An independent Scotland could set itself up as an insurance and reinsurance centre, a top industry lawyer believes.

If Scotland’s residents vote to break away from the United Kingdom in a referendum on Thursday, contracts and wordings around many policies would also have to be reviewed, he added.

In an interview with the Intelligent Insurer, Clive O’Connell, partner at law firm Goldberg Segalla, said an independent Scotland would have full fiscal autonomy.

“This could enable Scotland to develop as a centre for captive insurance and financial reinsurance as a direct competitor to Ireland,” Mr O’Connell said. “For insurance and reinsurance, this is where the true opportunities may lie in Scotland’s leaving the union.”

A key issue a go-it-alone Scotland would face would be which currency it would use — the pound, or a new currency pegged to the pound, or even the euro.

“Any of these options, other than remaining within the pound, could create issues for insurers and reinsurers,” Mr O’Connell said. “While the formalisation of independence will not be immediate, it will be essential to review wordings to determine whether currency conversion clauses would be needed in the event of a new currency emerging.

“Care needs to be taken to ensure that all contracts which may be affected receive appropriate endorsements.”

In terms of regulation, he noted that Scotland would need to create a new regulatory body, although it would probably simply follow EU standards, particularly with the advent of Solvency II.

But he added: “There is a possibility, which is probably remote, that an independent Scotland would not be allowed into the EU. If this were to happen, the regulatory position would be very different and complex.

“Insurers doing business in Scotland would have to be authorised by the new Scottish regulator, unless that regulator sought a reciprocal arrangement with the EU.”