Preparing for the eventualities that Brexit may bring has been challenging for everyone. Despite the immediacy of a deal, there is still a lot of uncertainty as to what the outcomes will be, and the eventual relationship between UK and EU.
In financial services, this is equally as pronounced. In preparation to face the impact, many firms have been planning and executing their Brexit contingency plans. Some have chosen to open subsidiaries or new companies in the European Union (and the wider European Economic Area) in order to have passporting access across the EU27. Examples of firms doing this are CNA Hardy, Hiscox and RSA who are executing plans in Luxembourg, Chubb in Paris, and several firms who have decided to move to Dublin. Lloyd's has chosen to set up its subsidiary in Brussels.
BIBA estimated £8bn of European revenue is at stake and their research indicated that 88% of UK firms are concerned about losing the ability to passport. It is therefore understandable that firms are taking steps to meet the challenges of cross-border trading and European business coming to the UK.
Presently, there is a lack of clarity around the regulations that will govern the concepts of passporting and cross-border relationships post-Brexit, with many firms calling for the government to consider the needs of the insurance industry in its plans for leaving the EU and particularly in the event of a ‘no deal’ following Brexit negotiations.
Leaving the EU does not spell the end of working together. The UK will still need to work with the EU and vice-versa. A restructuring of the current arrangements will be necessary but there are existing models (notably Switzerland and Norway) which support prospering insurance industries despite not being part of the EU.
RegTech will play a vital role in helping firms manage the eventualities of Brexit. Whist UK firms will become relieved from the heavy regulations that are enforced by the EU, creating a new set of UK regulations will come with its own challenges. The right RegTech solutions can provide a cost-effective flexible mechanism for compliant B2B trade, regardless of territory and regulatory jurisdiction.
Until 2018, REG’s customers have been UK based firms. Now we have expanded our capability to providing services to firms based outside of the UK and their trading partners globally.
In this period of uncertainty, it is difficult to predict if Brexit will negatively impact the UK insurance sector. The UK will continue to trade in the EU and also look to scale into growing markets, such as China, that have proved difficult as EU members to date. Uncertain, yes, but without opportunity, no.
Businesses that recognise the value of RegTech will only benefit from its adoption. Global insurance distribution is changing, and the maintenance of competent, effective governance can only be delivered with the assistance of competent, effective technologies.