How will Brexit Affect the Insurance Industry?
30-Jan-18
How will Brexit Affect the Insurance Industry? For the insurance industry, the uncertainty of Brexit is an anxious time. Immediately following the referendum, shares in insurance companies fell heavily, with some insurers falling over 15%.[i] Answering the title question; “how will Brexit affect the insurance industry?” is not straightforward. The simple answer is in fact, “we don’t know;” an unsatisfying answer for an industry that bases its entire business strategy on reliably predicting risk. However, while no one can yet be sure of all the effects, it is possible to make a number of assumptions based on what we already know; and there are advantages as well as concerns. Most insurance companies are now looking to the future positively and strategizing ways in which they can benefit from Brexit. Restrictions for working throughout the EU As a member of the EU single market, UK insurance companies can currently underwrite businesses throughout the EU, on the basis of their UK authorisations. Once the UK exits the EU, this right may end. This is not an insurmountable problem, and it is one that many UK based insurance companies are already seeking to overcome, by creating subsidiaries in the EU. [ii] However, it is certainly an issue that companies need to think about, well in advance of the exit from the EU. There will be a financial cost Certainly, there will be ways in which the industry will feel the financial cost of leaving the EU. This will happen in a number of ways. The weakening pound may mean people are less inclined to engage in activities that require additional insurance. There will be costs involved in changes to structures or policies as regulations may change. Documents will need to be updated and staff will need to be educated about new systems. Some companies may also invest in ways to continue trading abroad, in case reciprocal trading agreements are not reached. However, there are ways in which all these costs can be mitigated by ...
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