How Brexit could impact your insurance business

18th September 2017

The UK's vote to leave the EU in the 2016 referendum sent shockwaves around the world, and the impact of Brexit was also felt within the global insurance industry. Since then, the British government has served notice under Article 50 of the Lisbon Treaty, thereby triggering (what’s expected to be) a two-year negotiation period to leave the EU.

The course and ultimate outcome of these negotiations is hard to predict, and this uncertainty is likely to prevail for some time.  Nearly every business sector is likely to be affected by some form of change and the insurance sector is by no means immune. In fact, immediately after the referendum, some of the largest insurers in the UK like Aviva, Legal & General and Standard Life saw an immediate fall in share price by 15 percent. Uncertainty can lead to higher premiums, making business harder for brokers.

The UK manages £1.8 trillion worth of investments, making it the third largest insurance industry in the world. The biggest risk of Brexit is that Britain could now lose its passport rights to freely underwrite policies and insure across European borders.

Broadly speaking however, the impact that Brexit will have on the insurance industry will vary depending on the type of insurance business underwritten. In general, insurers, who have a large retail customer base are likely to rely more heavily on EU cross-border transactions. Continued access to the EU insurance market will be one of their main concerns while for other more specialist insurance businesses, Brexit is likely be less significant. 

Those UK based insurers that underwrite or passport European insurance policies will now need to consider how best to structure their European operations to continue to provide these services. They will most likely need to obtain additional licences to carry on business or establish new licensed companies or branches specifically situated within the EU.

Lloyd’s of London, the world’s leading insurance market, which provides specialist insurance services to businesses in over 200 territories will bear the consequences emanating from Brexit too. But it appears it’s taking it in its stride. Earlier this year it announced that in order to secure a European foothold after the UK’s departure from the EU, it has picked Brussels as the base for its new EU subsidiary. It’s already shifting more than 100 jobs from the UK – a great blow to Britain and its workforce.

Deciding where to locate a European branch is by no means a simple process and insurers considering this will need to take a range of factors into account. These include the approach and reputation of local regulators, local employment law, infrastructure, accessibility, and tax issues as well as practical considerations like local salary levels and office costs, availability of talent and the use of English as an official language in business.

Workforce repercussions will also continue to emerge as political decisions are made regarding EU nationals currently living and working in the UK. Skilled labour from the EU countries makes up a significant proportion of the workforce in the UK insurance sector, particularly in London and restrictions on the freedom of movement of EU workers will require insurers to revise workforce strategies.

UK-based insurers will have to prove to brokers that their clients will still benefit from engaging with companies that will have a more complex relationship with other EU members going forward. Brokers will, after all, steer their clients into the arms of insurers that best meet their needs. So if London wants to keep its customers it better make sure that it offers the best solutions and products not just compared to the EU, but on a global scale. I think it’s up to the challenge.





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