A British exit from the European Union would cause grave damage to the London market and the loss of thousands of jobs, according to a position paper from the International Underwriting Association of London (IUA), Lloyd’s, and Richard Brindle, group chief executive officer of Fidelis.
The paper participants, all market leaders, warned of these specific dangers from Brexit, if the UK public votes to exit the European Union on June 23:
- Job losses are highly likely among the 34,000 people employed directly in the city’s commercial insurance sector
- Further job losses are likely among the tens of thousands indirectly employed
- Underwriting companies are already making contingency plans to move elsewhere if Britain votes to leave the EU
- Foreign capital is likely to leave for more trade friendly jurisdictions.
The paper highlights the fact that insurance companies that stay in the UK, following a vote to leave the European Union, will continue to be subject to EU regulatory standards, but will not have any say in how they are formed. Those companies also will be forced to re-arrange cross-border insurance trade deals with almost all significant continental markets, the paper explained.
“Brexit campaigners have often said that trade with the EU is a one-way affair for Britain, and that Europe is a declining market for the UK,” the paper said, emphasizing, however, that this is not true for the London market, which sells insurance throughout the 28 member states.
“Roughly 16 percent of the market’s business comes from EU countries other than Britain, about £9.6 billion [$13.9 billion] in total, and that EU business is growing,” the paper said.
Indeed, business written by member companies of the IUA was up 29.2 percent between 2010 and 2014, yielding top-line income of £2.7 billion ($3.9 billion) in 2014, it continued.
“Our EU membership allows the London market to sell insurance freely to 443 million non-British people who live in the EU. That business will only increase as they thrive – unless it is choked off, and diverted to competing insurance hubs and other EU member states in a post-Brexit Europe,” according to the market paper.
EU members grants the London market a single point of access to the EU, as well as a single regulatory regime, the paper said.
“It allows insurance companies from elsewhere in Europe to invest in the London market freely, and they have done so to the tune of billions of pounds,” it added. “Companies considering an investment in insurance see London as a gateway to Europe, but Brexit would certainly encourage them to look elsewhere.”
“Feedback from our members clearly shows that the benefits of EU membership are highly valued and the possibility of these advantages disappearing is of grave concern,” said Dave Matcham, chief executive of the IUA.
“An IUA member survey shows at least six firms would reconsider the legal status of their London operations in the event of a leave vote, though there may be others. Passporting rights within the single market are particularly important, ensuring that firms are not obliged to maintain expensive capital holdings in each of the EU member states in which they operate,” Matcham noted.
“Lloyd’s firmly believes that to remain part of the EU is in the best interests of the Lloyd’s market and of the wider London insurance market, which contributes £12 billion [$17.3 billion] to the UK economy and employs over 34,000 people in London alone,” commented Inga Beale, chief executive of Lloyd’s.
“London has centuries of insurance history, and remains the world’s leading insurance market, largely because it is outward-facing,” said Brindle at Fidelis.
“It attracts foreign investment because companies in Britain can access the EU and the global market through a single operation,” he added.
“Brexit would jeopardize our leading position, and bring no advantage from any perspective, whether regulatory, economically or for our reputation. It’s highly likely that if we were starting a business post a Brexit vote, we would be headquartered elsewhere in the EU,” Brindle went on to say.
*A version of this story appeared previously in our sister publication Insurance Journal.
Source: IUA, Lloyd’s and Fidelis