EY flags up potential post-Brexit risk for insurers
Brexit planning has been a fact of life for the global insurance sector since the UK referendum in 2016. However, an insurance expert from EY has flagged a post-Brexit risk for international insurers that deserves more attention.
Kabaria Bhattacharya, associate partner at EY, told Intelligent Insurer that most large outbound insurers operating in life insurance, property and casualty have been working on the assumption of a no-deal Brexit since March 31, 2019. “These insurers have already ensured they have the necessary permissions and licenses as well as setting up target operating models,” she said. And for inbound insurers there will still be time to fulfil their regulatory obligations after January 31, 2020. “Some firms may need to think about capital model changes and regulatory reporting, but these aren't immediate issues,” she added.
However, Bhattacharaya added that insurers with expatriate exposures may be at risk, “customers may have moved to somewhere in Europe potentially to retire and this could create an EU exposure for firms”.
For most jurisdictions this is not an issue. But in November 2019, the French insurance supervisor ACPR indicated that it did not intend to comply with a recommendation from the European Insurance and Occupational Pensions Authority (EIOPA), which related to insurance policies originally sold in the UK to policyholders which now reside in France. ACPR called on insurers with exposures in France to reassess their operations.
While smaller insurance firms could be affected, the overall sentiment in the insurance market is positive. “Most firms are now focused on their day two operations and are ensuring they have people in the right places. Brexit is a great opportunity for insurers to cement their footprint in Europe by establishing EU operations and most insurance firms have considered this in their EU growth strategy,” said Bhattacharya.
EY’s Financial Services Brexit Tracker, published on Monday (January 20), confirmed that of the 222 firms monitored, the key areas of concern for financial organisations were reduced profitability, asset outflows, deferred M&A, a slowdown in lending, and customer losses in markets outside the UK.
