Brexit has tested the ability of the various European financial services centres outside of London to attract new investment from global insurers. Ireland has been on the short list of many UK insurers seeking to establish a subsidiary in an EU Member State in advance of Brexit.
As a firm, we have been fortunate to be involved in a significant number of these projects. While Ireland will undoubtedly win its fair share of investment from global insurers, a number of potential investors who had considered Ireland have decided to establish a new insurer elsewhere.
Although it was always likely that insurers would decide to establish subsidiaries in different EU member states, it seems to us that despite the gains Ireland will make, Brexit represents something of a missed opportunity for the local insurance market. This was a once in a lifetime opportunity to substantially grow the industry and to create a hub that would have been the natural home for global insurers in the EU for years to come.
It is important at this stage that the relevant stakeholders take stock of what Ireland has to offer as an investment location for global insurers and assess why this opportunity has not been fully grasped. Although there are many and varied reasons why an insurer may choose to establish in one country over another, in our experience the single most important factor in this decision is the insurer’s perception of the local regulator.
The importance of a strong and prudent regulator cannot be underestimated and a healthy tension must naturally exist between regulated entities and their competent regulatory authority. The Central Bank’s reputation as a robust and respected regulator has been a significant factor in the development of Ireland’s financial services industry to date. However, a regulator should also be agile in responding to change and open to new challenges and opportunities in order to maintain a stable base of industry participants and to attract new participants. This will in turn help to foster competition and innovation in the market. Since the vote for Brexit, financial regulators in other EU member states which were perceived as having fewer strengths than Ireland have increased their levels of agility and competitiveness. This has been noticed by the global insurance industry and has helped our competitors to attract investment.
The removal of the CBI’s legislative mandate to engage in promotion, and the manner in which this has been interpreted in practice has impacted on its engagement with applicants. This can be contrasted with the approach taken in practice by other regulators. To reflect the importance of competitiveness and innovation to the stability and long term health of the financial system and Irish economy, consideration should be given to clarifying the CBI’s mandate in legislation.
The impact and opportunities of Brexit will not end on 29 March 2019. Ireland should take steps now to build on its existing strengths and to respond to new approaches that have been adopted by its competitors.