AFM comments on impact of Brexit

AFM's comments on the possible impact on mutual insurers of a decision by the UK to leave the European Union:

“Mutual insurers in the UK grew rapidly in the industrial revolution to serve local communities and trades, and they continue to work as part of those communities today.  Almost all the members of mutuals live in the UK, and mutuals employ all their staff here, pay their taxes here, and invest their assets predominantly in companies, government gilts and property in the UK.  Regardless of the result in the June referendum, with a focus solely on serving UK consumers, mutual insurers are unlikely to change a business model that has enabled them to grow more rapidly in recent years than the British insurance industry as a whole.  AFM research shows people trust mutuals more than PLCs, so during any uncertainty in the aftermath of the referendum mutuals could see a greater surge in business activity.

"If there is a decision to leave the EU, the most apparent impact on most mutuals will be the effect on the wider economy; for example how it affects the investment climate, interest rates and general prosperity.  Regulation is another key issue: in recent years the majority of insurance regulation has emanated from Europe, particularly via Solvency 2, and this has coincided with a time of closer scrutiny and much higher compliance costs.  Much of the UK rulebook will need to be rewritten, though as the UK regulators have actively embraced European rules, and as issues such as consumer protection and effective stewardship are now universally accepted, it is unclear that the tone of regulation would change significantly.

“More generally, the nature of mutuality is about people coming together to create shared solutions to common problems, and we expect to continue working with and learning from the experiences of other mutuals, both in the UK and abroad, whatever happens."