While the impact on the financial markets was evident immediately, many continue to wonder what kind of impact Brexit may have on the insurance industry and the cost of insurance to business.
Of course we don’t have a definitive answer (yet) but in the meantime, here are some of our thoughts and analysis of 3 factors that we think may impact you and other insurance buyers.
Some insurers are opening European hubs as a contingency against not being able to trade across the EU (Passporting) as they can now. Passporting allows a financial institution in any EU country to service customers throughout the 28-country bloc without barriers.
Teresa May has made it very clear that as far as the UK Government is concerned, the UK will not be staying in the single market, which broadly means that insurers will lose the right to Passport.
Until we know the outcome of the negotiations there can only be educated guesswork as to the impact on claims. That said, where goods need to be imported impacts could be felt on a number of fronts.
For example, if a manufacturer needed new equipment, will that be more expensive in the future due to new tariffs and import administration? Or if car parts are needed, will this impact motor claims?
Another interesting point to consider is who will be undertaking any repairs. A sizeable proportion of the UK labour market is made up of foreign nationals, many from the EU. If some of these workers choose to leave the UK, how will that impact the costs of repairs and indeed the timelines to recovery?
Businesses holding large amounts of imported stock may also need to revisit their sums insured. Greater insight into your supply chains is also advised, to allow you to plan both financially and operationally for any potential future impacts.
Will my insurance premiums increase?
As outlined above, there are clearly factors in play that could lead to increases in premiums post-Brexit. However the insurance industry is global and Brexit, whilst significant, is just one factor.
Other factors to consider are the impact of natural catastrophes like the hurricanes in the Caribbean and the US, the earthquakes in Mexico and the storm damage in the UK following Ophelia. In addition there is the emergence of new technology and the opportunities it brings through lower administration or being better informed through big data.
Insurance is a supply and demand industry. Demand is somewhat constant, although clearly increasing as emerging economies’ financial systems mature. Supply in recent years has been abundant, with plenty of capital and capacity in the industry. Thus, we believe that even following the challenging events of 2017 as outlined above, premiums for well-managed, risk aware clients will remain sought after.
Ultimately it would be good to have a transitional period following March 2019, because that would give businesses longer to prepare, however it is not yet certain whether there will be one, how long it would be and what form it would take.
If you would like to discuss any of the details within this article or have an interest in how to manage your business risk profile to prepare for the eventualities of Brexit, please contact your Griffiths & Armour Insurance Broker or e-mail firstname.lastname@example.org.