne-born start-up in which he is investing is Insurance AI, which he says uses artificial intelligence “to bring banks and insurance companies into the new age”.
“The financial power of London is obvious, and it takes the lead in Europe for VC funding,” Mr Pirozraam continues. “However, I believe Cologne is in a good position to develop an insurtech start-up ecosystem, because we have a really good market in Germany, which can be served from the excellent insurance sector in Cologne. This business will be much more international than in the past. So combining Cologne’s power with London’s financial leverage is a huge win for everybody.”
Norbert Strohschen, president of the British Chamber of Commerce in Germany, does not predict a seismic shift to Cologne. “I think London’s dominance will continue – the insurance business is international, and London is historically one of its most important markets. International companies will stay there, but potentially others who considered London might now choose to stay in Germany or go to Cologne or Munich.”
In the meantime, the British Chamber of Commerce says it receives between 50 and 100 emails per day from German and British companies concerned about how their businesses will be affected by Brexit. Germany is the UK’s second-biggest trading partner after the US, with nearly €300bn in bilateral trade. But all that is for certain is enduring uncertainty, Mr Strohschen explains. “For questions on post-Brexit business, it’s really half a year too early. Nobody knows what is going to happen.”