The impact of Brexit on the insurance industry
Posted on: 12 September 2017
On 23 June 2016, some 72.2% of British people took part in a momentous vote on whether to leave the European Union. The result was close but unexpected – some 51.9% chose leave, while 48.1% wanted to remain. The shockwaves are still being felt – not least by many in the insurance sector.
There is undoubtedly much at stake since the UK is the third largest insurance and long-term savings industry in the world and the largest in the EU. It is clear many felt leaving would create volatility and uncertainty and with so many leading insurers having strong connections with Europe, an isolationist route made little sense.
So, along with the Bank of England, the then Prime Minister David Cameron and the present incumbent Theresa May, along with a host of economists, the insurance industry largely favoured remaining. We heard from the ABI, BIBA and Lloyd’s in depth about why it made sense to stay. But, despite so many speaking out in favour of remain, the message didn’t resonate with voters strongly enough.
However, there is no point in looking backwards – members of the UK insurance industry, like everyone else, are now Brexiteers and the message is about finding opportunities as well as raising concerns. There may well be scope to do more business globally and for insurers to respond to customers’ changing needs. For example, there could be more demand for trade credit insurance if there are fewer EU protections so small and medium-sized enterprises (SMEs) might seek additional services such as legal guidance alongside their insurance as the UK’s regulatory and legislative framework adjusts.
Negotiations are scheduled to last two years after the triggering of Article 50, which sets out the process by which members can leave the EU. It will be full steam ahead as we know 29 March 2019 is seen as the likely leaving date - there can only be an extension of negotiations if all members agree to this.
So the impact is yet to be realised on the deal that needs to materialise.
The gung-ho tones of Nigel Farage are muted as is the view that “no deal is better than a bad deal” which Theresa May had suggested. Many will be hoping lead negotiator David Davies’ efforts will result in a softer landing than some were preparing for.
But, even if the mood is less confrontational, a very different UK will eventually emerge and the insurance sector is exposed to a range of new threats as well as the opportunities. So what kind of changes should we expect to see?