A.M. Best and S&P Global Ratings have not taken action to downgrade the UK’s financial strength ratings, following the UK’s decision to leave the EU.
According to A.M. Best, the implications for the financial strength of insurers with regard to subsequent investment market volatility, currency fluctuations and increased economic uncertainty will be closely monitored.
A.M. Best said: “As the terms of the exit are negotiated, it will discuss, with rated companies, what the prospective changes will mean for their competitive positions and ability to continue to access business in the UK and the EU.
The decision to leave has led to a sharp drop in sterling and global equity markets. A.M. Best expects that the financial market volatility could have a material impact on insurers’ H1 results and balance sheets, with most companies reporting their positions as at 30 June 2016.
Meanwhile, S&P Global Ratings suggests that the vote to leave will not have an immediate impact on UK insurers’ ratings.
In a statement, S&P Global said: “We see the insurance sector as less exposed to the leave vote than the rest of the financial sector. While representing about one-third of the UK's very substantial financial services net export surplus, the insurance sector is far more reliant on trade with non-EU countries, especially the US.”
The nature of any future trading relationship between the UK and the EU is yet to be established, according to S&P Global.
S&P Global said: “Even in the absence of any trade agreements or passporting rights, we believe that UK insurers operating in the EU could, through appropriate planning, continue their businesses largely uninterrupted. The same would apply for EU insurers who currently trade in the UK through branches.”
