Brexit and Ireland

Legal Implications for Insurance & Financial sectors

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Brexit and Ireland: Legal Implications for Insurance & Financial sectors

Stephen NetherwayAmidst all the noise of the Brexit debate now gaining ground in Ireland lies one simple truth writes London City lawyer Stephen Netherway – no one can predict exactly what will happen to Ireland should the UK leave the EU this Thursday.


Updated 24 June 2016:

The results are in;

  • Remain a member of the European Union: 48.1% (16,141,241)
  • Leave the European Union: 51.9% (17,410,742)


All roads may now lead to Dublin – “Seismic, just seismic for the global insurance market based here and also perhaps in Dublin,” says Stephen Netherway an insurance partner with London law firm CMS. “The playbook for distribution and route to European market has just been ripped up and we enter the world of Rumsfeld’s unknown unknowns. For non-EU domiciled insurers and brokers based here, first up for review must be redomicilisation to preserve the certainty of single market access. For others, can London remain a fulcrum for HQ operations, and if not there will be shrinkage? Will Dublin now become the new London? And spare a thought for those insurers domiciled in Gibraltar, many with strong UK links and workers. This is their Brexit too and they face the spectre of the flight of their passport rights.”


It is a statement of the obvious that no-one knows what the outcome of the Brexit Referendum in the UK on 23 June will be, not least the British people.  

Crystal ball gazing has not been helped by a serial lack of confidence in the UK on the reliability of opinion polls following a pretty disastrous performance for the pollsters in the recent UK General Election.  

If they are to be believed, however, the referendum outcome is a toss-up or near enough one that makes no difference when ‘margin for error’ and voting turnout begins to be discussed.

Uncharted waters for UK/Ireland relationship

Ultimately, the landscape of the UK’s relationship with the rest of the EU, including Ireland, should there be a Brexit vote to remain will not be clear for a long time.  

David Cameron, the British Prime Minster, has expressly made clear his intention to deliver an exit trigger upon the voting for such by the British voting public.

In what will be unchartered, and quite possibly very rocky, negotiation waters there will be a two-year window triggered for the UK and the EU to settle by agreement the terms of exit.  

If there is no extension by unanimity, then the UK will not only cease to be an EU member after that period, but it risks the danger of failing to agree a new deal in time and to be left only with WTO rules and tariffs that they bring.  

This must matter to Ireland – the politicians can debate the political and sociological impacts of Brexit – because, commercially, an estimated over €1bn of goods and services are transacted and traded across the Irish Sea each week. Currently Britain is the 5th largest economy in the World and Ireland’s largest trading partner.

Impacts on Financial Services & Insurance Industry

The uncertainty of the outcome is matched by the uncertainty of what a vote to leave the EU will actually mean – not just for the UK but also for its European partners, and specifically in this context for Ireland.

Nowhere more so than in the financial services industry, including insurance, where the UK and Irish markets are very closely intertwined.

No one knows whether the ultimate settlement of the UK’s relationship with Europe upon a Brexit will be one of the following;

  • something akin to an arrangement whereby the UK will ‘leave’ and join the EEA, (assuming all the EEA States as well as the 27 EU States agree),
  • a series of UK/EU separate bilateral trade agreements/relationship instead,
  • an arrangement like Switzerland who has many agreements with the EU (over one hundred in total) designed to deal with their referendum rejection of EEA membership,
  • or ‘other’ within a spectrum of full change (WTO rules only) to effectively no change – acceptance of free movement rights and single market access.

Threats & Opportunities for Dublin’s IFSC

At the moment commentators are struggling to identify what are threats or what are opportunities and specifically for Ireland. Whilst it would be very presumptuous for a UK lawyer to start throwing such labels around, let’s just look at the potential agenda items for the Irish financial services sector.

Ireland can be justifiably proud of its recognised international financial services sector, with many global multi-nationals based in Ireland operating across a whole range of financial sub-sectors.

Dublin’s IFSC already plays on its proximity to London but the ability to further assert its position internationally is definitely a real possibility upon a Brexit.

For the UK, the business conundrum is that financial service provision is heavily subject to an EU regulatory playbook, which seeks to remove barriers for business across EU borders and levels the playing field.  

A bilateral trade treaty model looks pretty unattractive as a means to preserving current single market access privileges in this sector (if politically desired), and even if that can be achieved there will be great uncertainty over the route to achieving this.

For many UK financial services firms, especially non EU Institutional fund managers and banks, it may become necessary (and very quickly so) to establish or use a subsidiary in an EU/EEA State to continue to conduct business as effectively as before within the EU/EEA.

UK Insurers Access to Irish Market – The Gibraltar Factor

Specifically in the insurance field, waving goodbye to passporting rights upon a Brexit will hinder UK insurers from selling their services and insurance in Ireland without agreement and local regulatory compliance.

So also the many Gibraltar domiciled insurers who currently may passport their products around Europe.

Not many people outside Gibraltar may realise that a vote for Brexit is also a vote for Brexit for Gibraltar with consequences for its financial base.

The removal of the EU framework will remove the UK and Gibraltar insurers’ ability to offer insurance into Ireland without most likely locally authorised branch offices and specific additional capital requirements.

If this doing of business in the EU and so in Ireland is frustrated or made considerably more difficult, at least for a period, simple geographical proximity and market interlinking between Dublin and London suggests a possible negative impact.

Solvency II affords no passport to ‘third country’ insurers that the UK could become categorised as, or to such reinsurers. There are similarly no passporting rights grated to third country brokers and intermediaries under the EU intermediary directives.

Dublin domicile – a solution for UK firms?

A new EU base for many UK financial institutions currently located in London or Edinburgh may become a business imperative.

As to where, why not Dublin? With its business sympathetic corporate tax regime, a ready supply of skilled financial services workers, a shared language and a shared common law history and legal focus, and a stock of ready and waiting real estate to house any business relocations?

But with becoming potentially a new base for some many new financial institutions, how does Ireland manage the arguably increased associated risk of becoming the country primarily liable for the bail-out of any who may fail?

There is arguably little that Ireland can do at the moment but to see how the UK voters deploy their voting cards. No doubt there will be an exposition of the law of unintended consequences of Brexit for the Irish financial services sector, and identifiable threats; yet also there are identifiable and no doubt as yet unidentifiable beneficial opportunities that can be seen to arise.

The only certainty is that whatever happens this Thursday nothing may be ever quite be the same again for Ireland.


By | 2017-03-29T20:10:34+00:00 June 20th, 2016|Company Law, Papers|0 Comments

About the Author:

Stephen Netherway is a Partner in the international law firm CMS, based in London and Head of the UK Financial Institutions Insurance Sector.