As the final date of withdrawal of the UK from the European Union (31 October) grows nearer, the European companies are carrying out operations shifting certain businesses out of London. In case of the insurance sector, business worth £61 billion is being moved to European hub irrespective of a trade deal between EU and Britain, chances of which are very slim.
The EU’s insurance and pensions regulator directed all the insurance firms based out of the UK to move policies held by European customers to their branches located in a different part of the continent. Most of the policies have already moved to Belgium, Luxembourg, Ireland and other EU member nations. According to the Bank of England’s Financial Stability Report, released in July, even after the massive washout, insurance business worth about 5 billion pounds would remain in Britain, post-Brexit.
Most of the companies have already shifted to Europe as March 29 was the original date for Brexit. One such firm, Admiral Group, moved to Madrid. Its chief financial officer Geraint Jones said the firm undertook the expenditure of £4m-£5m to transfer policies into a new unit there.
The uncertainty that looms around Brexit has created an anxious environment, hampering already ailing British economy. The highly anticipated chaotic withdrawal of Britain from the Union, impacted the GDP growth rate of the nation, dropping it to the lowest in seven years, contracting the economy by 0.2%.
The transfer of insurance policies is going to further impact the UK economy with the loss of tax revenue, collected as insurance premium tax on every policy. Post-Brexit, that revenue would also be paid to the respective EU countries.
Besides the loss of revenue and clients, Duncan Barber, a partner at law firm Linklaters, seemed positive about the power which London holds over their EU nations, i.e expertise in underwriting. Barber said, “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.”