Brexit and the Insurance sector: what’s coming?
The threat of a no-deal Brexit is looming, and business leaders are now rushing to explore the potential impact. One sector that could lose out significantly in this scenario is Insurance. What are the key issues and are there any potential benefits?
The Passport problem
A major focal point for Insurance companies is the loss of the ‘Business Passport’ that allows them to install branches in other countries. This would leave the UK firms with two options: Apply to have the same legislation as a Third country, that is, a country from outside the European Economic Area, or to be converted to an authorized British subsidiary of an EU company before Brexit.
The latter option would take 18 months. With the UK’s departure from the EU now imminent, it would be impossible to deliver without significant disruption.
According to EY, the first option would be preferable, as it would avoid the need to renegotiate all contracts and would take less time. That said, there is no official process for UK firms to be ruled according to Third country legislations.
Interestingly, Moody’s analysts believe that the passport predicament will have little impact on insurance companies 
There is also a lot of debate around whether the UK and the EU will have mutual recognition or equivalence when it comes to common standards. Equivalence would be much more easily repelled than mutual recognition. It would also give the EU the chance to accept or refuse standards whereas mutual recognition would entail automatic acceptance of the UK’s standards.
In a recent development, the government seems to have given up on the option of mutual recognition and has submitted a proposal for a middle ground. This would give UK companies time to adapt to any change in equivalence, according to Phillip Hammond.
Given the diminishing value of the pound it is likely that there will be more investment in Britain. The currency drop, however, together with other consequences that would come from leaving the EU, would mean a reduction in the purchase of foreign commercial products and would impact the UK travel industry.
A silver lining?
The UK recently reached a high in its exports of financial services to the EU. The country’s role as the leading financial service provider means that it is also in the interest of the EU to strike a deal on this sector of the economy.
Even in a worst case scenario London is expected to retain its position as the leading provider of financial services in Europe.
UK firms are already opening hubs abroad to avoid business disruption after Brexit. Meanwhile others are simply planning to relocate abroad at the point of Brexit or before. Lloyds is just one example.
For the companies opting to implant subsidiaries in other EEC countries, contracts will need to be entirely renegotiated.
This does present opportunities for the UK’s army of interims: professionals that are enormously experienced in manging uncertainty, rapid change and the creation of successful new strategies.
At Russam our insurance clients are already seeking our support to manage the impending change and make the best of a very challenging situation.