Without access to the European Union’s single market, U.K. financial firms will face unprecedented struggle.
Ireland’s Central Bank Deputy Governor Ed Sibley voiced his concern about the financial and insurance industry challenges following Brexit. He stated that with less than a year before the United Kingdom withdraws from the European Union, banks and insurers remain unprepared.
Sibley said the EU should not attempt to stop U.K. banks and insurance companies from the single market.
Sibley’s financial and insurance industry warning is in direct opposition to certain E.U. opinions. Some E.U. members, and the European Commission itself, have pushed to restrict the City of London financial clearing, banking, and insurance industries from gaining access to the E.U.’s common market following Brexit.
Sibley stated that Ireland would be the second most Brexit-affected E.U. member, with only the U.K. more heavily affected. He underscored that there would be an especially powerful impact to the Irish funds industry and to Ireland’s insurance customers should a “hard or chaotic Brexit” occur. Ireland would face greater pains than other E.U. members because insurance companies from Ireland would become isolated.
The insurance industry in Ireland would face difficulties unlike anything it has ever experienced.
“Without action, there are risks that UK and Gibraltar-based insurers passporting into Ireland will lose their ability to continue to provide insurance cover, including collecting premiums, making mid-term alterations and negotiating and settling claims on any outstanding insurance contracts – ranging from long-term life insurance policies to annual motor insurance contracts – taken out prior to the UK’s departure from the EU,” explained Sibley.
The Central Bank of Ireland recently discussed Brexit preparedness with every Irish insurance company it supervises. The bank received 197 responses to its questions about how prepared the insurers are. Of those responses, 38 said their business model would be highly impacted by Brexit. Another 12 said that Brexit would have a medium impact on their business model.
The remaining 147 Irish insurance industry providers – nearly three quarters of the respondents – felt that Brexit would have little to no impact on their business models. When taking into consideration the challenges they would face, Sibley found this deeply concerning.
“As regulators, we see enormous challenges ahead, both for ourselves and for the firms that we supervise,” he said.