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The same dynamic appears to be at work in the post-Brexit scramble. While the final terms of Brexit implementation remain very much in doubt, an existential game of musical chairs has already been set in motion as insurers take what may be irreversible steps to prepare now for an uncertain future. They are making substantial investments to open new companies in European Union (EU) safe havens, moving and/or hiring people to staff their new facilities, as well as changing standard operating procedures and even fundamental business models.

Brexit takes the stage

Brexit and its potential impact on the industry was top of mind for many of those attending the International Insurance Society (IIS) annual Global Insurance Forum last month, particularly since this year's event was held in London. That's ground zero for companies that must transform their operations to remain competitive within the lucrative EU market once the exit of the UK is completed, one way or the other, in less than two years.

UK insurers at the forum spoke forcefully about the need to take immediate steps to adapt or risk facing restrictions that will leave them at a competitive disadvantage with carriers free to market throughout the EU. Many UK companies have already begun the process of setting up shop in Brussels, Dublin, Frankfort and Luxembourg, among other locales offering a solid regulatory infrastructure, an established financial services presence, as well as a skilled, multinational workforce.

Related: AIG turns to Luxembourg as Brexit makes U.K. less attractive

Questions and concerns

Brokers at the conference reported that clients are already peppering them with questions about how the London market — which supplies so much of their primary, specialty and reinsurance capacity for the full gamut of commercial risks — will function as Brexit approaches and is finally executed.

There is additional concern as to how quickly London will hemorrhage talent as the pool is drained by alternative EU domiciles. One report by Lloyd's and the International Underwriting Association of London said that a “material number” of the 34,000 people working directly in London's commercial insurance sector, as well as “tens of thousands” employed more indirectly may face a “grave threat” of losing their jobs due to Brexit. Even in the short term, an ongoing migration of talent could make it more costly and difficult to continue doing business efficiently in the UK's financial center well before an actual Brexit takes place.

Related: Inside Lloyd's: Demystifying the inner workings of the world's most famous insurance market

Brokers and insurers are also worried about the inefficiencies and extra frictional costs that could result during and after the Brexit transition. Then there's the potential for a regulatory free-for-all, as competing domiciles jockey to attract refugee insurance entities from the UK seeking safe harbors.

(Photo: Shutterstock)

Alterations: Good or bad?

In the meantime, however, no matter how the various battles over the particulars of Brexit are resolved, the insurance landscape is already being significantly and perhaps permanently altered. But is that necessarily a bad thing?

Disruption is rarely painless or without casualties. Yet the changes being prompted by Brexit might turn out to be an opportunity if those who are being displaced seize the moment to reinvent themselves. The fiduciary rule, for example, may have made insurers more customer-centric, rather than focusing on intermediaries as their primary client. Brexit may yet have similar unforeseen benefits.

Consider the future of Lloyd's. The 329-year-old insurance marketplace has already taken steps to adapt by setting up a base in Brussels that it plans to have operational in time for January 2019 renewals. However, thinking bigger picture, might Brexit be the catalyst to prompt Lloyd's to relaunch as a more virtual market down the road? How big a deal is having a physical center in a digital age? Lloyd's has already long since untethered itself financially from its London base in terms of capital sources, yet in many regards remains physically and psychologically tied to its historic London roots. Perhaps Brexit could change that mindset in a fundamental way.

Related: Lloyd's of … Brussels?

The same opportunity could present itself to other UK carriers forced by Brexit to find a new base of operation. Typically, when someone moves to a new place, they usually throw out a lot of stuff that was taking up space but ended up being not worth keeping. They often upgrade their furniture and appliances, and establish new routines. Perhaps they even go high-tech with a sensor-driven “smart” home. Blending into their new community and interacting with new neighbors create an altered dynamic. In a post-Brexit context, setting up shop in locations across Europe could very well inject new blood, improved technology, greater diversity, and renewed energy into an insurer.

As we dive deeper into the nitty-gritty details of how UK insurers will manage long-term in a reshaped EU, the European and global insurance markets will likely never be the same regardless of what the political leaders ultimately decide to do. That doesn't mean it's going to be worse (or better) for insurers and consumers — just different. Whether the differences are positive or negative is very much within the control of insurers being forced to move now.

As carriers make their post-Brexit plans and get ready to implement them, they should remember that insurance is a fungible resource. Wherever insurers call home, they will need to be more innovative, nimble, flexible, efficient, and responsive to evolving technologies, societal trends, and consumer demands, which know no boundaries.

Sam J. Friedman ([email protected]) is insurance research leader with Deloitte's Center for Financial Services in New York. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn. These opinions are his own.