The chief executive officer of Aon plc, a provider of insurance and risk management services, believes the United Kingdom should remain in the European Union, and that "leaving is an unnecessary gamble.”
On June 23, UK citizens will decide whether the country should exit the EU or stay within the bloc.
“If Britain votes to leave the European Union, foreign investment, trade, and supply chains may be constrained. And in the event of a Brexit, the center of excellence driven by innovation that has set London apart in the insurance space will be deeply challenged,” says Greg Case, President and Chief Executive Officer, Aon plc in a statement.
“The UK has been at the center of insurance and risk management since maritime trade and shipping was insured at Lloyd’s in the City of London more than 325 years ago. And while the City and the Corporation of Lloyd’s are British institutions, insurance in the UK continues to dominate because it harnesses the best the world has to offer: talent, markets and innovation.”
Case explained that in 2015, the insurance industry contributed billions of pounds directly to the UK’s gross domestic product; and the services sector as a whole comprised 80% of the UK economy.
“This marketplace does not thrive in isolation. Talent is a true differentiator for the City of London, and to create a barrier between the industry that addresses the world’s most complex risks and the global talent needed to do this will reverberate far beyond the Square Mile.”
According to Case, the Lloyd’s and London insurance marketplace directly employs 34,000 experts, and thousands more. “This is a key asset for this country, and would be challenged if the UK were to become isolated from Europe.
"A Brexit discourages the flow of talented professionals from Europe into the UK, and sends a message to global experts – the people London has historically attracted in droves – that the UK values its sovereignty more than its expertise.”
Risks of disruption multiplied
Case further pointed out that in today’s interconnected world, the risks of disruption are multiplied by the globalization of even individual transactions. “While a client’s insurance programme may ultimately be placed in London, today’s risks are truly borderless.
"It is a daily occurrence for my colleagues to work with complex multinational clients: say, a German client to insure risks in Malaysia undertaken by an Italian subsidiary. The most challenging of these programmes are placed in the London market, based on the innovative approach to underwriting and risk transfer led by talented professionals from all over the world.”
Case warns that clients could potentially lose coverage options in a post-Brexit world. Citing an example, Case says that a UK-based insurers may be disadvantaged by their lack of ability to easily do business with the European Union, a freedom they currently enjoy, and a general environment of uncertainty regarding solvency requirements after a Leave vote. “Leaving the EU jeopardizes the UK’s leading position in the epicenter of our global service economy.”
Equally concerning, Case adds, is how businesses may need to reconsider planned investment in innovation and new solutions in the UK, as the loss of free market access creates material business challenges and deep uncertainty.
"Would competitor centers within the single market, such as Frankfurt, Munich, or Paris draw business and investment away from the UK? Further, would the supply chains of large British multinationals become more risky and potentially weaker as formalised links are replaced with a structure that has yet to be determined?"
As an organization, Aon has made significant investments in the UK, from moving its headquarters to London in 2012, creating a “game-changing” global headquarters space in the Leadenhall Building, and building an “industry-leading apprenticeships programme” to invest in the insurance leaders of tomorrow, according to Case.
“Our firm took these steps with confidence because we believe in the UK market, believe in the power of connectivity over that of isolation, and believe in what we can accomplish as a firm with superior talent, markets, and innovation.”
“If we look back at this time in five years from now, the right decision will have been the one that attracts the best talent, strengthens markets, fosters innovation, and ensures London’s position in the global economy. In our world, risk is inevitable and we manage it accordingly – but leaving the EU is an unnecessary gamble,” states Case.
May trigger recession
Case isn’t the only one painting a gloomy post-Brexit world. The majority of companies across the country are concerned about the impact a ‘leave’ vote could have on their business and particularly with their foreign exchange (FX) dealings, according to research from market analysts East & Partners Europe (E&P Europe).
The analysis has found that more than half (53.6 percent) of all UK companies believe leaving the EU would be worse for their business. This rises to 90.2 percent of companies drawn from the UK’s top 1000 revenue earners, although only 15.9 percent of SMEs share this view.
These top UK companies are also fearful of the pound falling against the US dollar if the UK votes to leave the EU, with 77.2 percent of them holding this view and forecasting an average fall of 12.3 percent. SMEs are less fearful of such a fall with 17.5 percent expressing this view and only expecting an average drop of 4.5 percent.
Conversely, 56.5 percent of all companies expect the pound to bounce against the US dollar if the UK votes to stay in the UK.
A vote to leave the EU on June 23rd would trigger recession and set real GDP back by 6% by 2020, according to The Economist Intelligence Unit's "Out and Down: Mapping the Impact of Brexit."
The report, which explores a post-Brexit landscape also looks at the impact on industrial sectors, ranging from financial services to healthcare.
"Whilst some of the 'Remain' campaign claims may seem alarmist, the fact is that a vote to leave would have a negative political and economic impact,” said Danielle Haralambous, the UK analyst for The Economist Intelligence Unit who helped compile the report.