As the UK holds its collective breath while it waits to see exactly what the Brexit will mean and how it will materialise, high-level discussions are being had as to what the multitude of possible outcomes could mean for the insurance industry and how businesses will respond.
In order to retain passporting rights into the European market, the potential of relocating is no doubt being investigated should the terms of Brexit include more restricted access to the European market. New Zealand’s CBL Insurance stated prior to the vote it would move its European operation from Tunbridge Wells in the case of a Brexit, most likely to Ireland.
The agency responsible for the attraction and development of foreign direct investment to Ireland is IDA Ireland. Speaking to
Insurance Business UK, head of international financial services at IDA Ireland Denis Curran said Ireland houses 400 financial entities employing 38,000 people between international and domestic operations. Curran said the opinion of the Irish government prior to the EU referendum was it would be beneficial if the vote was for remain.
“The reason behind that is the UK is our second largest exporting destination, 14% of Ireland’s exports go the UK, there’s about €1 billion in trade between the two countries every year,” said Curran. “From a larger macroeconomic perspective, we thought it was beneficial for the country here if the UK remained within the European Union.”
The question businesses are asking themselves is how can they maintain stability now that the vote has been cast for ‘leave’. The exact details of the exit are nowhere near being finalised, so it is far too early for any kind of hard and fast decisions to be made. Still, companies are assessing their options.
“A lot of our clients are in the process of, and this is the conversation we’ve been having with them, still digesting the outcome,” said Curran. “A lot of them are putting Brexit teams in place within their own companies to analyse and strategise the potential impact on their own business, and then to develop scenarios about how they might react to that particular impact.”
If a UK insurer was to relocate to an EU member country, Ireland is an attractive option. It has access to the European market, is already a home to many global industry players and is managed by similar regulations.
Kevin Thompson is the CEO of Insurance Ireland and also spoke to
Insurance Business UK regarding post-Brexit considerations. The Irish insurance industry has recently seen relatively strong growth and is in a comparable position to most mature markets. Still the environment post-Brexit vote has presented challenges.
“The difficulty of a post Brexit environment is we don’t really know what Brexit means,” said Thompson. “By not knowing what the definition of Brexit actually looks like it’s hard to identify what the opportunities or potential downsides would be at this stage. For us, if you look at the Irish market, there is a lot of interdependency between Dublin and London, with a lot of Irish companies servicing the UK market and vice versa.”
The challenge is maintaining stability between the two markets. Thompson said a priority would be maintaining the relationships between the UK and Irish insurance markets already in place. A potential way of doing this might be looking at grandfathering regulations to make sure trade could continue, if the Brexit ended in increased restrictions.
In terms of UK businesses uprooting and moving to Ireland, Thompson said any sort of mass migration would be highly unlikely.
“Is there a chance of companies deciding to come here? Of course there is, but equally there’s a chance that they may decide to domicile somewhere else within Europe. What we do have though is fairly common cultural links between Ireland and the UK, we still have a common law framework, that’s strong as well. There are a lot of areas where we are very, very similar.”
Ultimately though, stability for insurers currently operating between the UK and Ireland is what everyone is looking for. Thompson said there is a lot of interdependence between the two markets and that is important to maintain.
“Our view is we’ve tried just to take a sensible approach, in that anything we can do to bring stability to the situation, and anything our government can do in that respect, we would look to fully support,” he said.
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