A no-deal Brexit would be a “nightmare scenario” for the insurance industry and must be avoided “at all costs” to safeguard the future of the sector, a new report has warned.The report by global law firm Kennedys said that slow progress in Brexit negotiations has forced many insurance companies to draw up – and in some cases implement – plans to move part of their business out of the UK, with Dublin a favored destination.
Interviews with senior industry figures revealed a “gulf” between their preferred Brexit outcome and Theresa May’s Chequers plan, with “serious concerns” over the Prime Minister’s decision to ditch UK demands for mutual recognition of British and EU regulations in the service sector.
There was “little – and diminishing – confidence” that the UK Government will be able to negotiate a deal providing “sufficient market access” for financial services companies, which are set to lose 'passporting' rights.
And the report found that the key priority was to break the current political “deadlock” over Britain’s preferred Brexit outcome, with companies unable to wait for politicians to make decisions at the last minute. If the proposed 21-month transition period following Brexit day in March 2019 does not become legally binding this summer, firms “will be forced to make contingencies based on a hard Brexit or a no-deal outcome”.
With the UK insurance industry employing 330,000 people and generating £20 billion in export earnings and £12 billion in tax revenues each year, marking its continued success, the report said it was vital for the sector to have a voice in shaping Brexit.
While acknowledging that the movement of insurance jobs away from London has not been as great as many predicted, the report warns that “many firms are already creating and executing plans to move part of their business out of the UK”.
Leading marine liability insurers Standard Club and North P&I Club have already established new EU subsidiaries in Ireland, with other companies drawing up plans to relocate or create alternative hubs in Brussels, Amsterdam, Luxembourg, Paris, Madrid and Munich.
Kennedys’ head of corporate and public affairs Deborah Newberry said: “Our report clearly highlights a gulf between the type of Brexit which the insurance industry favors and the UK Government’s recent White Paper. The UK should be bolder in batting for Britain’s insurance and financial services sector, given the sector’s contribution to the UK economy”.
She added: “If the industry is to retain its significant market shares in key industries – 60% in global aviation insurance, 52% in energy and 33% in marine insurance, to name but a few – it is imperative for the UK Government to listen to the industry and protect its interests.”