Analysis by Ernst & Young (EY) via its Financial Services Brexit Tracker reveals that re/insurers continue to step up their Brexit contingency plans despite the transition agreement, as widespread uncertainty remains.
Despite the importance of the financial services sector to London and the wider UK, it appears that insurers and reinsurers, along with participants operating in other sub-sectors of the UK’s financial services sector, remain unclear on the potential implications of Brexit and as such continue to implement post-Brexit plans.
According to analysis by EY, since the referendum vote and as of June 2018, 34% (75 / 222) of companies tracked said they are considering or have confirmed they are moving some of their business, and/or staff from the UK to Europe, which is growth of 2% from March and 1% from the previous quarter (December 2017).
At the same time, and again as of June 2018, 24% (53 / 222) of companies tracked by EY have publicly confirmed at least one location in Europe to move staff and/or operations to, which compares with 21% of companies having done so by March 2018 and 19% in December 2017.
The analysis reveals that 15 re/insurers and re/insurance brokers have said they are considering relocating, or will relocate, staff/operations, with 14 of these naming at least one European city.
So far, the desired EU location for UK companies appears to be either Dublin or Frankfurt, attracting 21 and 12 companies since the referendum vote, respectively.
Reinsurance News has reported on a number of announced post-Brexit plans by insurers, reinsurers, and brokers, including the Lloyd’s of London marketplace, Sompo International Holdings, AIG, MS Amlin, and Tokio Marine Group, among others.
Omar Ali, UK Financial Services Leader at EY, said: “The transition period, when confirmed, means that we avoid the much-feared ‘cliff edge’, but the level of change to how financial services firms operate will still be significant and the time window to meet these challenges is short.
“Until there is more certainty around key issues, such as the degree of access, movement of people and cross border contract continuity we should continue to expect companies to make operational moves, and prudently stick to their original contingency plans.
“Companies’ worst-case scenarios appear to be less drastic than initially feared, but words are now becoming actions and plans are becoming reality. Firms have not yet made final decisions on the exact number of staff relocation or new jobs and are instead concentrating on the immediate operational challenges to be ready for Day One of Brexit. A key focus is to ensure the continuity of contracts that are currently in place which cover time periods beyond the end of the 2021 transition.
“Most firms are yet to iron out all the finer details, but there is evidence to suggest they are continuing to make definitive decisions, with many recognising that the Transition is not yet locked in, and may not be until very late in the day. We are seeing more and more companies name multiple locations, unsurprisingly focused on those where they have existing operations or there is an existing financial services infrastructure to slot into.
“This points to the fact that it is unlikely we’ll see one pre-eminent financial services hub emerge in Europe, and London will remain a leading global financial centre.”
Companies’ increased and continued eagerness to step up post-Brexit plans is in spite of the transition period announced on March 19th, 2018, which has not yet been ratified, an underlines the need for greater clarity on exactly what the UK’s financial services sector might look like when the country leaves the EU.
