Brexit reactions - as they happened

InsuranceERM will be reporting the reaction to today's news that the UK has voted to leave the EU.

This wraps up our coverage of the day: Do also read our stories on the realities of Brexit for insurers and comment on the process for the UK withdrawal.

Our sister publication Insurance Asset Risk has comment on the impact on bond markets and prospects for the UK economy outside the EU.

Life insurance stocks punished: The close of stocks markets in Europe revealed a rout in a few life insurance companies, while re/insurers, non-life firms and Lloyd's market insurers got off relatively lightly in the context of the FTSE 100 index dropping by 3.15% and the FTSE 250 declining by 7.19% compared with the previous day's close.

"The UK is likely to seek Solvency II equivalence"

Law firm Freshfields Bruckhaus Deringer: "It is likely that the UK government would, as part of preparations leading up to a Brexit, enact legislation to maintain the effect of EU-derived law, subject to some selected repeals or modifications, at least for a transitional period following the exit. The UK is also likely to seek Solvency II equivalence and as such will maintain the existing Solvency II framework. The UK government could also decide to 'grandfather' pre-existing contractual arrangements, so that those arrangements are unaffected by any repeal of or modification to the relevant legislation. These mechanisms would decrease the scope for uncertainty in this area."

"For the London market it is very much business as usual for now"

Nicolas Aubert, chairman of the London Market Group and CEO of Willis Towers Watson GB: "Today's result is a significant one, but for the London market it is very much business as usual for now. As the future of the UK's trading relations unfolds, we are confident that the market will respond to this complex, challenging and unprecedented situation with the flexibility, agility and pragmatism which is an inherent part of its DNA.

"The London market enjoys a range of benefits from being part of international markets, and we would like to see as many of these benefits retained as possible as part of the exit negotiations.

The European Insurance and Occupational Pensions Authority (Eiopa), "takes note of the decision of the citizens of the UK to leave the EU. According to the EU treaties which the UK has ratified, EU law continues to apply to the full to and in the UK until it is no longer a member. It is now up to the government of the UK and the EU to negotiate the terms and conditions. Eiopa will continue delivering its contribution within its competencies laid down in its founding regulation".

"From a business standpoint, many things will become less straightforward and more complex"

Talanx chief financial officer Immo Querner: "From a business standpoint, many things will become less straightforward and more complex, including for example in the context of the upcoming negotiations over the UK's legal relations with the EU during the next two years. In the short term we must adapt to increasing market volatility – whether it be on currency, bond or stock markets. Over the medium to long term, however, it is our expectation that markets will normalise.

"As an international insurance group active in the UK, Brexit does not have any significant implications for us. We do not anticipate any immediate direct repercussions on our branches in the UK or our customer relationships with UK business partners. On the contrary, our goal is to further expand our business in this market. Overall, we shall stand by our successful strategy of internationalisation with the familiar target segments and markets."

Legal and General Asset Management: "We do not anticipate any immediate material changes to the legal and regulatory environment governing the asset-management industry, LGIM and client funds."

"Is this exogenous shock going to trigger a global recession? Probably not, but uncertainties have increased"

Axa Investment Managers: "We expect UK GDP growth to slow significantly from the 1.9% we forecast in a Remain scenario. Our expectation is for quarterly growth to fall back towards zero around the middle of next year. Accordingly, we change our forecast pencilling in GDP growth of 1.5% (from 1.8%) in the UK for 2016 and 0.4% in 2017 (from 1.9%).

"Markets will unavoidably ask the question: is this exogenous shock going to trigger a global recession? At this stage, our answer is, probably not, but, again, it is fair to say that uncertainties have increased."

"Much EU legislation affecting the insurance industry is likely to be here to stay"

Charles Portsmouth, director at consultancy Moore Stephens: "The reality is that a wholesale rollback of regulatory pressures originating from the EU is still unlikely. Major European-level initiatives such as Solvency II have already been incorporated into UK law; they are an integral part of the system in this country.

"Moreover, the UK as a whole and the insurance industry in particular are likely to want to retain access to EU market with a new trade deal. We are still part of a global economy and in order to preserve lucrative ties and be able to sell cross-border, UK-based insurers are likely to find they still have to comply with EU regulation. The future of our current EU passporting rights and their use by non-EU companies, through their London based European headquarters, to access the EU market will be of prime concern to the insurance industry.

"In short, there are no simple answers to predicting what will happen. However, much EU legislation affecting the insurance industry is likely to be here to stay."

Standard Life's note on the referendum: "Standard Life has a strong track record of successfully adapting to changing markets and regulation, and the evolving world around us. Consequently, we will have the required measures in place to help ensure we can continue to support our customers and clients and our other stakeholders across our group as the negotiations develop. As a business we already operate successfully across many borders in the EU and elsewhere in the world. We want to provide continuity and peace of mind throughout the process of negotiation; we will follow developments closely as the new arrangements are agreed and where appropriate, we will contribute to the process."

Alexander Erdland, president of the German Insurance Association (GDV): "We must not fall into a state of shock."

"Insurance clients are fairly resilient to significant market variations"

Acturial consultancy OAC: "At the time of writing the FTSE100 Index is trading at around 6,000, 5% lower than this time yesterday, and yields on bonds are lower. Both these effects act to depress solvency positions. The pound has lost around 10% against the Euro, and the US Dollar and this has helped to offset any losses on overseas denominated assets.

"We have been reviewing the possible financial implications of a possible Brexit on our insurance clients' solvency positions by doing various scenario tests.

"Current market movements are not as extreme as the scenarios that we have performed and in most cases our analysis has shown that insurance clients are fairly resilient to significant market variations. Markets are, however, highly volatile this morning and we will keep them under review.

"Given the long term nature of most firms' liabilities, it is important that firms take a long term view of their investments and act only if there is a clear strategic or tactical benefit in doing so.

"At this stage we do not believe there is any fundamental need to change asset positions, and firms should seek to 'ride through' the current short term market volatility. Even if solvency is threatened any decision to sell equities is likely to be disadvantageous so we are encouraging a position to keep steady.

"There will clearly be longer term implications of the decision to leave the EU and this may have an impact on firms' views of where they should invest their assets. However our recommendation is that this should be done in a careful and considered manner after appropriate advice from investment managers."

AIG Europe (AEL), which had previously suggested it may relocate in the event of Brexit: "AEL's network of international offices means we are well positioned to deliver our products and services to customers across Europe. We will continue to focus on our employees, clients, brokers and policyholders as the UK transitions to a new relationship with the EU.

"AEL has been actively planning for any contingency in the referendum outcome. We will closely monitor the progress of the UK's negotiations with the EU, and participate in the debate with the government and trade bodies as appropriate. We will continue to evaluate our options as the shape of the future relationship between the UK and EU becomes clearer."

Sharon Bowles, former MEP, chair of the Econ Committee, who played a key role in the Solvency II negotiations: "So misery for at least two years and then just a guess" (via Twitter)

"Customers should remember we remain part of the EU until the process of leaving is complete"

Huw Evans, director general of the Association of British Insurers: "The UK insurance and long-term savings industry is strong and built to protect customers from market uncertainty and shocks. Customers should remember we remain part of the EU until the process of leaving is complete and they should therefore avoid hasty decisions about their financial matters. For the UK Government, it will be important now to focus on ensuring the UK remains a globally competitive place to do business with the best possible future trading network with the EU and the wider world."

"Clearly the UK's decision to exit the EU presents challenges for London Market companies"

International Underwriting Association chief executive Dave Matcham: "Clearly the UK's decision to exit the EU presents challenges for London Market companies and uncertainty surrounding the potentially prolonged nature of this process will be problematic for future planning. Our industry is, however, experienced in responding to change.

"The free trade benefits of EU membership have been vital in maintaining London's position as a global insurance hub and are highly valued by IUA members. This is true both for insurers headquartered in the UK and those international firms that use London as their centre for European business.

"We know that many companies will now be considering their own individual responses. Continued access to European markets is essential and will, I expect, be at the forefront of the process to respond to the referendum decision. The IUA will be working with the London Market Group to ensure our industry's views are fully represented as developments continue."

"The IUA's own research shows that more than 20% of our members' premium income comes from continental European markets. Insurance is almost by definition an international business and in order for it to operate efficiently regulatory developments are pursued at an international level."

"Outside the EU it will still be desirable for UK supervisors to have reciprocal arrangements in place with other national regulators. Otherwise we will see a duplication of compliance costs that will damage companies and escalate costs for clients."

The IUA addes that regulations governing the conduct of insurance business in the UK have been established in the context of EU membership. The UK was instrumental in developing Solvency II which is an evolution of its own predecessor system. For London Market companies conducting European business, the maintenance of regulatory equivalence will be important.

Quick stock check at 09.15 BST: Prices are recovering after initial sell-off

FTSE 100 down about 4.5%, FTSE 250 about 7.5%

Aviva down 16% compared with last night's closing price
Legal & General down 15.5%
Standard Life 15%
Prudential down 10%
Phoenix down 10%
Direct Line down 7%
RSA down 4%
Admiral down 3%

Elsewhere across Europe…

Generali down 14%
Axa down 12%
Scor down 8.5%
Munich Re down 6%
Swiss Re down 3.5%

"Firms must continue to abide by their obligations under UK law, including those derived from EU law"

The UK's Financial Conduct Authority: "Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for government and parliament.

"Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.

"Consumers' rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the government changes the applicable legislation.

"The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future. We will work closely with the Government as it confirms the arrangements for the UK's future relationship with the EU."

"[Brexit] will have no significant operational impact on the company" 

Aviva's note to investors: "Aviva has conducted extensive analysis of the possible implications of a vote to leave the EU and considers it will have no significant operational impact on the company.

"Aviva's operations in the UK and its other subsidiaries in the EU are well capitalised and continue to trade as normal. Aviva continues to be supervised by the PRA/FCA as lead regulator and Aviva's European subsidiaries are incorporated and regulated locally and principally trade in their local market.

"At Aviva's 2015 preliminary results, published in March 2016, Aviva reported a Solvency II ratio of 180% and a surplus of £9.7bn. Aviva has one of the strongest and most resilient balance sheets in the UK insurance sector with low sensitivity to market stress and over the last four years Aviva has tripled its economic capital surplus.

"Aviva will continue to monitor the technical implications of the vote to leave, which will only be resolved after several years of negotiating a new relationship between the UK and the EU."

Sergio Balbinot, president of Insurance Europe: "We are deeply saddened to hear that the people of the United Kingdom have voted to leave the European Union. We now hope that policymakers can work quickly to limit the impact that this time of uncertainty will have on both consumers and businesses."       

Mark Carney, governor of the Bank of England: says financial system has enough capital and liquidity to weather stress, but the Bank "won't hesitate to take additional measures as required as markets adjust".

"As a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities.

"The Bank of England is also able to provide substantial liquidity in foreign currency, if required."

Quick stock market round-up at 08.30: insurance stocks hammered

Markets are VERY jumpy, but here is a quick summary of market moves in the first half-hour of trading this morning.

FTSE 100 down about 7%, FTSE 250 about 10%

Legal & General down 23%
Aviva down 21%
Standard Life down 20%
Prudential down 14.5%
Phoenix down 13%
Direct Line down 10%
Admiral down 5%

The UK's dream of independence will turn into a nightmare

Munich Re chief executive Nicolaus von Bomhard: The UK's dream of independence will turn into a nightmare. Nostalgia has trumped reason. The EU is now in desperate need of a fresh start in order to rule out any further fracturing."

"The Fed might now hold off from raising interest rates in the near future, thus delaying the return to a more normal interest-rate environment"

Munich Re chief economist Michael Menhart: "The decision by the people of the United Kingdom in the referendum is a major blow for the EU. It will have severe implications for the economy – particularly that of the United Kingdom. Annual growth in the UK will probably be around one percentage point lower until 2018. Economic growth in the EU will also suffer, although to a lesser extent.

"One effect on long-term investors in particular, such as insurance companies, will be as follows: The US Federal Reserve might now hold off from raising interest rates in the near future, thus delaying the return to a more normal interest-rate environment.

"The referendum decision is not likely to impact the insurance industry as heavily as other sectors. London will lose influence as a financial centre to hubs such as Singapore or New York, and this will also affect insurers."

"The insurance industry should not expect significant dissolution of 'cumbersome' EU regulation" 

Jonathan Howe, UK insurance leader at PwC: "To answer the first question insurance companies will be asking - Solvency II will almost certainly remain - too much time, money and effort has been invested and the regulation is enshrined in UK Law. Additionally, the insurance industry should not expect significant dissolution of 'cumbersome' EU regulation, given the perception that the UK has a history of 'gold plating' insurance regulation.

"The Lloyd's & London Market and General Insurance Market make extensive use of passporting. The loss of these rights could see insurers being forced to restructure and facing large operational, regulatory and tax costs as they adapt to such a change.

"Many non UK insurance companies from areas such as the USA and Asia currently use the UK as their European headquarters and as a 'gateway' into Europe through EU/EEA passporting. There is a real risk that these rights could be eliminated and insurers will be thinking about the best location for their bases in the future."

"Leaving the EU is not an event but a process and many questions regarding the next steps and the new relationship between the UK and the EU remain at this point"

Michael Heise, chief economist, Allianz: "The vote by the majority of Britons to leave the EU is to be respected as a democratic decision, but it does pose a severe test for the United Kingdom and the whole of the European Union with considerable economic risks. Politicians and investors now need to display prudence and foresight. Knee-jerk reactions should be avoided at all costs. The EU should persevere with its projects such as the completion of the Single Market.

"Leaving the EU is not an event but a process and many questions regarding the next steps and the new relationship between the UK and the EU remain at this point. As a result, political and economic uncertainty will persist for some time to come. This will keep volatility on financial markets elevated and dampen economic sentiment in both Britain and the rest of Europe. However, by acting in a constructive and collaborative manner, British and European policymakers can do much to reduce any disruptions to trade and capital flows. Even if the European project from now on will move forward without Britain, the UK is bound to remain a key ally of the European Union warranting close political, economic and financial ties.

"Although the repercussions of the vote are likely to weigh on the British economy in the years ahead, there are no grounds for excessive gloom about the European economy. The recovery in the eurozone is now sufficiently robust to survive this episode."

"Most negative scenarios are well reflected in market prices already. Nevertheless, the vote brings with it some short-term uncertainty"

Allianz chief investment officer Andreas Gruber: "In the medium- and long-term we expect bilateral agreements between the UK and the EU in order to achieve a continued prosperous collaboration. Most negative scenarios are well reflected in market prices already. Nevertheless, the vote brings with it some short-term uncertainty, and for this reason investors are assuming higher risk premiums and hence lower prices. We believe market disruptions are short-term.

"Due to our long-term investment approach we are not expecting any negative impacts on Allianz' investments

Lloyd's chairman John Nelson: "I am confident that Lloyd's will stay at the centre of the global specialist insurance and reinsurance sector, and I look forward to continuing our valuable relationship with our European partners.

"For the next two years our business is unchanged. Lloyd's has a well prepared contingency plan in place and Lloyd's will be fully equipped to operate in the new environment."

"This is more than a wake-up call"

Allianz CEO Oliver Bäte: "This is more than a wake-up call. EU now needs to reform faster. Otherwise, it's a dark day for Europe."

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