International rating agency A.M. Best has again discussed the UK’s vote to leave the EU following British Prime Minister, Theresa May’s 12-point Brexit speech. A.M. Best said that while it doesn’t anticipate any rating actions, broad uncertainty makes it challenging for the London and broader UK insurance and reinsurance marketplace.
Despite Theresa May’s speech, A.M. Best notes that significant uncertainty remains for the UK insurance and reinsurance industry after its vote to leave the EU in June 2016, highlighting implications that might be driven by regulatory changes, post-Brexit economic fall-out, and a loss of passporting rights for businesses.
“One of the biggest questions facing the insurance industry has been whether there will be a period of transition for insurers to adjust to new conditions in the wake of the U.K. leaving the E.U,” said A.M. Best, in a recent special report on UK insurers and Brexit, but which also applies to reinsurers.
May said that the UK would lose its access to the EU single market, so it remains very unclear if UK insurers and reinsurers retain or lose passporting rights that enable them to conduct cross-border business throughout the EU without the establishment of a subsidiary in a remaining EU domicile, something a number of companies have already started looking at.
“The industry must prepare itself for the changes ahead. Key issues that need to be addressed through 2017 include the shape of future insurance regulation, how to maintain access to E.U. business and talent, the transfer of business and how to take advantage of potential trade opportunities.
“A.M. Best does not expect to take rating actions as a direct consequence of Brexit. However, increased economic and regulatory uncertainty, as well as the potential for higher barriers to trade, mean that, overall, it is a credit negative for the U.K. insurance industry,” said A.M. Best.