Brexit: Any lessons from the past?

Manuel Lovell, Managing Consultant - Underwriting and Broking - Oliver James Associates, discusses the impact of Brexit on the London Insurance Market.

As a head-hunter working with London and Lloyd’s market underwriters, I have a vested interest in the so-called ‘Brexit’. Being half-French, half-British and yet born far from Europe, and having worked in European markets within Financial Services for over seven years, it is easy to understand why I am interested in finding out more about how Brexit would affect me professionally and personally.

The thing that has struck me most about the Leave and Remain debates so far is the supposed aftermath (good or bad) of what would happen should the Leave vote be victorious; it has made me wonder about the love-hate relationship that the UK has with the rest of Europe, and how past instances of imposed key economic change within this continent have been felt within the Insurance sector. Looking back, the main two changes would be the UK joining the Common Market in 1973 (alongside Ireland and Denmark); and the introduction of the Euro across the original eleven member states in 1999 (a further eight have adopted the Euro since).

There are very few people still working in the insurance sector who can remember the impact of joining what was then called the European Communities. However, plenty of people who were present when the Euro was adopted initially in 1999 are still working and were available for comment. I was interested in understanding people’s experiences as we work in the most international of all markets with plenty of products being established across varying jurisdictions.

A big hurdle to overcome was refreshing people’s memory of the events back then; a lot has happened in the seventeen years since the Euro was introduced, including another event that generated the biggest fear in its build-up: the ‘y2k bug’. Personally, I think I do remember my calculator going wrong, but that may have been the battery…

A common consensus is that no-one can really remember having to change the way things were done or having new impositions put in place to trade with Europe. Furthermore, there was not quite the brouhaha associated with next month’s referendum either - there were certainly some questions waiting to be answered, but it was generally accepted and acknowledged that the introduction of the Euro would not really impact on the insurance industry in a negative manner.

Of course, conversations turned to next month’s vote, and there seems to be a conflict in a lot of people of weighing up personal reasons and professional opinion, as very often these do not match up. For most underwriters involved in these conversations, a client is a client and whether they are based in the US, in Europe or in Asia makes very little difference to them, because they mostly consider the US to be like Europe minus the UK’s membership into the EU.

It was incredibly interesting for me to understand how underwriters in London view their market; I always knew that London is seen and acknowledged as the global hub, but I then heard one underwriter after another repeat that their market is the world - it just happens that some people have a narrower geographical focus than others. The world has become a far smaller place since 1999, let alone since 1973, and the majority of developed countries today have stable governments, so the parameters of the vote are potentially vastly different from the two past events that I’ve been looking at. Indeed, countries are run more like businesses now, and the people in charge will always find ways to counteract any change in a way that will benefit the two parties in most transactions.

When this was pointed out to me by a marine underwriter, it struck me that a Common Market in Europe fundamentally was, and still is, a good idea; it is just a shame we let politicians start running it and allowing for national pride to be more important than the original goal of keeping a group of economies buoyant and growing, especially when we all have so much to offer each other.

Underwriters are trained to assess risk and decide on risks’ ‘worthiness’ to be taken on, and in this case, there is a wider spectrum of opinions than there would be if an underwriting committee convened to discuss a Liability risk, for example. Since there wasn’t much of a memory associated with the last ‘big’ event relating to the EU and the UK’s fractious relationship, some people wonder if an exit from the EU would see that big an impact on their client base and portfolio after all.

The simple answer is that no-one knows for certain - it could allow for London and Lloyd’s to become more competitive without EU restrictions, just as easily as it could cause months of uncertainty blossoming from particular treaties and agreements no longer being valid and needing to be renegotiated with key trading partners. Once again, what impact will this have on underwriters whose companies have covered these countries is perhaps best guessed as: Business As Usual.

The real difficulty in trying to piece together how underwriters were affected by events in 1999 was the fact that most people could not remember there being any difference from before 1/1/1999; some underwriters admitted they were worried that Europe would take on a more protective nature, but this never happened. If underwriters cannot remember any difference before (and a large number of the ones I spoke with are not overly concerned about will happen should the Leave campaign be successful), then from a professional point of view the vote partly becomes a moot point.

That being the case, people will need to vote using their own expectations, political leanings, understanding of the various propaganda (from both camps) and most importantly, their own feelings about how the UK benefits from being in the EU. As a French passport holder, I do wonder how the people in Europe view this referendum; is it getting large coverage or is it merely a footnote in their current affairs?

My final thought is that, should the UK stay in the EU, could this perhaps be the impetus needed to finally help shape the EU into what Churchill et al envisioned this ‘united Europe’ to be like? My answer to this question has to actually be another question: do the politicians really care enough to change things?

If you’re interested in Underwriting and Broking roles, you can contact Manuel directly +44 (0)20 7310 8580

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