Risk and insurance managers voice concerns over Brexit

Many are taking a wait and see approach to assess how Brexit plays and in turn, how they can best support their organisations to deal with its fallout. However, there are concrete steps that risk managers can take now to support their organisations through this tricky period of uncertainty and beyond, by helping their employees make appropriate operational and strategic decisions. Brexit raises some serious questions about the ability of the London insurance market to service European and German clients in the future, according to the chairman of the Gesamtverband der versicherungsnehmenden Wirt-schaft e.V. (GVNW), Dr Alex-ander Mahnke. The newly created German risk and insurance manager association, which resulted from a merger of the DVS and the country’s in-house broker association bvf earlier this year, is monitoring the impact of Brexit on London’s insurance market.hideLondon is an important insurance market for many large European companies, so naturally there is concern that Brexit could disrupt access to specialty insurers based in the UK’s capital, as freedom of services and passporting rights are placed in doubt in any future UK relationship with the European Union (EU). “Lloyd’s has always prided itself as being one of the most important insurance markets and one that is part of Europe. But for the UK insurance industry – and more specifically for London and Lloyd’s – the potential loss of passporting rights is a serious challenge to business models,” said Mr Mahnke. “We do not want to lose an important insurance market, so we are monitoring the situation carefully,” he said. UK-based Tracey Skinner, director of insurance and risk financing at BT Group and an Airmic board member, is also concerned about the effects of Brexit on London market and European insurers. “In the insurance-buying community we should be thinking about the potential impact of Brexit on insurers’ security ratings across Europe, in addition to the potential loss of the ability to write freedom of services contracts from the UK. However, until we know more about what the UK government will be able to negotiate with Europe, we will not be able to [understand] the full impact,” she said. These concerns mirror those of participants in our European Risk Frontiers survey, who we have spoken to since the UK voted to leave the EU. Many are worried about the effect on their insurers’ and brokers’ ability to deliver cover and services from the UK. “Going forward, I will need to consider what impact Brexit will have on our insurers and brokers,” said one Swedish risk manager, who wished to remain anonymous. Risk managers are also concerned about the wider risk implications of Brexit on their organisations. Many say it is difficult for them to react because the situation will remain unclear until the UK and EU begin discussions on future relations. However, they stress that risk managers have a role to play in managing any Brexit-related risk and can take action now. Clive Clarke, group insurance manager at Lloyd’s Register and Airmic chair, explained that Brexit is near the top of his organisation’s risk register. He said risk managers need to ensure they are on top of practical issues and, crucially, aligned with strategy on the issue. “As risk and insurance managers, I think we have a little bit of time to fully consider how Brexit is going to pan out and affect our businesses. There are practical issues such as where your offices are going to be located and the like. However, I think it is really important that risk and insurance managers are part of the taskforce or working group that is giving an opinion on how Brexit will affect and impact our companies’ strategy. So that is what we can be doing now and the practical issues will flow through as discussions progress. We need to ensure that risk is linked to strategy on this important topic,” said Mr Clarke. Fiona Davidge, enterprise risk manager at medical research charity Wellcome Trust, agreed that Brexit is an important area for many firms. Risk managers can play a role by ensuring organisations take a risk-based approach to managing the issue, she added. Her charity has a European policy manager, who has been tasked with leading an internal working group looking at issues around Brexit. That group will produce a paper for the board on Brexit. Ms Davidge had a meeting with the European policy manager, at which they both agreed a risk-based approach to the process makes sense. “The European policy manager thinks there is value in using our existing risk process, to help work out what the impact of Brexit might be. So this is an area where risk managers can play a role. We may not be leading the process but we can help ensure our existing structures are involved, rather than the organisation starting from scratch,” said Ms Davidge. “In the end, it is just about the likely impact of a new set of uncertainties – from Brexit – on an organisation. So I think risk managers can bring the structure they have in place to Brexit risks. If you take the ISO definition of risk, which is the effect of uncertainty on objectives, Brexit opens up the potential for a lot of uncertainty of a type we would not have foreseen six months ago. So clearly there is a role for risk management to play in mitigating Brexit risks,” said added. According to Gary Marshall, founder and principal director of Gary Marshall Risk Management and group risk manager at Polestar Ltd before it went into administration this summer, every organisation will have its own dynamics around Brexit that must be addressed. He said some firms’ needs will be more pressing than others. Mr Marshall advised risk managers to tackle any short-term issues, while also taking time to digest Brexit’s full impact before making “knee-jerk” decisions. “It is necessary for risk managers to understand the key inputs and outputs that relate to their company’s European Union involvement and what will happen when the UK is no longer part of the EU. I feel at this moment [that] taking the soundings on this issue is most important and we have time to do that, rather than just making knee-jerk reactions. It is a bit of a long game at the moment but some firms will have vey specific short-term requirements to get in play,” he said. Colin Campbell, head of risk and compliance at UK-based retailer Arcadia Group, agreed that risk managers must deal with short-term issues caused by Brexit, such as market volatility and currency fluctuations. Down the line, strategic considerations will come into play, he added. “Further out, the issue is more about our strategic plans for global expansion and territories that we might trade in, [as well as] the ease of doing business with, and in, those territories. Whether we actually go into a territory or not are now key strategic decisions [in the] short term and longer term,” he said. There are of course implications beyond insurance from Brexit for European risk managers. According to GVNW’s Mr Mahnke, some European companies “closed their eyes” to the prospect of the UK leaving the EU. However, he explained that German companies that export to the UK or buy insurance in London now have to assess the consequences of Brexit. “It seems like the UK has always been part of the EU and few thought it would ever be any different. But it has happened and we have to deal with it, although the implications are not yet clear,” he said.

Risk and insurance managers voice concerns over Brexit

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