The City of London is the world’s leading insurance centre. Many of the insurers based in London write business throughout the single market of the European Union (the “EU”). This is a significant market, which accounts for 32% of the global insurance market with assets of almost €9,800 billion invested on behalf of life and non-life insurance customers. UK authorised insurers currently access the single market by way of the financial services passport. This allows an insurance company authorised by one Member State of the European Economic Area (the “EEA”) to carry on business across all EEA Member States. The continued ability of UK authorised insurers to access this market is uncertain as the UK will have to renegotiate its trading arrangements with the EU following its exit from the union.
Some of the insurance clients we are speaking to are considering establishing an EEA subsidiary in order to retain their EU passporting rights. Ireland, as an English-speaking common law jurisdiction with geographical proximity and ease of access to the UK, is an attractive jurisdiction for UK based insurers considering their future business plans post-Brexit.
One of the key concerns for the Central Bank when considering an application for authorisation by an insurance company is whether the ‘heart and mind’ of the business is based in Ireland. Irish-authorised insurers are entitled to out-source certain activities, but applicants must demonstrate that the insurance company will be sufficiently resourced within Ireland to carry out its business in compliance with the applicable legal and regulatory requirements.
Ultimately, until the UK exercises its right to invoke Article 50 and leave the EU, the full implications of Brexit will remain unclear. The UK may negotiate a favourable deal through which it will retain access to the single market for financial services, but there is no certainty of this. UK based insurers are, therefore, advised to consider alternative means of ensuring continued access to the single market in order to address the current uncertainty surrounding their future business plans.