How the Brexit will affect the UK insurance market


How the Brexit will affect the UK insurance market

 

The British Exit, also known as Brexit, has been making headlines for months. Last night the historic vote took place. By a narrow margin, the UK has decided to leave the EU:

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As a result of yesterday’s vote, many things have already started shifting in England. For one, British Prime Minister, David Cameron will step down indefinitely sometime in the coming months, though no exact timeline has been reported. Cameron was actively against leaving the EU.

Cameron delivers an emotionally charged speech after the results of the vote are announced

The vote also puts into question Scottish independence from the UK, as the British Pound steeply dropped and stocks began to tank.

Of course, the lingering question on our minds is what happens to insurance in the UK, a country that provides individuals and businesses in many other European nations insurance?

Here’s what we know:

The death of a single market:

Prior to this vote, the European Union acted within a single market, which gave companies access to over 500 million people. The EU is world’s largest insurance market, with just about 33% of the world’s total insurance premiums. In a February speech about Brexit, Sean McGovern, Lloyd’s Chief Risk Officer stated, “the single market is vital to London’s ability to service its global clients.”

The impact this will have leaves insurance companies, and other financial institutions shrouded in uncertainty. While, by many, the argument for leaving the EU was that it would help to open trade with other countries, however, it may shut down trade within the 27 other EU countries, if certain regulations are put in place.

British insurance companies may be forced to open satellite offices in other countries or may have to relocate entirely to conduct business more efficiently. This, of course, is reliant on the outcome of the negotiations between a scorned EU and the UK.

A possible reduction in talent:

Many insurance companies pull talent from many of the EU member countries, Lloyd’s of London being one of them. The vote is seen as a step towards the reduction of EU employees, and a shrinking of the talent pool Britain has access to.

A lengthy process:

Only one other country has successfully left the EU. Greenland voted to leave the EU in 1979 but was not officially independent of the EU until 1985, further proof that the UK will not be able to leave the EU immediately. Right now, it is estimated that it will take at least two years and probably more before the UK is fully independent. What stands in its way is economic negotiations with the EU, which must be taken on with careful examination.

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