Standard Life and Royal London are set to follow the lead of Aviva by transferring their local insurance operations into separate entities regulated in Ireland rather than continuing to operate as branches of their UK businesses following Brexit.
The move could have significant financial consequences because standalone operations in Ireland would have to be capitalised separately from the insurers’ head offices in Britain.
In recent years Aviva had restructured its Irish life and non-life businesses to operate as branches of the UK business in a bid to conserve capital, only to reverse the decision last month following Britain’s vote to leave the EU.
The need for some UK insurers to restructure their Irish businesses after Brexit was flagged by the Central Bank of Ireland last week in its latest macro financial review.
“It is uncertain how the UK’s exit from the EU will affect the structure of the sector in Ireland,” it said. “While the majority of local insurers are Ireland-based, there are some key firms who write on a branch basis who may need to seek establishment.”
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While Standard Life has an international business in Dublin, which is regulated by the Central Bank, its domestic business operates as a branch of the UK’s operation.
“We will have the required measures in place to help ensure we can continue to support our customers and clients and our other stakeholders across our group as the negotiations [with the EU] develop,” said Michael McKenna, chief operating officer at Standard Life.
Royal London acknowledged it could not continue to sell insurance from the UK through an Irish branch following Brexit.
“Royal London’s options are to create a subsidiary in Ireland or to run Royal London Ireland as a branch of a Royal London business in another EU jurisdiction,” said Joe Charles, its head of proposition in Ireland.
Of all financial services, insurance could offer the best opportunity for jobs to relocate to Dublin from London post Brexit, claim industry sources.
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Meanwhile, according to the Institute of Directors, 29% of Irish businesses have downgraded their revenue expectations for 2017 amid uncertainty about how the triggering of article 50 will hit their business.
The findings were part of a joint survey by the institutes in Britain and Ireland, which found that directors in both countries share common Brexit fears. However, it found, in terms of trade, Ireland was far more dependent on the UK than vice versa, with 75% of Irish respondents having business links across the Irish Sea against 71% of UK businesses which did not.
The survey found that 58% of Irish respondents believe that Ireland’s economy will drop in 2017 as a result of Britain’s vote to leave.