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Association of British Insurers: UK insurers could face higher capital requirements post-Brexit

A stark warning, with some impassioned words from Huw Evans, Director General of the ABI this week.  It's worth remembering that the UK's future trading relationship with the EU has yet to be negotiated - even if the current Parliamentary process is concluded in March:

"I cannot think of many countries in the world where some of its leading politicians would openly contemplate signing up one of its world-leading sectors to decades of rules made by our competitors. Whatever we eventually agree on our future relationship, that must not be allowed to happen.”

Evans also pointed out that the UK insurance industry currently trades at a £16.7bn export surplus, making it one of the country's leading industrial exporting sectors - with a third of that business written in the EU marketplace.

Harking back to the exhaustive negotiating process which preceded Solvency 2, the ABI points out that the UK's Prudential Regulatory Authority took a leading role in shaping Solvency II (and is by repute the most vigorous enforcer of the rule-book).  So what happens if the PRA's ability to influence European standards dissipates?

Some of the obfuscation about what happens to the UK financial services industry following Brexit comes down to confusion about Equivalence vs Passporting:  Whilst the latter represents a permit to sell across borders in the EEA, equivalence demands that best practice is implemented as closely as possible, recognising that by doing so it makes it easier for UK financial services companies to do business with the EEA.  Since we don't know the outcome of the post-divorce negotiated settlement in full, there may need to be a leap of faith by UK practitioners that Equivalence will prevail.  There are also concerns about hedging and liquidity should Sterling be impacted as a capital raising and investments currency...

No deal an “unforgivable act of economic and social self-harm.” “As a last resort, if the only alternative to no deal is some form of short delay to Brexit, then delay we should.” If we become rule-takers, the EU could ‘weaponise’ those rules to damage UK. A no-deal Brexit “would be an unforgivable act of economic and social self-harm that the UK would live to regret” Huw Evans, Director General of the ABI will warn tonight. Speaking at the Association of British Insurers’ Annual Dinner in London, Huw Evans will also warn that any future arrangement with the EU that required the UK to comply with rules it had no say over could be “weaponised by those in the EU that want to….damage the UK.

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