Across the United Kingdom, the Brexit insurance industry impact was felt right away as the voting results were revealed. Shares throughout the sector plummeted, leaving investors and insurers reeling. Growing fears from experts appear to have taken an axe to stock prices.
The main concern is the effect the Brexit will have on Lloyd’s of London, the massive insurance market.
Lloyd’s currently enjoys a special appeal to other insurance companies. This is because it can act like a passport directly into the rest of the European Union. The Brexit insurance industry changes may alter that status. Many insurance companies doing business with Lloyd’s could be forced to move some business into EU subsidiaries.
Without the “passport” through Lloyd’s, insurers may find themselves bypassing that insurance market altogether. There would no longer be a purpose for them to hold their business in Lloyd’s when it doesn’t provide EU access.
This Brexit insurance industry shift makes it clear why Lloyd’s had been campaigning for remain votes.
Following the announcement of the Brexit referendum, Lloyd’s insurance market chairman, John Nelson spoke to the media. Nelson said “I am confident that Lloyd’s will stay at the centre of the global specialist insurance and reinsurance sector.” He also added that “The attractiveness of the Lloyd’s platform goes far beyond licences: robust financial security, global brand strength, and unrivalled underwriting expertise.”
According to Nelson, those are very important qualities as they have withstood the test of time. Still, shares across UK insurance sector took a nose dive on Friday. In fact, they fell by a massive average of more than 15 percent. Equally, shares in continental Europe Axa and Generali also stumbled quite a bit.
American companies weren’t immune to the initial Brexit insurance industry harm. Prudential Financial and Metlife dropped 7 percent. AIG has a considerable London operation. Because of that, it lost 4.7 percent in its share prices. Insurance companies hold sizeable portfolios of corporate bonds to protect themselves against liabilities. Any reduction in their value could have give a swift kick to the solvency ratios of insurers in the short term.