London Company Market Concerned About Loss of Single Passport if UK Exits EU

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Membership of the European Union provides insurers with substantial benefits and London Market companies would be significantly damaged if they were lost, according to the International Underwriting Association (IUA).

“The EU financial services passport allows firms based in London to conduct business across all member states and establish branch offices through a single regulator in the UK,” said London-based IUA in a statement.

“Such open access to European markets is vital for both companies headquartered in the UK and those based in other international financial centers, but using London as their center for European operations,” said the IUA, which is the London market trade association representing non-Lloyd’s international and wholesale insurance and reinsurance companies.

“The feedback we have received from our members clearly shows that the benefits of EU membership are highly valued and the possibility of these advantages disappearing is of grave concern,” said Dave Matcham, chief executive of the IUA.

“Passporting rights within the single market are particularly important, ensuring that firms are not obliged to maintain expensive capital holdings in each of the EU member states in which they operate,” Matcham continued.

IUA members also have highlighted the importance of free movement of capital for the purposes of investment or payment, a common regulatory framework, absence of trade tariffs within the EU and freedom of labor movement, he explained.

“All of these arrangements are significant in helping to maintain London’s position as a European and global hub for specialist and wholesale insurance,” Matcham said.

“If the UK were to leave the EU, IUA members are concerned that they would have a continuing obligation to comply with EU regulations, but little power to influence them. This could result in a loss of competitiveness in European markets. Increased trade barriers and difficulties in the UK obtaining trade agreements with other countries are other worries,” he went on to say.

Matcham said IUA members also are skeptical about touted benefits of “Brexit” with companies “cautious about the likelihood of such a scenario benefiting them through lower taxes and a reduced regulatory and compliance burden.”

IUA members have been preparing for the June 23 referendum on UK membership of the EU, debating different possible outcomes at board level, said the IUA, noting that companies typically have the issue featuring highly on their risk registers.

Chris Cummings, chief executive of TheCityUK, addressed a recent meeting of the IUA board on his own organization’s work representing the views of the wider financial services industry on EU membership. This discussion revealed that the views of IUA members are in line with those of the wider financial services community represented by TheCityUK.

“Those IUA members that have expressed a corporate view on the referendum have all declared a preference for the UK to remain within the EU. If a decision were taken to leave, then companies would need to adapt to whatever alternative scenario results,” Matcham added.

“The London Market is resilient and experienced in responding to change. It is well-positioned to respond to the referendum decision,” he said. “From a London insurers’ perspective, however, the need to maintain access to markets would clearly be the most important aspect of any revised relationship between the UK and other EU member states.”

Source: International Underwriting Association