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Categorized | Insurance

Axa chief warns on Brexit ‘Russian roulette’

Posted on January 31, 2016

Henri de Castries, Chief Executive Officer at AXA photographed during the interveiw, for one use in the Financial Times, copyright Magali Delporte, 2012©Magali Delporte

Henri de Castries

The head of one of Europe’s largest insurers has warned that the British referendum on leaving the European Union this year was akin to the country playing Russian roulette “with maybe not six bullets in the barrel but at least four.”

Henri de Castries, Axa chief executive, said that the UK was right that the EU was “dysfunctional” and needed change, but added that there would be a severe negative impact on the country if it were to leave, particularly on the City of London.

“There is a school of thought in the UK that says that the Monday would not be very different from the Friday [after a vote to leave]. I disagree — I think it would be very different,” he said, in an interview with the Financial Times, speaking from the group’s offices in central Paris.


De Castries excited by scale of technological change

Paris, the 31th of July 2012. Mister Henri de Castries. AXA copyright : Magali Corouge/ Documentography

The insurance industry is moving into a more accurate and dynamic age, says Axa chief

Comments by Mr de Castries, who has been chief executive of Axa since 2000 and is one of France’s leading business figures, make him one of the few continental voices to have spoken out on the debate, with most reluctant to get involved or simply assuming a decision to stay.

He said that there would be “very serious consequences” for the City of London in particular following a vote to leave, because the European Central Bank would not allow London to be the hub for Euro clearing any more. “You break a financial centre faster than you create it,” he warned.

Referendums, he said, were also dangerous tools, because they were unpredictable. “People never answer the question asked. The response depends on their mood. It is like playing Russian roulette with not six bullets in the barrel but at least four.”

    David Cameron, the UK prime minister, is in the midst of tense negotiating to reform Britain’s relationship with the European Union ahead of the vote, which is likely to take place over the summer, although a date has not yet been set.

    Mr de Castries said that reform of the EU was necessary, however. “The UK is very right to say that there are things that should be changed in the union because you’d have to be a fool not to agree that the current state of things is pretty dysfunctional,” he said. He added that a UK decision to leave, combined with a lack of reform, would be a “disaster for everyone”.

    The 61-year-old chief executive, who has said he will step down from Axa by 2018, also hit out at financial regulation, saying it has weakened rather than strengthened the global system by forcing institutions to act in the same way.

    “If you look at systems in nature, stability does not come from the fact that everyone is doing the same thing. It comes from the fact that there is diversity. You have to ask yourself if the regulation is leading to an excessive uniformity.”

    He points to Solvency II, the EU insurance regulation introduced at the start of 2016, as a classic example.

    “It has led us to shorten our investment horizons because you measure the solvency of players with a one year investment horizon. Insurers are going less into long term investments, and have less countercyclicality.”