Column on European Union

Brexit poker: What do we have to watch out for?

The starter’s gun has sounded for the exit negotiations between the United Kingdom and the EU. The economic fallout from Brexit looks relatively manageable for German insurers – at the same time we can’t afford to drag the process out for too long. The column of Jörg von Fürstenwerth, Chairman of the GDV Management Board.

On 29 March 2017, the UK government submitted its letter of resignation to the European Union. The clock has been ticking since then. All we know so far is that the UK will no longer be a member of the EU on 30 March 2019. It is still a matter of conjecture what happens after that.

The most complex negotiations in the history of diplomacy?
It’s high time to shed some light on these proceedings. There are many German insurers operating in the UK. At the same time, in 2015 they only accounted for just over 0.5 percent of our sector’s total earnings with premium income of EUR 1.3 billion. I would therefore argue that the German insurance industry can manage the economic repercussions of Brexit. However, that doesn’t mean we can afford a cliff-edge scenario, i.e. the UK’s totally unplanned and uncontrolled exit from the European project. That would be a step too far not only for us but for the entire European economy. Now is the time for reliability and clarity – for Europe’s citizens and its economy.

Admittedly, it’s a tall order. The decision made by the people of the UK (a source of great regret to me personally) has unleashed considerable uncertainty. In addition, the weakened post-election government doesn’t help, even if an uncompromising hard-Brexit strategy has now become more improbable. That is why the onus is now on the UK and EU to move fast and come up with clear and predictable operating conditions and devise a roadmap with details of the next steps.

Move fast? Spiegel Online has referred to the “most complex negotiations in the history of diplomacy”, which opened in Brussels at the start of the week. We also broach the topic in the new edition of our trade magazine “Positionen”. It includes a big chart full of information about the German and British insurance markets.

Limit the economic friction of Brexit
What needs to be done? As insurers, we welcome the demonstrably hard line taken by the EU to date. It is not conducive to the cohesion of the EU27 to have the United Kingdom enjoying an ‘à la carte’ Brexit.

The priority for the negotiations currently under way is to keep some semblance of free trade and freedom of movement. We need to limit the economic friction that will inevitably accompany Brexit.

Secondly, we need a level playing field, i.e. the same competitive conditions. In a strongly regulated sector such as insurance, it is in the interests of our customers to have the same financial supervision requirements in Europe and the United Kingdom.

The third requirement is clear rules of transition governing how we adapt our business to the new situation, for example the orderly settlement of long-term retirement provision contracts, which may extend well beyond Brexit.

Number four, institutional investors from continental Europe must be guaranteed access to UK financial services. The financial sector on the mainland also needs to be strengthened, the completion of the capital markets union is central to achieving that.

Finally, the displacement of the European Banking Authority (EBA) following Brexit does not justify the complete upheaval of the European supervisory structure. The different interests of the banking, insurance and securities markets still need to be adequately accounted for post-Brexit. We resolutely oppose a further split into a corporate and market supervisory authority, such double supervision would inevitably lead to an unworkable harmonisation bureaucracy.

The United Kingdom is a proud insurance market with a very strong tradition in the business. It is the biggest national market in Europe with premium income in excess of USD 320 billion and number four in the world behind the US, Japan and China. I would like to wish our colleagues in the British Isles a good hand for the big game.

Sincerely yours
Jörg von Fürstenwerth

Jörg von Fürstenwerth