“We demand rigidly defined areas of doubt and uncertainty!” – Vroomfondel, A Hitchhiker’s Guide to Galaxy. It’s a similar cry to the one heard all over the country since June’s Brexit referendum.
After a long period of ‘unknown knowledge’ regarding Brexit, we finally have some clarity: Theresa May’s speech on Tuesday 17th January laid out the broad principles on which this government will be basing its negotiations. The good news for Financial Services as a whole is the promise that the UK will aim for ‘open trade borders, with a clear and stable outlook through Europe’.
This can only benefit continental relationships, helping to alleviate fear towards the agreed exit strategy and subsequent changes after two years of UK-EU negotiations. For insurers, it is time to start developing, agreeing and, finally, implementing the plans needed to provide stability in the UK and a foothold in Europe.
Unfortunately, this ‘clarity’ has also raised uncertainty about the actual outcome for Brexit. This set-up is, for some, far worse, because it may lead to speculation about the exit negotiations as a whole. With opposing parties both convinced they are of the right mindset, how will re/insurers work their way towards the proposed ‘exit terms’? Worse still, the final terms may not arise until 2019.
All eventualities now have to be catered for in terms of the UK’s EU exit; this is another financial burden that re/insurers do not need whilst they are dealing with a soft market and low interest rates. The CII has warned that economic confidence in Insurance is the lowest it has been in six years, and expectation suggests not much will improve in 2017. Furthermore, last week, there were announcements of restructures, redundancies and poor investment returns. So where does this leave the market? Especially at a point when we are relying on the time-honoured principle of ‘business as usual’.
This a period when the Insurance industry needs strong leadership to ensure London maintains its position as the world’s prime re/insurance centre. Lloyd’s is already making plans, which should be unveiled by Easter at the latest, but it has mentioned wanting to foster a firm presence in Europe, with underwriters allowing them to write business. It will be interesting to see if Lloyd’s chooses Dublin – an English-speaking location – or a continental location, which could be seen as a commitment to working with European investors and insurers.
This seems like it could be a good opportunity with the right framework, and it would allow companies to expand into Continental Europe – a tricky market – with a real mandate and concrete long-term plans. Equally, international clients need an international presence, one which can be linked to London to share information and data.
From my point of view, ‘Brexit’ could be a big opportunity for re/insurers who want to embrace change and recognise that being ‘onshore’ in the EU could be incredibly beneficial for accessing markets that are not Anglicised in nature or language. It just depends on the management of such companies… and of course, who they hire.
To stay posted on the latest Brexit news – and its implications for the re/insurance market – please contact Manuel Lovell, Managing Consultant, on 00 44 (0) 2038 619 226 or firstname.lastname@example.org.