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The UK is now one month into a government headed by Prime Minister Boris Johnson. Johnson has said that the UK must leave the EU on October 31, ‘do or die’. Whatever the final outcome of Brexit, there is no doubt that Johnson has increased the momentum towards a no-deal exit. This change promises to reinvigorate not only the party, but the country’s drive towards a completion of the Brexit process. Johnson undeniably displays ample amounts of determination, which should, at the very least, propel the country into a direction - though whatever that direction may be is still, more than three years since the referendum, uncertain.
The new Prime Minister will undoubtedly set the tone of business relationships between the UK and the rest of the world, and this will have an impact on how UK insurers, as well as every other profession, are perceived by regulators across the world. The most immediate determining factor will be a resolution to the question of ‘deal, or no deal?’. Of course, this won’t be a particular focus for smaller insurance firms whose client base will be mostly UK based. Indeed, our own research suggests that, overall, our members who belong to smaller firms are largely unconcerned about Brexit in regard to the effect it will have on their business. Though these firms will still be subject to the wider economic ramifications which will follow, as far as their day-to-day operations go, these will remain largely unchanged. Therefore, the prospect of a no-deal scenario in the financial sector is neither a universal fear, nor will its effects be the same, instantly. Although it does cause some concern around existing issues such as the skills gap, which could be exacerbated by new immigration policies and barriers to current EU labour markets. If this does occur, it would be felt by the whole UK market.
It is a different story, however, for those larger multinational insurance firms, those who have not only business operations across the globe, but further business interests too, such as investments for example. With such high value stakes, these firms do not have the luxury of waiting until the end of October before preparing for the possibility of crashing out of the European Union. Indeed, these firms are already deeply into the throes of business contingency planning for the event of a no-deal Brexit. Considerations such as preparing their various international subsidiaries or considering the possibility of re-locating to another country on the continent are high on the list of possibilities. That said, there is a consistent consensus among the profession that an exit from the European Union without any sort of deal is the worst-case scenario.
The threat of a mass exodus of financial services from the UK shouldn’t be viewed in any way as an over-dramatized exaggeration. According to the ABI, the insurance industry contributes £29.5 billion to the UK economy, and contributes around £12 billion in tax. Losing our large players to our neighbours would see these tax contributions drop significantly, not to mention the more than 300,000 jobs put at risk from a diminishing sector. To oversimplify the issue: to remain domiciled in the UK needs to be, from a business perspective, more attractive than to relocate.
The insurance profession is one which is constantly angled towards the future, looking at new products for new liabilities, for example cyber risks, and new distribution methods to supply them. While the political landscape is at the least uncertain, the threats to the insurance sector should be manageable, and allow us to keep serving our clients the best that we can. In fact, recent figures uncovered by the CII’s annual Public Trust Index have shown that, at the moment of making a claim, trust in the profession is optimistic. This is reassuring as trust is perhaps the most significant factor in determining how well we, as a profession, are able to serve society.
