The consequences of this popular verdict on the financial sector were almost immediate. Following the announcement of preliminary results during the night of June 23 to 24, 2016, The Sterling decreased to 1.3305 USD, recording its most dramatic drop for over 30 years
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Meanwhile, the Euro gained nearly 8.5% compared to the British currency. However, it fell by more than 3% against the dollar. The stock exchanges in London, Frankfurt and Paris collapsed. Asian financial markets including those in Tokyo, Shanghai and Seoul also fell reflecting their distrust in the economic future of the region.The position of insurance and reinsurance companies is far from reassuring. Upon learning of the victory of Brexit, the stock exchange price of insurers fell sharply. The Axa course fell -17.5%, Generali -14.94%, Prudential -14.39%, Allianz -11.59%, Admiral -4.38%, % Scor -12 and Munich Re - 8.71%. Insurers are worried about the withdrawal of their passport
Brexit, insurers are worried about the withdrawal of their passport1
Withdrawn from the European Union, the United Kingdom will be henceforth considered as a third country. Insurers and insurance intermediaries based in the United Kingdom will not have the opportunity to benefit from the European passport freedom to provide services. They will now be forced to establish a subsidiary in a EU country to access the rest of the market, which involves large amounts of capital. Same fate for international players, including American, Japanese and Chinese that must relocate their UK headquarters in a country of the European Union within a period of two years. European insurers will also have to acquire a license to exercise their business across the Channel. According to figures from the rating agency Standard & Poor's, about 739 foreign insurers are currently underwriting risks in the UK via a European passport. Is it necessary to recall the impact of the Lloyd's Brexit that generated (in 2015) 14% of its turnover in the European Union. Its English base will no longer serve as a hub to underwrite business in Europe. Nevertheless, it will keep its importance especially as local business represented 18% of the total sales of the organization.What future for the city of London after the Brexit?
Given these new constraints, many experts are unanimous that the financial center of London, long considered as Europe's leading financial hub, will lose much of its charm. Some studies by European banks assume the status of leading European financial center will likely be granted to Frankfurt. Amsterdam, Luxembourg, Dublin and Paris are also regarded as potential places.
Beyond these speculations, the impact of divorce between the UK and the European Union on the insurance industry would depend greatly on post-Brexit [4] negotiations which will focus on the trade agreements, the terms and duration of disengagement.
Brief historical overview
A poll on the maintenance of the United Kingdom in the European Union was organized in 1975. The pro-Europeans had won with 67.09% of votes.
The question of Brexit resurfaced in January 2013, when British Prime Minister David Cameron promised to hold a vote on keeping the UK in the EU, if he were re-elected. On 8 May 2015, D.Cameron was reappointed for a second term. All the conditions were thus met to implement this public commitment. After the EU summit on 18 and 19 February 2016,holding a referendum was decided for 23 June of the same year.
Following the announcement of the results on 24 June 2016, David Cameron announced his resignation, planned for Sept. 2, 2016.
Article 50 of the Lisbon Treaty
Article 50 of the Lisbon Treaty on the exit of a EU member country states that "the negotiations should last a maximum of two years and that the exit should be made through an agreement setting the terms of withdrawal, taking account of the framework for future relations between the Union and the outgoing state. This agreement must be approved by the European Council, following a European Parliament vote."
1 The passport is the right of a firm authorized in a Member State of the European Economic Area to offer its services in the territory of another Member State from a permanent establishment (branch or agency).
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