23 June 2016, approximately 72.2% of British people took part in a significant
vote on whether they want the UK to leave the European Union. Following the
referendum, the UK population decided to leave. As this was seen as extremely
unexpected, the shockwaves are still being felt to this day, not least by many
in the insurance sector.
caused by Brexit put the insurance sector into chaos. Property funds of the
insurers have suffered significantly as doubts over the economy, liquidity and
commercial property values originally took hold.
instability will likely be the first thing to affect the insurance market.
Brexit will have significant implications for the insurance market, as more
importantly, rules and regulations will need to be reassessed and renegotiated
with the European Union in order for businesses to be placed abroad. “O’Connor,
R 2017” implies that the EU currently functions under a legislative system
called Solvency II, which regulates and matches the way insurance is done
throughout the European Union. Joining elements such as a minimum standard of
customer protection, supervision, and improved integration with the EU market,
Solvency II allows insurance companies that are based in Britain to operate in
the EU, and vice versa. It is extremely likely that Britain will keep the same
regulations in place, however, the UK will still need to be classed as
‘equivalent’ under EU law in order to be treated equally to other member states
and gain full access to the EU market. If there was any breakdown throughout
the ‘divorce’ negotiations, then UK insurance companies could be treated less
favourable. As a result, insurance
companies that are based within the UK are starting to look elsewhere in order
to safeguard that they retain access to the single market. Lloyd’s of London,
which gains just over 10% of its overall revenue from Europe, has recently
announced that they plan to relocate their business to Brussels.
is important to point out that although AXIS Capital are a Bermuda based
company, they do have large dealings within the UK property market. The
potential of any regulatory changes following the Brexit could have a large
effect on how they conduct business.