In a result that has sent shockwaves throughout the insurance industry worldwide, the UK has officially voted to leave the European Union.
The outcome has been watched globally with many predicting that the decision to leave will have a huge impact on the financial markets and the insurance industry in particular.
Across Asia, markets have been in full retreat as results became clearer, Shanghai dropped 1.2%, Hong Kong was down 4.7% and Tokyo down 6.7%, according to The Strait Times.
In Japan, trading on the Nikkei Index was briefly halted and the Dow has indicated that it will open 700 points lower.
Remisier Alvin Yong told The Strait Times
that as the results became more clear, the markets reacted.
"Early on my clients were still hopeful, but now all of them are having a change of mind and are cutting their losses,” Yong said.
"I think the drop will continue as the results roll in. Worst case scenario is that we may see STI taking a three-digit loss after the European markets open later in the day, and that will be one of the biggest single-day drop since 2008."
The UK Treasury, the International Monetary Fund and others all warned that a vote to leave would damage the UK economy as well as threatening global markets; while both the Association of British Insurers (ABI) and the British Insurance Brokers Association (BIBA) were outspoken in their support of a remain vote. Meanwhile, managing director of British multi-national insurer Aviva went on record with Insurance Business UK
stating that: “Our corporate view is that we should remain.”
It’s not just the insurance industry in the UK that is likely to be affected either. While the US economy is much better insulated from the fallout of the vote, banking and financial sectors definitely have something to lose.
Many US companies have moved not just parts of their operations, but whole headquarters, from the US to the UK. Aon, for example, made news in 2012 when it relocated from Chicago to London in order to give the company greater access to the world's insurance hub.
The company has been particularly vocal in its feelings against the Brexit referendum.
"If Britain votes to leave the European Union, the innovative center of excellence that has set London apart in the insurance space will be deeply challenged," the company told CNBC.
"Talent is a true differentiator for the city of London, and to create a barrier between the industry that addresses the world's most complex risks and the global talent needed to do this will have real implications."
Elsewhere, insurance association leaders from across Europe – including in Germany, Ireland, Italy and the Netherlands – all had their say, pleading with insurers across the UK to vote to stay “in” and issuing a collective statement which read: “While the Referendum is clearly a matter for the British public to decide, there will be implications for all EU markets. We believe it is in everyone’s interest – the UK and the EU – for the UK to remain. And we will be watching and hoping that the result means that the constructive relationship will continue with the UK playing a full role as a full EU member.”
Ultimately however, their efforts have proven to be to no avail.
Some insurers have already taken steps in anticipation of today’s outcome. New Zealand’s CBL Insurance, which operates European Insurance Services from Tunbridge Wells in the UK, will continue operations in the UK but will change its legal domicile with managing director Peter Harris stating: “We have already confirmed to our employees at European Insurance Services Ltd (EISL) in Tunbridge Wells UK, who write business in France, that… EISL will remain operating in Tunbridge Wells, and shift its legal domicile, probably to Ireland.”
Meanwhile, Pierre Vaquier, Axa Investments Managers-Real Assets CEO, has stated that the company will “revisit its options” following the EU withdrawal with the company having previously planned to build London’s tallest skyscraper.
The referendum vote came at the conclusion of what was a divisive campaign. On one side of the contest was British Prime Minister David Cameron ushering stark warnings about the financial and economic risks of a departure; while the ‘leave’ campaign was headed up by former London Mayor Boris Johnson who used immigration as a key ploy in whipping up support suggesting that an exit would allow Britain to regain control of its borders.
Now questions are swirling as to the future of the British Prime Minister – he had publicly vowed to stay on regardless of the result, but many have questioned whether his position will remain tenable after such a significant defeat.
The vote has widely been considered a shock result with Paddy Power, Ireland’s largest bookmaker having placed the odds on a ‘remain’ vote at a 1/12 chance – effectively a 92 per cent probability. This represented a swing from 77 per cent just one day earlier, making the result all the more surprising.