An AIG report says that the 2 year notice period to leave the EU gives both insurers and the insured the time to amend one year, and most three year, policies on renewal, or plan for any amendments required.
Buying insurance could become more complicated if the new UK licensing regime requires changes to insurance contracts. Currently the UK permits local risks to be insured from outside the UK on a non-admitted basis, apart from statutory policies that must be insured within the UK. As yet we don’t know if the UK will continue to permit non-admitted insurance.
Some European countries already require EU issued policies for the risks insured in that country and do not permit these risks to be insured in a non-EU country. Global insurers with EU licences will be able to continue underwriting these risks, so the impact on administering corporate insurance programmes may not be significant in terms of cost or resource.
Brexit is unlikely to affect the price of insurance.
Risk managers should be talking to their insurers and brokers about how their business will be impacted, especially if contingency plans could result in a material change to the risk profile of the company e.g. if projects are deferred until key decisions have been made.
People risk is a major concern for companies with a reliance on staff from the EU or UK. If EU citizens are no longer able to work freely in the UK (and vice-versa) then businesses may suffer staff shortages and/or the loss of key personnel. The number of EU nationals entering the UK to work has already dropped, hitting the public sector, agriculture and hospitality the hardest. Companies need plans on how to deal with labour and skills shortages, whether by retaining older workers, investing in retraining, or improving terms and conditions to attract new recruits.
For key personnel, AIG has extended its D&O policy to cover legal challenges in the event of permanent residency applications being rejected pre-Brexit, and the subsequent challenges to repatriation orders post-Brexit. This also covers legal costs for executives living in the UK and EU to fight a repatriation order as a result of termination of the UK’s EU membership.
Shareholders will expect boards to understand the opportunities and threats from Brexit, and implement plans to ensure the future of the business.
The impact of Brexit is still a massive unknown but the real danger is that companies stand still whilst waiting for clarity.