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Brexit : What consequences for the insurrance secteor
Brexit, which opens the way for the United Kingdom to leave the European Union in the next two years, is raising fears of negative consequences for the insurance sector. However, certain players believe that this unprecedented procedure may also open up opportunities, provided that competition laws are followed.
New opportunities for other European capitals
The first consequence of Brexit will be the end of passporting. The passports required to sell financial services within the EU will no longer be issued to operators located in the UK. Their activity in Europe will therefore be impacted directly. This is an opportunity for countries such as Ireland and Luxembourg, and also for cities such as Brussels, Frankfurt or Paris, who wish to attract companies who have decided to relocate.
As early as March 2017, American International Group (AIG) took the initiative by announcing the opening of ‘a base in Luxembourg’. The London insurance and reinsurance business, Lloyd's of London, followed on by disclosing it was looking into a fall-back solution in Brussels or Luxembourg. HSBC, for its part, announced it would be relocating a thousand jobs from London to Paris.
The advantages of Paris
As the leading insurance market in Europe after the United Kingdom, with 205.7 billion euros in insurance premiums in 2015 1, France fully intends to play its role.
“France’s strong points are its sophisticated financial centre, its competent financial microcosm, with the best actuaries in the world for example, and a robust and effective regulation system” Marc Perrone, Head of banking and financial regulation for Linklaters, already pointed out in late 2016.2
Paris also boasts a new appeal for teams, with the extension of the impatriates’ fiscal regime from five to eight years, not forgetting the tax exemption on the ‘impatriation bonus’.
A need for reciprocity
Brexit may also lead to a series of mergers and acquisitions: a study carried out by the firm Mercer identified Chinese and Japanese insurers who are lying in wait to acquire certain British players. 3
Finally, what about Solvency II?
Will EU insurers be penalised by its application to their British neighbours?
Christophe Pardessus, Head of Legal, Compliance and Claims at Marsh France, is optimistic in an interview for La Tribune de l’Assurance: “In the short-term, if Britain no longer applies Solvency II, its terms of activity will perhaps be less restrictive. In the long-term, however, this means that the British insurance sector could be undermined. (...) It seems to me that it will be difficult for the British to go it alone in terms of regulation. I believe they will stay close to European insurance law.” 4
1 - Insurance Europe, European Insurance in Figures, December 2016
2 - ‘Brexit : la place de Paris affûte ses arguments d’attractivité’, La Tribune,16 November 2016
3 - ‘Brexit : une chance pour l'assurance française ?’, La Tribune de l'assurance,1 June 2017
4 - ‘Brexit : une chance pour l'assurance française ?’, La Tribune de l'assurance,1 June 2017