Leaving EU will cause ‘considerable uncertainty’, says market’s chief risk officer

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Lloyd’s is working on contingency plans if the UK public votes to leave the European Union, the insurance market’s chief risk officer Sean McGovern has said.

Speaking at an Insurance Institute of London lecture today, McGovern said: “It may be a statement of the obvious, but exiting the EU will create a level of uncertainty, for Lloyd’s, for the London market, as well as the UK and European economies, we have rarely experienced.”

He added that he wanted to assure the Lloyd’s market that Lloyd’s has been working on the issue of a potential Brexit “very actively”.

McGovern said: “I am leading a team which is building out our contingency plans to deal with a range of possible scenarios. The objective – to ensure that Lloyd’s can continue to provide our market with access to the EU.

“Whilst there will be more work to do in the event of a vote to leave, we are confident that this objective can be achieved and that we will be able to provide ways to allow business to continue to be written on both a cross-border and a branch basis.”

‘Considerable uncertainty’

McGovern said that if the UK did vote to leave the EU, the market would enter a period of “considerable uncertainty”.

He also noted that if the UK leaves the EU, it would be considered a ‘third country’ under the new Solvency II capital regime and would need to apply for Solvency II equivalence. Even if successful, such equivalence would not give UK companies a right to access the EU market on either a cross-border or a branch basis, McGovern said.

He reassured the audience that the Lloyd’s franchise board and Council of Lloyd’s has been working through every eventuality. He said: “For those of you that use the Lloyd’s platform to access European markets, I am confident that, whilst there will be more work to do in the event of a vote to leave, we will be able to find a way through the uncertainty.

“This will allow business to continue to flow to London but will also continue to offer the opportunity to write business in local markets under the Lloyd’s structure.”

But he added: “We should not kid ourselves – the London market’s access to the EU will not be as good as the access we currently enjoy.”