Mactavish warns UK firms not grasping full Brexit risk

UK companies must ensure they have done everything possible to protect their business from Brexit or face lawsuits brought by disgruntled investors, governance expert Mactavish has warned, adding that it fears many firms are not taking this risk seriously enough. The warning comes as a survey by Premium Credit revealed that more than a third of insurance professionals (37%) believe there is high chance company directors will be sued by investors and other stakeholders for failing to prepare for a hard Brexit. A further 19% think there is a slight chance of Brexit-related lawsuits against directors. Listed companies that suffer heavy share price drops when the UK leaves the European Union, particularly if the price falls more than their peers, will be exposed to scrutiny from investors and other stakeholders looking to recoup their own losses. Mactavish said UK listed firms must therefore clearly document their Brexit plans. “Every listed UK company faces major liability risks for failing to prepare adequately for Brexit, especially if there is a ‘no-deal’ outcome,” Mactavish said. It added that directors could be held personally liable in legal action. The company believes that the majority of UK companies are not taking these risks seriously enough. Mactavish also warned that many companies have yet to face up to the insurance risk of a “bad Brexit”. The firm’s CEO Bruce Hepburn said: “Brexit brings a host of new challenges for British business, and commercial insurance policies – including D&O cover – are bound up in a labyrinth of interconnected policy definitions, policy triggers and cost categories, so it’s difficult to understand what they are covered for in the event of bad Brexit. In light of this, they need to review their existing cover to ensure it is adequate.” At the same time, companies are bound to disclose business risks, effectively putting their insurers on notice, by the Insurance Act 2015. Failure to understand and communicate Brexit-related risks could therefore expose businesses to rejected claims, said Mactavish. It said companies should consider investigating and disclosing facts affecting D&O, product liability, cyber or business interruption insurance. Premium Credit said 38% of insurance professionals believe a bad Brexit will drive insurance claims. D&O is thought to carry the highest risk of Brexit-related claims at 38%, followed by business interruption on 31%. Premium Credit’s survey also revealed that only 21% of insurance professionals said companies have kept their insurers informed of Brexit-related risks to their business, placing cover at risk. Some 42% of respondents said companies have risked the validity of their insurance cover by failing to inform insurers of specific “bad Brexit” risks. Adam Morghem, strategy and marketing director at Premium Credit, said it isn’t too late for companies to act. “Our findings are alarming but there is still time for many businesses to ensure they have appropriate plans in place for a bad Brexit and that they have provided their insurers with the relevant information to ensure that they have sufficient cover here.” Mactavish has also warned that large UK corporations i are “dangerously underinsured for key business risks” because the businesses have become so complex.

Mactavish warns UK firms not grasping full Brexit risk

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