Potential Impact Of Brexit On The UK Insurance Industry 2024
With the EU referendum drawing closer, insurers are sitting up and following the news about the possible implications that an exit from the EU could have on the UK insurance market.
Lloyds insurance group has gone on record to state that an exit would damage the insurance market as a whole.
As one of the largest insurance policy underwriters, when their Chief Risk Officer Sean McGovern issues a statement, the financial sector takes heed of what’s being reported.
Possible Ramifications of a UK exit from EU
The EU Gender Directive
Right now, sexual discrimination is something everyone is aware of, but not everyone is aware that under the EU Gender Directive, UK insurers cannot discriminate between genders.
In practice, despite the life expectancy gap narrowing, insurers can’t increase a premium because you’re male or female, and statistics indicate you’re likely to live longer or less. That could mean lower premiums for women and increased insurance quotes for men.
Under current legislation, that cannot happen, so every quote, all things being equal, would be the same for either gender.
Solvency II Directive
This Directive has been in the works for years and was only enacted in January 2016. The Solvency II Directive aims to unify the insurance market and protect consumers against insolvency.
Currently, all insurance providers are required to be Solvency II Compliant. The insurance market compliance cost is estimated at around £300 million.
The legislation has been a cause for concern among many large insurers, with some citing the tough regulations that could force them into relocation.
Prudential, one of the giants of the insurance market has considered a relocation of their HQ from London to Hong Kong in a bid to escape the tough requirements of EU regulatory compliance.
More variety in a single insurance market
As the insurance market within the EU consists of 28 countries combined into one single market, consisting of over 500 million people, there’s plenty of variety in insurance products.
As every insurance product is different to cater to the individual needs of policyholders, the single market offers a greater variety of products.
Moreover, it allows UK insurance firms to sell policies across the Member States without additional requirements or costs for oversight of additional regulations.
International Trading Links
While the EU insurance market is a single platform, large nations such as the United States and China have trading links with the UK because it gives direct access to the single market. International trading could be hampered if the UK breaks away from the European Union.
Lloyd’s of London and the International Underwriting Association (IAU)
Lloyd’s of London is a market more than it is a company. As a group consisting of 94 syndicates, and hundreds of brokers, they have underwritten over £25 Billion of gross premiums (2014). Outside Lloyd’s group, the IAU represents all other insurance firms, including reinsurers.
Both groups agree that exit from the EU would not benefit the insurance market.
Due to international trading links, including Japan, the US, and China, a breakup could see large firms relocate their Head Offices from the UK to other Member states to retain access to the single market as it is now.
All insurers have invested significantly in complying with the Solvency II Directive, in addition to the UK’s regulations through the Prudential Regulation Authority, which go beyond the EU regulations ensuring consumer protection.
As insurers have already invested significantly to comply with EU Directives, none want to see that go to waste, which it would in case of a breakup from the European Union.
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Steve Case is a seasoned professional in the UK financial services and insurance industry, with over twenty years of experience. At Insurance Hero, Steve is known for his ability to simplify complex insurance topics, making them accessible to a broad audience. His focus on clear, practical advice and customer service excellence has established him as a respected leader in the field.