Brexit - Where to Start?
Sean McGrath joined An Taoiseach, Leo Varadkar at the IMN Indo Brexit Briefing at Trinity College this morning. From left to right: Peter Kilcullen - Chief Customer Officer Allianz, Sean McGrath - CEO Allianz, Leo Varadkar - An Taoiseach, Derbhail McDonald - IMN Group Business Editor
In business terms, it’s bleak and is certainly among this decade’s most complex conundrums - one that was born of confusion, obfuscation and politics.
It certainly wasn’t expected and a lot of people outside of the UK are still against it. But, like every unexpected surprise, it’s here now and our job as business leaders is to figure out how to manage the outcome so that consumers do not lose out.
For Allianz Ireland, a company with operations in both Northern Ireland and in the Republic - serving hundreds of thousands of customers - we will carefully manage any change to minimise any potential negative customer impact.
However, Brexit will undoubtedly have an unnerving impact on business on this island. For anyone who has business crossing a borderline – hard or soft – the cost of Brexit will be felt in Euro and Pounds for many years to come.
Looking at the negotiation strands, while the UK wants a free trade area deal that includes financial services, there remains some doubt as to whether a deal on financial services will happen – or indeed can happen, with some in the EU not wishing to play ball with the UK unless there is some reciprocal movement from them.
There will undoubtedly have to be some sort of border when Brexit commences. No country or trading area will countenance a scenario where there is no VAT, no tariffs and zero checks on crossings. So a border is a given on the island of Ireland but a soft Brexit option is definitively the preferred outcome.
On a brighter note, for Ireland there is potentially a clear opportunity. While economically we are often characterised as the size of Birmingham, we are nonetheless nicely nestled between Boston and Berlin. With our position as the out-post of Europe and a gateway to the US, Ireland could well become a winner from Brexit.
To do that Ireland should focus on being the cog that turns smoothly in the Brexit machine. It’s important to consider some key statistics here relevant to insurance.
For instance, many of the insurers based in London write business throughout the single market of the EU. The EU is a significant market, accounting for 32% of the global insurance business. Assets of almost EUR 9,800 billion are invested in the EU on behalf of life and non-life insurance customers. Over half of the world's top 50 banks and nine out of the world's 10 leading technology companies are based in Ireland. Most of the world's leading insurers and reinsurers have long-established bases in Ireland employing over 28,000 people. Ireland has a strong technical capability and insurance expertise. As an example, the Society of Actuaries ln Ireland has over 1,400 members, including over 750 qualified actuaries, which is the highest number of actuaries per capita globally.
There is though a need for urgency from an insurance market perspective. Most insurance contracts are annual ones working to a clear calendar year. So, rather than waiting until 2019 for clarity, the upcoming European Council meeting in late March needs to get a transition deal over the line. Achieving that will ensure that insurance policies written from April 2018 onwards can build in as much clarity around Brexit as possible for the coming 12 months.
For this to happen, pragmatism needs to partner with politics on all fronts. And Ireland too needs to play its part. A workable solution to the impasse in the Northern Ireland assembly would clearly help matters.
With a committed and progressive stance, Ireland can attain a post-Brexit role as Europe’s insurance centre of excellence and that is what we should aim for. Ireland already has a very impressive track record on foreign direct investment in everything from pharma to technology. We should focus now on attracting insurance business, not just for those companies displaced by Brexit, but in an ongoing world-wide capital investment and economic growth context. To support this agenda, insurers, Government and their agencies, independent regulators and existing businesses and their representative bodies must all play their part.