Market tries to allay buyers’ fears it won’t be ready for Brexit

A clear majority of UK risk managers are worried that the insurance market is not prepared for Brexit and that they will face problems as a result, according to a snap poll carried out during the main panel debate at the Airmic annual conference in Birmingham yesterday. The insurers and brokers on the panel, however, reassured Airmic members that they will be ready for the outcome of Brexit negotiations, even in the nightmare scenario that UK insurers completely lose passporting rights. One of the brokers on the panel did point out, however, that while insurers may well have plans in place to ensure they can continue underwriting business in Europe, attention also needs to be paid to how that business will be processed and transacted on a day-to-day basis. Chris Brown, partner with Lockton Companies, said: “I fear that the market may be moving along with a lack of pace in some respects. We have seen in the past that the insurers will implement what is needed but from a broking perspective we do have to make sure all the systems are up and running, so that the day-to-day business happens as it needs to. We have quite a long way to go. The insurers are doing what they see as a solution but the broking community has to make sure that the business can be traded on behalf of the clients,” he said. BBC presenter Huw Edwards hosted the Airmic Leadership Debate, which focused on core insurance market topics such as Brexit, innovation, the role of the broker and pricing. Brexit, not surprisingly, was the first subject on the list. Mr Edwards asked delegates whether they agreed or disagreed that the insurance industry is well prepared for Brexit and whether there will be major problems for insurance buyers as a result. Some 75% of the delegates disagreed that the market is well prepared. Vincent Vandendael, chief commercial officer of Lloyd’s, said he was surprised by the result of the poll because he feels the industry is well prepared. He pointed out that Lloyd’s has already announced it will set up an insurance company in Brussels that will hopefully be open for business in time for the 1 January 2019 renewal season. This operation will be able to issue paper for Lloyd’s agencies across the 27 EU and three European Economic Area countries after Brexit. The business will then be reinsured back into London on the basis that reinsurance is regulated on a global, rather than European, basis. “On this basis we can delegate underwriting and claims back to the floor in London,” Mr Vandendael reassured Airmic members. Mr Vandendael did, however, advise risk managers to look into how their outsourcing arrangements may be affected by Brexit. “Many risk managers do outsource activities to third parties and brokers and if this activity is not carried out in the UK but in Europe, they will need to look into that,” he said. He also said it is advisable for all parties – insurers, brokers and risk managers – to look carefully at how claims will be dealt with under Brexit. Theoretically, Brexit could complicate claims that need to be paid cross-border. But Mr Vandendael does not see the logic in such an approach. “I cannot see how this would be in the customer’s interest,” he said. Chief underwriting officer of AXA Corporate Solutions UK, Mark Platten, said his firm will be ready for Brexit and is looking at every possible scenario. Mr Platten pointed out that the market already handles many complex cross-border transactions and services connected to global programmes and therefore Brexit should not come as a complete surprise. “We will be ready. Many insurers already have an operation in Europe. We are of course based in France so this is not a question for us. I am not sure customers think all insurers are ready. But those insurers such as AXA Corporate Solutions, which offer multinational programmes, do already offer solutions for customers in so many different countries and environments,” he said. The panellists were asked if they thought that the London and wider UK market may lose business to carriers based in mainland Europe as a result of Brexit. They did not think there would be an exodus. Mark Weil, chief executive officer of Marsh’s UK and Ireland business, said he is both pleased and surprised by how the market has reacted to Brexit so far and is confident that things will be “sorted out”. He explained how Marsh has actually set up a system on behalf of customers to deal with the worst-case scenario. Under this bridging system, Marsh has lined up a range of fronting insurers across the EU that will be able to front local business and then reinsure it back into London where desirable and necessary. “Risk managers do not want to wake up on 1 February 2019 and find that suddenly they have no renewal partner. Bridging is a good idea. It is actually what happened before passporting and is reliant upon reinsurance that is equivalent and much more robust. London will remain the leading hub where the talent is based. We will find a way through this but we won't if there are no contingency plans,” said Mr Weil. One delegate asked the panel who would bear the cost of Brexit. Risk managers assume, of course, that the market would pass on the extra cost to them. Mr Vandendael said this would not necessarily be the case. “It is clear that there will be added cost and we need to think how to offset this cost. We need to find savings and efficiencies through new technology,” he said.

Market tries to allay buyers’ fears it won’t be ready for Brexit

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