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Johannesburg – Brexit presents opportunities in the insurance sector for emerging markets like Africa.
According to Christine Rodrigues, director at Norton Rose Fulbright, it is uncertain what the impact of Brexit will be on the financial services sector, until Article 50 is triggered. However, local insurers with UK-based holding companies may have to consider how cross-border interaction with other subsidiaries in the European Union (EU) will continue once the UK completes its two-year negotiations.
“South African insurers who have parent companies using passport rights and licences in the EU are likely to be affected,” said Rodrigues. It depends if the local insurers’ reinsurers in the UK have passport rights to operate in the rest of the EU.
Currently membership of the EU means that UK-based insurers have the right to operate in other member states through a branch or by offering cross-border services. This gives UK insurers “passporting” rights.
UK insurers may need to set up subsidiaries in the EU, which would be subject to the jurisdiction in the EU, she explained. They will have to acquire insurance licenses in each of the 27 EU member states. “They need to determine if it would be more cost effective to set up a subsidiary in another jurisdiction.”
UK insurers may even consider setting up subsidiaries in Africa, which could become a “reinsurer hub” for the continent. This could help create the capacity to tap into the growing local market.
International insurers operating in South Africa that could reinsure directly into various jurisdictions in the EU, may not be able to do so in future. This will be dependent on what agreement is reached between the UK and the EU.
Negotiations must be concluded within the two year period, unless an agreement is reached between the parties for a different time period.
