24 June 2016 Insurance

Re/insurers will be forced to consider leaving UK following Brexit

UK-based re/insurers will inevitably be forced to review where they are based following the UK’s decision to leave the European Union and some firms may opt to redomicile outside the UK as a result.

That is one of the key concerns emerging in the aftermath of the shock result of the UK referendum.

Stephen Netherway, partner and head of the insurance sector group at CMS, warned that the industry is entering a period of great uncertainty as a result of the vote.

“Seismic, just seismic for the global insurance market based here,” said Netherway. “The playbook for distribution and route to European market has just been ripped up and we enter the world of Rumsfeld's unknown unknowns.

“For non-EU domiciled insurers and brokers based here, first up for review must be redomicilisation to preserve the certainty of single market access. For others, can London remain a fulcrum for HQ operations, and if not there will be shrinkage?

“And spare a thought for those insurers domiciled in Gibraltar, many with strong UK links and workers. This is their Brexit too and they face the spectre of the flight of their passporting rights.”

Others have echoed this sentiment. Angus Dent, chief executive of ArchOver, described the vote as a disaster for the UK and said companies will start leaving.

“You can expect foreign businesses, institutions and other investors to start pulling out of the UK. The Chancellor will be forced to put together an emergency budget to plug the gap and this country, which was on course to become the world's fourth largest economy, will now go backwards. What a waste of all the hard work."

Andrew Holderness, global head of corporate insurance at Clyde & Co, added that insurers, reinsurers and intermediaries will need to urgently review the scale of their operations from continental Europe into the UK, or vice versa, and determine what impact losing it might have on their overall balance sheet.

“If it’s critical, or if they want to continue writing it, they have a number of options: acquiring another business to provide the right platform, establishing a branch or subsidiary – or finding another business to front for them,” he said.

“If operations are marginal, there may well be value to be had from the sale of the renewal rights or a portfolio transfer.”

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