No turning back from either Bremain or Brexit for insurers
There was always a danger that the debate surrounding the EU referendum in June would generate more heat than light.
When it comes to the impact on some of the most significant elements of the UK economy – such as the insurance sector – it is vital to identify the issues that will arise for business leaders in the industry to resolve whichever way the vote goes.
The Kennedys research-based risk report, Brexit: the insurers speak, shows that while there is broad-based insurance industry support for remaining in the EU, there are legitimate business concerns about what will happen in the event of either outcome.
Having carried out over 20 in-depth interviews with senior executives from within the sector, our aim is to inform and not take sides. The reality, of course, is that neither outcome will be a vote for the status quo.
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In the event of a ‘Leave’ vote, the UK will need to devote energy and resource to reframing its trading relationships with the EU and the rest of the world.
If we ‘remain’, the sector will be faced with further EU regulations spanning capital markets and insurance solvency requirements, data protection and cyber reporting, as well as new rules on the sale of insurance policies and broader efforts to complete the Single Market for retail financial services.
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Most senior executives we spoke to thought it would prove difficult, if not impossible, for the UK to negotiate an exit that maintained full EU market access, and were very worried about how long it would take to reach free trade agreements around the world.
Importantly, the report confirmed the ability to recruit and retain global talent is a critical success factor for the UK insurance sector. A stay vote may lead to tighter restrictions for non-EU migrants as the only way to reduce net migration, while a leave vote may tempt the UK to limit the free movement of EU citizens.
Either way, access to one source of talent could be cut off.
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The very British issue of the impact on Scotland of a ‘Leave’ vote and the risk of it prompting a break-up of the UK, and Scotland joining the EU, is also brought into sharp focus. This is a significant factor given the strength of Scotland’s insurance sector, particularly on the life side.
All of that said, this looks like a vote which is going to be led in the main by hearts rather than heads and I have no doubt that whatever the outcome the UK insurance market will do what it has to do the retain its position as the global market leader.