Brexit and Insurance:Uncertainty, Less Capacity, Higher Prices

By Brandon Ross

June 21 — U.S. insurers differ on the implications of a British exit from the European Union—a so-called “Brexit.” But they agree on one thing: It would bring long-term market uncertainty.

Some say a Brexit would likely decrease the industry's ability to underwrite business. Others say it could play out in America’s favor, depending on the company.

As the U.K. gears up for its June 23 vote on whether to break away from the 28-nation bloc, the global insurance industry is waiting intently for the verdict. Ongoing trade agreements and deliberations on global insurance standards could be substantially delayed, industry veterans said.

“To the extent that you remove Britain, the largest market in [the EU], and then set up a domino effect where other countries break off from the EU, there’s nothing good in that,” Dr. Robert Hartwig, an economist and president of the Insurance Information Institute (III), told Bloomberg BNA June 21.

Many U.S. insurers have ties to EU or Swiss reinsurers, such as Lloyds of London, Munich Re, Hannover Re and Swiss Re Group, some of which are based in the U.K. A Brexit could complicate these relationships, he said.

On the other hand, David Snyder, vice president of policy development and research for the Property Casualty Insurers Association of America (PCI), told Bloomberg BNA that while uncertainty may be the near-term consequence of the Brexit, long-term benefits could include better operating conditions for U.S.-based insurers in Europe.

“There’s value in a European common market, in the ability to be admitted once and operate all throughout the EU,” Snyder said. “On the other hand, Solvency II is creating problems for U.S. insurers [operating] in Europe.” The impact on companies will vary greatly based on how much a company operates in Britain, Snyder said.

Solvency II is the EU's new insurance regulatory regime that U.S. insurers say is disadvantaging their operations in the EU due to a restriction that deems the U.S. as a non-equivalent regulatory environment. Solvency II means increased regulation and operating cost for U.S. insurers in the EU, Snyder said (See previous story, 02/24/16).

Solvency II Closing Markets

“Solvency II is starting to close markets that have been open to the U.S.,” Snyder said. Because of this, the benefits that have traditionally been inherent with the uniform approach of the EU's rules are being undermined by the new regime, he said.

But the insurance institute's Hartwig pushed back against potential benefits.

“The uncertainty [of the Brexit] would certainly decrease capacity,” he said. Capacity is the amount of risk that insurers and reinsurers are willing to take on.

For example, he said, “There would be uncertainty with what would happen with interest rates, which would impact companies' ability to underwrite.”

Further, companies may not be able to transfer capital or key personnel between the U.K. and the remaining EU countries with efficiency if the Brexit comes to pass, he said.

“It’s hard to predict, except that it would be worse than it is today,” Hartwig said

To contact the reporter on this story: Brandon Ross in Washington at

To contact the editor responsible for this story: Heather Rothman at

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