14 CAPTIVE REVIEW | DUBLIN REPORT

DUBLIN | BREXIT

Captive Review (CR): What impact would

Brexit have on the captive market in Ire-

land?

Sarah Goddard (SG): It’s fascinating just

how much isn’t known about the impact

Brexit will have. This is genuinely uncharted

territory and there is no previous experi-

ence to indicate what may or may not hap-

pen should the UK referendum decide to

follow the Brexit path. There is, of course,

a very high level outline structure of how

a country may leave the European Union,

including the possible two-year timeline for

exit, though even at such as high level there

are options. Moreover, in trying to assess

the impact of a Brexit on Ireland’s captive

market, one has to make certain assump-

tions.

My first assumption is that the access

to Freedom of Services for all EU member

states will be curtailed for the UK. Although,

there are arguments about whether the UK

will be able to get EEA status alongside that

currently enjoyed by Iceland, Liechten-

stein and Norway, as well as Switzerland’s

single market status. It appears unlikely

that a UK withdrawal from the EU would

positively incline other EU member states

to allow it access in this way. Captives for

which cross-border access is important may

find greater restrictions in the future, and

therefore may decide that a new location

for this business proves more effective.

It remains unclear how individual Euro-

pean member states will or will not be able

to trade with the UK on a bilateral basis

should a Brexit take place. Ireland and the

UK have a very long history, and a impres-

sively strong relationship, so there could be

a good starting point to build on the unique

relationship into the future.

Tim Scanlon (TS): Brexit would potentially

have a significant impact on Irish author-

ised captive insurance companies who use

their authorisation to carry on business in

the UK by insuring UK-based insurance

risks. Depending on the nature of the agree-

ment reached between the UK and the EU

in the event of a Brexit, it may no longer be

possible for those captives to use their Irish

authorisation to carry on business in the

UK. In such circumstances, it may be nec-

essary for those captives to obtain a licence

or authorisation to carry on business from

the UK regulatory authorities or to use the

UK authorised fronting insurer to insure

the risk.

CR: Has the run up to EU referendum

caused instability among the captive

industry?

TS: In our experience the referendum has

not caused instability among the captive

industry or any other parts of the insurance

industry at this time. We have had quite a

number of discussions with financial insti-

tutions on the impact of a Brexit. Some of

those we have spoken to are actively con-

ducting high-level contingency planning.

Our overall sense, however, is that many

financial institutions are conscious that

there will be a two-year transition period

should Brexit transpire, which would allow

them time to formulate a response. Also,

given the range of potential scenarios which

could arise post-Brexit, it is not possible

to plan at this time for a particular out-

come regarding the ultimate relationship

between the UK and the EU.

SG: I haven’t seen any instability about the

referendum with respect to captives specifi-

cally, though I am aware that other sectors of

the international financial services industry

with UK operations have been considering

alternative centres for their businesses in

the event of a pro-Brexit decision.

Tim Scanlon of Matheson and Sarah Goddard of DIMA explore the effect that a potential ‘Brexit’ would have on the captive industry in Ireland

Written byTim Scanlon

Tim Scanlon is head of the Corporate and Commer-cial Department at Matheson and also leads the firm’s Financial Institutions Group. Tim is a highly experi-enced lawyer who has advised on many of the largest transactions which have taken place in Ireland.

BREXIT ROUNDTABLE DISCUSSION

Written bySarah Goddard

Sarah Goddard is the CEO of DIMA (Dublin Inter-national Insurance & Management Association), the representative body for international (re)insurers conducting non-domestic business from Ireland.

15 CAPTIVE REVIEW | DUBLIN REPORT

BREXIT | DUBLIN

opportunity to attract staff from UK finan-

cial institutions which may seek to relocate

part of their business to Ireland. These

individuals tend to be highly educated and

experienced professionals who would help

to build Ireland’s reputation as a leading

European jurisdiction in which to locate

financial institutions. Similarly, an increase

in the number of financial institutions set-

ting up in Ireland would also give Ireland an

opportunity to attract talent from other EU

member states who might otherwise have

chosen to reside in the UK.

SG: I don’t think there are any particular

advantages for Ireland from the EU move-

ment laws within the Brexit environment.

Ireland itself has been a country of emigra-

tion, and the Celtic Tiger years saw many

Europeans relocate to Ireland under the

Freedom of Movement provisions. The

recession years resulted in a reversion to

emigration, though this is re-reverting, as

it were.

CR: What key industry trends would be

of most significance following a poten-

tial Brexit to Ireland?

SG: An extraordinary amount is unclear

about the impact of a Brexit and it is nigh

on impossible to identify possible indus-

try trends. It is possible that there would

be an exodus of international financial

services companies from the City of Lon-

don, but there are likely to be much more

fundamental impacts as far as sovereign

issues, trade at the highest levels, eco-

nomic impacts, what happens to people

with UK passports living in other Euro-

pean countries. All in all… there’s a lot at

stake.

TS: The key trend that would be of

most significance following a Brexit is the

increasing nature of regulatory supervision

in the insurance industry. If Ireland is to

encourage UK domiciled financial institu-

tions to relocate some of their business to

Ireland, the Central Bank would have to be

able to demonstrate to those institutions

that it has the resources available to accom-

modate applications for authorisation of

potential new entrants and to ensure ded-

icated and sophisticated supervision. This

will require investment by the Irish State in

the resources that are available to the Cen-

tral Bank of Ireland.

CR: If Brexit occurs, Ireland, and Dublin

in particular, could significantly capital-

ise on the relocation of institutions for EU

related reasons. How could Dublin draw

these institutions in?

SG: We have to bear in mind that the finan-

cial services aspect of the ramifications of a

Brexit vote are a very small part of the overall

picture. There are many potential impacts

which would have a profound influence on

Ireland, not least the possible construction

of a physical border between the Republic

of Ireland and Northern Ireland.

The UK is Ireland’s biggest trading part-

ner, and it is estimated that up to six million

people living in the UK are able to claim

Irish nationality. This also means that both

countries have an ingrained connection and

there is currently a clearly open door for

institutions to visit and examine the options

open to them. The Irish Ambassador to the

UK, Dan Mulhall, has been vocal in com-

municating the Irish government’s support

for the UK to stay within the EU. The IDA is

an Irish government agency which explains

the rationale for international companies to

establish in Ireland, and has many offices

around the world with information for

any companies thinking about moving

their operations.

TS: A vote in favour of Brexit will

undoubtedly impact on the Irish finan-

cial services industry. Whether it leads to

increased or reduced activity levels over

the medium to long-term is very difficult

to assess at this point. That being said,

we believe there may well be increased

demand from UK-based financial insti-

tutions for engagement with the Central

Bank of Ireland on the issues arising from

Brexit both with respect to on-going

business and potentially moving author-

ised activities from the UK to Ireland.

We believe that positive and constructive

engagement from the Central Bank in rela-

tion to the issues that arise would be very

positively received by those financial insti-

tutions.

CR: The hostility towards immigration

from the EU is a key factor in the reason

for the EU referendum, how can Ireland

take advantage of the movement laws

should Brexit transpire?

TS: To the extent that there is an increase in

the number of financial institutions seek-

ing to establish operations in Ireland as a

result of a Brexit, this may give Ireland the

“We have to bear in mind that the financial

services aspect of the ramifications of a Brexit vote are a very

small part of the overall picture”

Sarah Goddard