Friday 24 June 2016 8:31 am

What Brexit means for London’s insurance industry

The UK's decision to leave the EU might not immediately cause serious damage to London's reputation in the insurance industry, but the result does raise serious questions around regulation and access to the wider market.

In a statement released shortly after the result of the vote was revealed, Lloyd’s chairman John Nelson said that he was "confident" the specialist insurance market would "stay at the centre of the global specialist insurance and reinsurance sector".

Nelson added: "For the next two years our business is unchanged. Lloyd’s has a well prepared contingency plan in place and Lloyd’s will be fully equipped to operate in the new environment."

Analysts at RBC Capital Markets remarked that, while the Brexit carried mostly negative implications for the insurance sector, Lloyd's insurers were relatively well insulated from the impact of Brexit. It also said that its short term earnings could even stand to benefit from market movements, thanks to their reasonably high level of dealings in the US.

FTSE 100 insurer Aviva issued a statement reassuring investors that it had assessed what impact Brexit would have on its business before the vote took place and felt "it will have no significant operational impact on the company".

At time of writing, shares in Aviva were trading down 16.5 per cent at 371.3p, although shares in financial services companies have performed poorly today in general.

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Meanwhile, Jonathan Howe, UK insurance leader at PwC, said leaving the EU was unlikely to result in the immediate unwinding of Solvency II rules in the UK. Howe added: "The insurance industry should not expect significant dissolution of 'cumbersome' EU regulation, given the perception that the UK has a history of 'gold plating' insurance regulation."

However, Howe also warned: "The Lloyd’s & London Market and General Insurance Market make extensive use of passporting. The loss of these rights could see insurers being forced to restructure and facing large operational, regulatory and tax costs as they adapt to such a change."

Meanwhile, Andrew Holderness, global head of corporate insurance group at Clyde & Co, said:

Without passporting, the level of regulation will undoubtedly rise. It is also very likely that the overall demands on the regulators themselves will increase significantly. This will then have knock on effect and could impact their speed of response to a range of issues such as requests for approvals and rule waivers or modifications.

And earlier on this year, Lloyd’s of London's chief risk officer and general counsel Sean McGovern warned that Brexit could "create a level of uncertainty, for Lloyd’s, for the London market, as well as the UK and European economies, we have rarely experienced".