Brexit – What impact will it have on the actuarial and insurance market?

On the 20th of February David Cameron announced that the EU Referendum will be taking place on June 23rd.
Last night 
the Staples Inn Actuarial Society met to discuss the effect that a Brexit would have on the Actuarial field and the insurance industry as a whole. The discussion led by Rob Price – Investment Risk Actuary, Hiscox and Tim Werkhoven – IFOA EU Referendum Party, began by looking over the deal David Cameron had reached with the EU and then continued on to explore the options open to us if we left; finally commenting on the effects that may occur within the Actuarial market and an open discussion about viewpoints from the audience.

There are 4 main pillars of change that Cameron negotiated on; economic governance, competitiveness, sovereignty and migration/access to welfare. Change to each of these will come into effect if the UK decides to stay in the European Union. However, the leave campaign questions how many of these are certain, and how we prevent further regulations from the EU imposing on us in the long term. The UK is one of the 3 big players in the EU, along with Germany and France who both have their own reasons to want the UK to stay. Currently we act as the middle ground between the two, keeping the balance between Germany and the Nordic nations and France and the Mediterranean regions. An argument to stay is that we will have a seat at the table, have access to the single market, eligibility to relieve funding and we already have a lot of opt out situations such as the Euro.


If we were to leave there are a variety of models we could look to move to:

1.       Join the EA (European Area) Community as Norway, Liechtenstein and Iceland have done. This way we would pay money to the EU to gain access to the free market. This will mean waiting 2 years for a ‘divorce’ from the EU and we then have to seek access to the EA.

2.       Have a model such as Switzerland, which essentially means bilateral trade deals are negotiated on a term by term basis.

3.       Turkey has a customs based relationship which would mean that a limited trading of goods and obligations are held in place, with no access to the single market and tariffs imposed on goods.

4.       Broad free trade agreement – relatively unknown.

5.       WTO (World Trade Organisation) we would have to go to the WTO and rely on them for basis of our relationship with the EU.

There is no certainty about which route the UK would choose to follow post Brexit and that risk is why some people will vote to stay in, however, for others the greater risk is the way the EU could change over the coming years, just as it has done since 1973.

The IFoA for their part are keen to utilise the skillsets of actuaries as much as possible to present the facts of the arguments and as such have commissioned two contracts of models to be run

1.       Immigration / Pensions and the impact on state pensions and how the demographics are affected

2.       Insurance and the impact Brexit will have on the industry.

They are hoping to present the result of both of these on the 11th of April and it will definitely be interesting to see whether the facts match up to the preconceptions.

The views of the audience mirrored that of many I have spoken with previously – we need to ensure that we are thinking about long term issues, not just the short term ‘crises’ constantly depicted in the media – a prime example being immigration.

Something that strikes me is that regardless of whether we remain or whether we leave there are huge risks involved in both, some that will only effect the UK and others that will affect the EU as a whole. This is something I am sure will cause problems for the actuaries among us who, as per their nature, are adverse to excess uncalculated risk.

Written by Abby Tempest



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