A no-deal Brexit “would be an unforgivable act of economic and social self-harm that the UK would live to regret” Huw Evans, Director General of the ABI will warn tonight. With time running out he will add that “as a last resort” Brexit should be subject to a short delay if no deal is the only alternative.
Speaking at the Association of British Insurers’ Annual Dinner in London, Huw Evans will also warn that any future arrangement with the EU that required the UK to comply with rules it had no say over could be “weaponised by those in the EU that want to….damage the UK. This could result in UK insurers having to hold more capital than they need, which as well as damaging competitiveness and reducing investment in the economy, could also see people get less from their pension.”
His remarks, at a dinner attended by CEOs of major insurers, senior politicians and regulators come as new figures reveal the UK insurance industry now has a £16.7 billion export surplus, with over a third of this going to the EU.
The UK is currently the largest insurance market in Europe, the fourth largest in the world and employs over 300,000 in the UK.
The main extracts are reproduced below:
“A no-deal outcome would be an unforgivable act of economic and social self-harm. It would mean leaving the world’s single biggest trading block overnight with nothing but WTO rules to replace it.
“This would be wholly inadequate and unprecedented. None of the EU’s 20 largest trading partners trade with the EU on solely WTO terms; they all have deeper agreements in place. And the WTO framework itself is designed to provide a mechanism for states to resolve trade disputes – it is not designed to be a safety net for the world’s fifth largest economy leaving the world’s biggest trading block. Nor do its rules guarantee market access for the services which make up four fifths of the UK economy. This matters because the EU is – by a very long distance – the largest export market for the UK insurance and long-term savings industry.
“As an industry we have done everything possible to prepare for no deal, including transferring an estimated 29 million insurance contracts and the establishment of nearly 40 EU subsidiaries and branches to minimise disruption to customers. But we still believe very strongly that a conscious decision to opt for no deal would be an act of economic recklessness our great country would live to regret with WTO rules offering little to no protection against the consequences. As a last resort, if the only alternative to no deal is some form of short delay to Brexit, then delay we should.”
“We have to keep reminding ourselves that it is the agreement on our future economic relationship that we will have to live with for decades to come, not the divorce arrangements. And here, we continue to face a wholly unacceptable risk that we could end up long-term rule-takers of the trading block we have just left.
“This matters because our sector leads Europe. This city with its world-famous London Market is the insurance capital of our planet. The UK insurance industry is a net exporter to the tune of £16.7 billion and employs well over 300,000 people across the UK. Whether it is speciality risk, reinsurance, the sophistication of our long-term savings market or the sheer critical mass of expertise, capital and market infrastructure, the UK is an undisputed global and European leader in insurance and long-term savings.
“We may not have long to wait to find out what rule-taking could involve. The European Union is kicking off its major review of Solvency II, with crucial issues like the Risk Margin and the Matching Adjustment in scope and without the UK in the room where last time we negotiated critical changes to accommodate UK market practice. At its worst, this process could be ‘weaponised’ by those in the EU who want to use Solvency II to damage the UK. This could result in UK insurers having to hold more capital than they need, which as well as damaging competitiveness and reducing investment in the economy, could also see people get less from their pension.
“I hope and trust this won’t happen. But it would be naïve to think that over the course of the next few decades, EU rules will do anything other than reflect the interests of its members, not its former members, seeking to draw capital, talent and market infrastructure into the EU27 and removing much that only ever went into EU law because of UK needs.
“I cannot think of many countries in the world where some of its leading politicians would openly contemplate signing up one of its world-leading sectors to decades of rules made by our competitors. Whatever we eventually agree on our future relationship, that must not be allowed to happen.”
Insurance Edge Comment;
We are not leaving, we will never leave the EU. There may be a bit of paper one day saying we have, but in reality the UK will pay billions to the EU forever, follow all important laws and regulations and mass migration will continue. The whole Brexit argument is tedious, a colossal waste of money and ultimately futile.
Politicians have too much to lose if the UK leaves, especially when it comes to cushy jobs, pensions and perks for themselves and their hangers-on. For those venal reasons alone, Brexit was a non-starter from June 2016 onwards.
Everyone in the insurance sector knows we operate in a truly global, AI-powered, digital economy and that irrevocable fact of business life cannot be fundamentally altered by any second vote, vaguely worded Brexit deal or no-deal. Nobody within the insurance industry should lose a moment’s sleep over Brexit, because it an event that will never occur in our lifetime. Except in name only.