LONDON -- Whether or not the United Kingdom decides to participate in the single European currency, the U.K. insurance industry will be affected and must start preparing for the buyer-driven changes that will follow its introduction.

That was the clear message from a one-day conference -- The Practical Implications of the euro for the Insurance Industry -- held in London last month.

Eleven European Union countries -- Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain -- are committed to introducing a single European currency, the euro.

On Jan. 1, 1999, the conversion rates between the participating countries and the euro will be locked irrevocably.

The euro then will operate as an accounting unit for commercial contracts and transactions, in parallel with the 11 countries' existing currencies.

Beginning next year, insurance contracts may be denominated in euros rather than national currencies, if buyers so choose, even though the euro itself will not be available until 2001.

The final changeover to the euro, including the introduction of euro notes and coins, will take place Jan. 1, 2002.

The United Kingdom has not joined the euro but can join in the future if it wishes.

John Greenway, chairman of the U.K. government's All Parliamentary Group on Insurance and Financial Services, admitted there is a lot of uncertainty in the U.K insurance industry regarding U.K. participation in the euro.

In the conference's keynote address, he summarized the U.K. government's position as follows:

"We are not committed to joining, but we can do so later if it is in our interests. . . .We are keeping our options open."

Mr. Greenway said it follows that if the U.K. government is "hedging its bets" on joining the euro, U.K. insurers must do the same.

He said he believes potential U.K. entry into the euro is "still some way off" but that "the more pressing need is to position U.K.-based insurance business so as to take best advantage of the euro's introduction."

He predicted four main effects -- driven by European insurance buyers -- on U.K. insurers resulting from the euro's introduction.

Dismantling of national currencies will lead to the opening up of insurance markets. Subsequently, insurance contracts across Europe will become more transparent, creating greater pressure on price and service levels.

* Premium, claim and benefit transactions will become euro-based for many European policyholders. Again, the increased transparency should increase competition and drive down prices.

* The euro's introduction will accelerate the process of insurance industry mergers, acquisitions and takeovers in Europe. There also will be big advances in cross-border electronic trading.

* There will be demand for new commercial insurance products and pensions denominated in euros.

Mr. Greenway suggested U.K. insurers adopt a three-point strategy for the introduction of the euro:

First, exploit the significant opportunities for new business that the euro's introduction presents.

Second, protect U.K. market share from any potential advantage that membership of the euro provides to competitor European insurers.

Third, and most difficult, pursue organizational structures that "make sense either way so as to neutralize the impact of whether or not Britain decides to join."

Mr. Greenway said it is important for U.K. insurers to plan their business strategy -- whether the U.K. is in or out of the euro -- so they have the right structure that is in their best economic interests.

Janette Weir, head of political and economic research at the Assn. of British Insurers, agreed the euro will impact heavily on U.K. insurers' commercial business and investments in Europe. "There will be a big impact on commercial lines if European buyers want to do business in euros from day one," she said.

Therefore, U.K. insurers that want to compete seriously in Europe must be able to provide and transact euro-based products and services, Ms. Weir said. She also agreed that the euro's introduction will create more transparency in European insurance transactions and said U.K. insurers must be prepared to meet the competitive challenges.

As far as the United Kingdom joining the euro, it is difficult to say where the U.K. insurance industry should be, Ms. Weir said.

"It is a strategic issue, and insurers are considering their options about what needs to be done," she said. "Some insurers are doing detailed impact assessments, while some are keeping a strategic watching brief on the issue."

Ms. Weir said U.K. insurers must assume that the United Kingdom will join the euro at some time in the future. However, she concedes that insurers find it difficult to get money from their boards to plan for a changeover to the euro for a "U.K. in" scenario. "There is a lot of competition for board money, especially with Y2K, and there is no certainty with the euro."