Reinsurers in good shape as threat of no-deal Brexit looms

Reinsurers are better placed to cope with a possible departure of the UK from the EU with no agreed deal than UK primary insurers, according to Graham Coutts, EMEA head of reinsurance at Fitch Ratings.

Coutts said reinsurers have more global diversification in their businesses, which better insulates them from sovereign issues.

“Reinsurance business tends to be more geographically diversified and transacted on a cross-border basis, so the impact of some of the issues facing the primary sector should be less severe,” he said.

“On the asset side, reinsurers again tend to have more geographically diversified investment portfolios to match the liabilities, so there is lower exposure to specific concentration risks.”

Meanwhile, Brexit has created some opportunities for EU27-based reinsurers, according to Mathilde Jakobsen, director of analytics at AM Best (EU) Rating Services.

“At this year’s January 1 renewals, Brexit uncertainty and local regulation meant that a significant amount of German business moved away from UK-based reinsurers,” she said.

Overall, however, the feeling is that the industry is well prepared for the potential disruption of a no-deal exit. Continental European entities conducting insurance business in the UK, and UK re/insurers seeking to write business in the EU, should both be able to continue doing business as normal after a possible no-deal Brexit, said Jakobsen.

“The operational issues associated with the loss of passporting rights have been smoothed by the UK government’s Temporary Permissions Regime, which allows European Economic Area insurers to operate in the UK for a maximum of three years post-Brexit while they seek authorisation from UK regulators,” Jakobsen concluded.