Brexit – UK Votes to Leave the European Union
Insurers and reinsurers that currently make use of “passporting” rights should consider their structures and whether they should reorganize their groups so as to ensure that they have continued access to the European Single Market. We could see a period of (re)insurer group restructurings: this could include the re-domiciling of the main UK carrier into a continuing European Member State or the incorporation of existing European branch operations into authorized insurers in the Member State of the branch. We may see an increase in (re)insurance groups establishing a SocietasEuropaea (SE) in their groups, a form of company regulated by EU law.
A feature of an SE company is that it can move its place of domicile from one EU Member State to another. During the two-year exit negotiation period, UK companies could convert to SE status, move their place of domicile to an EU Member State and thereby maintain access to the EU Single Market. Many insurance groups have taken advantage of the UK as a tax-favored location for an ultimate or intermediate holding company and may need to reconsider this following the Brexit.
Whilst this may not have an immediate impact on the taxation of profits, which is within the competence of individual Member States in any case, much of the UK tax law has developed to reflect EU requirements and these may be undone over time. Perhaps more significantly, the beneficial treatment that arises from EU directives on inbound income from EU subsidiaries for withholding tax purposes may no longer apply, in which case companies would revert to reliance on less comprehensive double tax treaties.
In order to fill this gap, the renegotiation of these treaties with the remaining Member States may also need to be put on the agenda. Insurance groups outside the UK and the EU that are considering entering these markets should consider carefully an appropriate structure that could give access to the pool of insurance expertise that exists in the London market as well as giving them access to the European Single Market. Groups will have a window in this period to put into effect a suitable structure for the post-Brexit world using the legal tools available under the European regulatory regime before they are lost.
We expect firms operating in all areas of the London insurance and reinsurance ecosystem, whether underwriters, actuaries, accountants and auditors, brokers and other intermediaries, law firms, HR firms, or other professionals in the London market to respond in a creative and dynamic way to the challenges that have been presented by the voters of the UK. The resulting uncertainty does not lend itself to a one-size-fits-all response within the diverse areas of the insurance sector. In short, there will be leaders and followers in adopting contingency plans and other appropriate measures to maintain and seek competitive advantages. This dynamism will result in winners and losers over the next few years following the historic Brexit vote. We would be happy to advise clients on their options at this time of uncertainty.
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Task 16 Have a discussion on the following topics:
• Major insurance companies. Their problems and achievements.
• Trends in the sphere of insurance worldwide.
• Different types of insurance and their share in the market.
• The development of insurance market in Russia
Task 17 Carry out research on the types of insurance services provided by insurance companies and other financial institutions. Describe the services in question and illustrate them with examples
Task 18 Role-play: conduct a business seminar with the participation of representatives of the world’s major insurance companies and discuss the latest trends in insurance business development. Touch upon the impact of the latest financial crisis, recent natural disasters and other developments on the insurance industry
UNIT 9
FOREIGN EXCHANGE MARKET
LEAD-IN
Task 1 Read the abstract and answer the questions below:
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