Brexit: the insurers speak

In preparing our insights report on the EU Referendum, we undertook a series of in-depth interviews with senior executives in the insurance sector.

Below is the executive summary of our report, which can be downloaded in full here.

Key findings

The UK is a recognised global leader in insurance

The UK forms the world’s leading financial centre. The Global Financial Centres Index 19 (issued April 2016) ranks London number one globally, ahead of New York, Singapore and Hong Kong. Within this overall picture, London is recognised as a leading hub for international insurance [1]. Nearly half (46%) of premiums in the London insurance market are derived from business in UK and Ireland, 13% comes from the rest of Europe (excluding UK and Ireland) with the remaining 41% coming from the rest of the world. Access to the EU Single Market is recognised by our respondents as having contributed to the UK’s strength as a global leader.

Widespread support for continued EU membership

  • Almost all respondents felt that the costs of an EU exit would outweigh any benefits. As a result, there was near-universal support for the UK to remain within the EU.
  • Whilst we only found one senior executive respondent who advocated a Brexit, there are voices in the broader industry that do support Britain’s exit from the EU. A recent Survey by Insurance Day showed that while support for remaining in the EU was high at 64%, 28% support Britain’s exit and 8% remain undecided [2].
  • A British Chambers of Commerce survey has also suggested that support for the UK remaining in the EU has dropped among business leaders, with its final poll ahead of the 23 June vote showing 54.1% supported remain (compared to 60% in February 2016).

Uncertainty is the universal concern – but the market impact would be uneven

  • The uncertainty that would follow a Brexit is the biggest concern. The consensus market view was that a renegotiated settlement would take at least five years to achieve. The firms we spoke to repeatedly said that there were too many unknowns for them to predict accurately the long-term impact of a Brexit on either themselves or the wider UK economy.
  • The uncertainty associated with a leave vote could provide a strong incentive to relocate business to other insurance hubs around the world, particularly in the London Market where the client base is global and the workforce is highly mobile. It was considered that the combination of globalisation and digitisation is weakening the need to maintain a physical presence in London. Potentially up to 48,000 jobs [3] would be put ‘at risk’ (more than twice the size of Britain’s steel industry).
  • Businesses may start to relocate from the UK within one to two years of a Brexit vote. Some suggest that jobs may well relocate ‘within weeks’ of a Brexit vote. One interviewed firm said that it would be a priority, in the immediate aftermath of a leave vote, to transmit a ‘business as usual’ message to the market in order to stem any capital flight.
  • Firms which make use of passporting rights to do business across Europe had major concerns. Any inability to undertake cross-border activity as now, based on Freedom of Service (FoS) provisions would cause businesses to redraw their corporate strategy and potentially undertake major corporate restructuring. Brexit could become a major source of M&A activity in the sector as insurers look to acquire or divest their EU business units.
  • The firms who had established ‘game-plans’ in the event of a Brexit were focusing on how to minimise the impact of volatility as “uncertainty drives discounts” and scares both investors and consumers. In the short-term, firms expect the immediate impacts to be on sterling, credit spreads and interest rates. Over the few years following a Brexit, these impacts could create downward effects on employment, output and ultimately GDP growth.
  • Overall, however, most firms said it was too early to undertake detailed contingency planning until the outcome of the vote was known. To do otherwise risked incurring unnecessary cost.

Accessing talent from a global workforce

  • The ability to recruit and retain global talent is a critical success factor for the UK insurance sector.
  • In the event of a ‘Remain’ vote, there are concerns about the UK’s ability to compete for global (non-EU) talent as the only way to reduce net migration would be to introduce tighter restrictions for non-EU migrants. This could have a negative impact on the London’s insurance sector’s global competitiveness.
  • In the event of a ‘Leave’ vote, the UK may be tempted to limit the free movement of EU citizens. This would hamper insurers’ efforts to attract and retain talent from around Europe. Conversely, a leave vote could relieve pressure on the UK to limit non-EU migration. This could make it easier to recruit from the rest of the world.
  • In reality, most respondents thought it would prove very difficult, if not impossible, for the UK to negotiate an exit which maintained market access for goods, services and capital (three of the four freedoms) while limiting free movement of people (the fourth freedom) between the UK and the rest of the EU. Respondents felt that Britain would not be able to ‘pick and choose’ which freedoms would apply under any subsequent free-trade agreement.

Steady as she goes: Brexit unlikely to impact on insurance regulation

  • Vote Leave, the official Brexit campaign, states that EU regulation currently costs UK businesses over £600 million every week. However, respondents dismissed these figures arguing that a UK-led regulatory regime would be just as robust as the current EU-led regime.
  • Respondents believed that a Brexit would not result in a regulatory bonfire. There was broad consensus that most EU-wide insurance regulatory regimes, notably Solvency II, were ‘designed in the UK’ and as such UK regulators would be reluctant to make serious amendments to existing rules.
  • Even if it left the EU, the UK would still need to follow broadly equivalent regulations in order to negotiate maintenance of market access. In the event of a ‘Leave’ vote, most respondents could not identify any regulations a UK regulator would (or should) remove. Only one EU legislative initiative – the Gender Discrimination Directive – was highlighted as suitable for removal.

High risk of reduced EU market access

  • UK insurance has a global footprint and it is therefore vital that the UK is able to maintain access to key markets around the world both inside the EU and beyond it. There are widespread concerns about the UK’s ability to negotiate favourable terms of market access in the event of a vote for a Brexit.
  • It was felt that none of the other models for market access – Switzerland, Norway or Canada – would come close to replicating the current level of market access. Even if the UK was deemed to have equivalent regulation, as Bermuda has achieved with Solvency II, this does not equal free market access.
  • The cost of a Brexit would not simply be felt in the UK. Professionals working in other EU markets felt that the loss of UK market access would result in UK insurers retreating from their European-wide operational footprint. It was felt that UK insurers currently benefit other EU markets by increasing consumer choice and competitiveness in those markets.

Related item: Visit our Brexit focus area for latest updates


  1. Global Financial Centres Index 18, September 2015
  2. Insurance Day survey, February 2016
  3. Lloyds, Speech by Sean McGovern, February 2016


This report does not represent the views of Kennedys Law LLP. The report is based on interviews with 20 senior professionals working in the UK insurance industry. The report attempts to present a balanced debate based on the interviews we conducted. While there was a clear majority of respondents who supported the UK’s continued membership of the EU, Kennedys Law LLP is not aligned with any campaign group, nor does this report seek to make recommendations on whether the UK should remain in or leave the EU.