Posted on Mar 18, 2020
As we mark the four-year anniversary of the historic Brexit referendum in June 2016, trade negotiations between the UK and EU continue to be as tense and as complicated as ever. Different industries are beginning to make final preparations for the UK’s full exit from the EU customs union and single market. But for the UK’s £230 billion insurance industry, these final preparations have already been rolled out.
‘The Great Brexit Insurance Migration’
For many, this involves exiting Britain themselves. In what has been dubbed as the Great Brexit Insurance Migration, London’s role as the fourth largest insurance market in the world is threatened by the loss of around £61 billion worth of business moving to rival financial centres like Belgium, Luxembourg, and other EU cities. This move, noted last year, is happening regardless of what the final trade deal turns out to be in December. For instance, major car insurance provider Admiral Group had set their sights on Madrid as early as 2018.
And they’re not alone — the New York Times reports that over 275 major UK companies have moved operations, employees, and legal entities outside the country, or are already planning to do so.
The pros and cons of remaining
But for those who do stay in the country, experts are predicting a fundamental shift in how insurance will operate. Leaving the EU means being no longer bound by its laws, which include rules and regulations regarding insurance, as well as losing ‘passporting’ rights that allow insurance companies to sell to other EU countries without any barriers.
New regulations, then, will face companies who choose to stay, but what exactly these new rules will contain remain largely unclear. Of course, there could be some good to come out of it. For example, the EU Gender Directive has long held that gender cannot be considered a factor in underwriting policies, despite evidence that there are gender differences when it comes to safe driving practices. Women, in particular, will benefit from UK insurers no longer being bound by this rule, as they could be entitled to lower premiums.
Adjusting to an entirely new set of rules and regulations can cost companies huge amounts in the short-term, though it is not impossible — as in the case of Switzerland and Norway, and their independent, yet thriving, insurance industries.
Striking a balance
Still others, on the other hand, are looking to strike a balance by cautiously expanding business outside of London while maintaining its core UK operations.
“There’s a huge amount of expertise and infrastructure around the London market which one might expect to diminish in relative importance over time,” explains Duncan Barber of Linklaters LLP. “But London should still remain the pre-eminent centre for insurance for the time being.”
This is the case for companies like HomeServe, which had quietly planted seeds in Italy, the US, Spain, and Japan over the last decade. These markets provide ample growth and revenue for the company, while its main UK operations continue to enrich its offers. On top of their main business of boiler coverage, HomeServe UK currently also provide electronics and plumbing cover alongside special packages for flats and landlords. Variations of these are offered to French, Spanish, and American customers.
Meanwhile, Hiscox, a business insurance company, moved some 300 of its best talent to regional offices in the UK to boost its national presence earlier this year. With a good foothold in key US cities like San Francisco and New York, the move to bolster regional sales is just one of the reasons why profits have been on the rise, giving its top management the confidence to say that the company is Brexit-ready.
At the end of the day, the final decision on the Brexit trade deal — and all the little changes in policy, economy, and culture it will bring — is constantly changing. Companies would do well to keep on their toes and watch every development, and you can do that too by monitoring our articles here on EU Today.
Follow EU Today on Social media: