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If you were fed up with the medias attention on the World Cup you should now steel yourself for the build up to the Scottish referendum.

It has been billed as a once in a lifetime event, but we all know that Salmond will hardly give up if it’s a no vote and if I was a betting man I would wager another Scottish referendum is far more likely than another England World Cup win in my lifetime.
We hear that the Financial Services industry is of critical importance to Scotland, but this has mainly focused on the banking sector, and whilst not headline grabbing or likely to influence the vote, if Scotland does leave the UK, it will also cause many practical complications to the UK insurance industry and won’t just be about whether there is an exodus of Scottish insurers and jobs or ‘will I need a green card’ to drive in Scotland.
Even though Scotland already has its own legal system, UK policies are generally governed by English Law and this has worked all the while Scotland has been part of the UK. If this changes, whilst there could be an initial agreement to keep the status quo, future changes in legislation either north or south of the border may cause complications.
Territorial limits in policies will need amendment as many are restricted to the UK, however, it may not be as easy as insurers deciding on geographic definitions. Insurers have to be licenced to underwrite certain classes of business in other countries or have reinsurance constraints and arranging cover abroad generally is more complicated due to licencing and local regulations, even with our nearest neighbours. For example, some household name insurers are not able to cover risks in Eire.
There will be implications with Employers Liability Insurance as staff permanently (or semi permanently) based in another country need to have insurance cover arranged in that country. Any business with premises both north and south of the border are likely to require separate cover for Scottish based staff unless a special deal is done between the two governments.
Some of these issues would be resolved by a decision on who regulates insurance in Scotland and we are told that a new Scottish financial conduct regulator would look to align its rules “to retain a broadly integrated market across the Sterling Area”, but there is no guarantee they will be allowed to keep the pound.
Many in the industry complain that the cost of regulation in the UK is much higher than on the continent due to the UK’ s propensity to ‘gold plate’ European regulations, although the Channel is a big barrier with little cross border insurance trade so few are affected. However, the prospect of companies operating with different rules and cost bases in the same established market will be of great concern to both brokers and insurers.
Other issues will be what happens to the UK wide agreements for terrorism and flood cover, will Scotland change the rate of Insurance Premium Tax, VAT or retirement ages and of course there could be a different currency. Some may just be practicalities, but they could also distort competition and disadvantage companies in either area.
All could no doubt be sorted over time, but will involve a lot of time and expense, no doubt mirrored in numerous other industries and sectors faced with similar concerns.

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