For decades London, England has enjoyed a position of prestige when it comes to the global insurance market. The world-renowned city is still home to the world’s largest insurance market, Lloyd’s of London. London itself holds accounts for a tenth of the entire world’s insurance and reinsurance market. However, that all may be changing as the consequences of Brexit become more clear.
Experts speculate that Britain’s decision to leave the European Union (EU) will result in 61 billion pounds ($75 billion) of business to shift to rival financial centers in the EU. Yes, it is true that the terms of Brexit are still being worked out, but the EU has made it clear that this financial shift is going to happen regardless of what the final terms are.
The EU’s insurance and pensions regulator has already given the order for every U.K.-based underwriter to transfer all of their European-based clients policies over to units based on the continent. This is going to be a huge blow to the U.K.’s insurance market.
Duncan Barber, a partner at Linklaters LLP, spoke with the Insurance Journal about the coming changes .“There’s a huge amount of expertise and infrastructure around the London market which one might expect to diminish in relative importance over time, but London should still remain the pre-eminent center for insurance for the time being,” said Barber.
The short-term effects of Brexit will cause thousands of policies to be transferred to units still based in the EU. The long-term effects are unclear. While many of the world’s top insurance experts still reside in London, if the opportunity of the future only lives in the EU it’s not unreasonable to expect more localized talent to develop elsewhere.
For now, the English insurance market will suffer a blow but still retain their position of power. In a few years we may in fact look back at Brexit as the beginning of the fall of English-dominance in the global insurance industry.