Brexit: The Impact on Actuarial and Insurance Market
A brief intro of Brexit-
British withdrawal from the European Union, often shortened to Brexit (a portmanteau of “British” or “Britain” and “exit”), is a political goal that was pursued by various individuals, advocacy groups, and political parties since the United Kingdom (UK) joined the precursor of the European Union (EU) in 1973. Withdrawal from the European Unionhas been a right of EU member states since 2007 under Article 50 of the Treaty on European Union.
In 1975, a referendum was held on the country’s membership of the European Economic Community (EEC), later known as the EU. The outcome of the vote was approximately 67% in favour of the country’s continued membership of the EEC.
The UK electorate again addressed the question on 23 June 2016, in a referendum on the country’s membership. This referendum was arranged by Parliament when it passed the European Union Referendum Act 2015.
The result of this referendum held in June 2016 was 51.9% in support of an exit (17,410,742 votes) and 48.1% (16,141,241 votes) to remain with a turnout of 72.2% and 26,033 rejected ballots.
We compiled some of the articles from industry experts to let you know that how it will impact the Actuarial and Insurance market.
From Abby Tempest (HFG)
On the 20th of February David Cameron announced that the EU Referendum will be taking place on June 23rd. Since then prominent individuals have come forward airing their views on whether Britain should remain a part of the European Union. These include the typical politicians such as Boris Johnson, who is arguably the most influential of these voicing his side from the Leave camp, and perhaps more surprisingly some financial services board members have publically spoken their views. This is surprising as generally the Financial Services will try and be more discreet about their political views.
One of the most outspoken sectors within FS has been the insurance industry and within that what is most interesting has been the overwhelming majority of senior officials who have voiced their desire to remain within the EU. Some names of note are Inga Beale (Lloyds CEO); Mark Wilson (Aviva CEO); Keith Skeotch (Standard Life CEO); and Sean McGovern (RSA CEO). In the industry in which they work these names on their own carry a huge might, combined it will be extremely interesting to see the effect their decision has on the masses. Just as Boris Johnson is said to be the most influential political leader of the Leave campaign in Europe, will the executives of the FS industry be those most influential in the Government’s Remain campaign?
Market statistics seem to support that insurance industry professionals are less likely to vote leave. For example, a recent poll made up of 259 London market firms commissioned by Haggis Partners found just under 68% believe that the Lloyd’s market would be ‘hurt’ or ‘severely damaged’ by a Brexit. The Insurance Insider supported this evidence last September when it published that 71% of the 90 insurance executives asked believed a Brexit would be for bad the London market.
At the centre the arguments put forward by Beale, Wilson, Skeotch, McGovern (and many more), is pure economic reasoning, looking at the costs a potential Brexit could have to the UK Financial Service industry, the effects it could have on large firms that have European outposts and the potential threat of trade difficulties. Whilst these perhaps overlook some of the other, more impassioned reasons for leaving the EU, they believe the economy to be the heart of this country and the biggest risk factor upon leaving the union.
More on Brexit
What UK insurers will follow after Brexit?
(It is understood that despite the UK voting to leave the EU, the Solvency II directive is still applicable to UK insurers until new legislation is established.)
A UK referendum vote in favour of leaving the EU could pose a risk to growth prospects for the UK economy and its financial services sector, according to a report by Standard & Poor’s (S&P).
The gap in UK defined benefit (DB) pension funding has now reached £900bn, an increase of £80bn from yesterday, as a result of UK’s decision of leaving the EU, Hymans Robertson has confirmed.
Prices of insurance products and annuities could be different for men and women in the event of a Brexit due to a possible removal of the EU Gender Directive, according to Aegon.
Let us know what do you think of the situation when UK is going to be standalone…