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08 June 2016

Commercial risk: Risk managers urged to plan for Brexit risks

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Risk and insurance managers must urgently consider the business risk and insurance implications of this month’s referendum vote on whether the UK should leave or stay in the European Union.

“The EU referendum is quite a personal issue to the individual but generally businesses do tend to be suggesting that staying in is preferable,” said Clive Clarke, the incoming chairman of Airmic. “Airmic members’ views will be generally mixed,” he added.

Airmic does not have an official view or position on Brexit but sees it as a real issue for risk managers, which they should be planning for.

“Brexit is definitely an issue that should be on risk managers’ agenda,” said Julia Graham, the Association’s deputy chief executive and technical director.

“Risk managers need to be in touch with this issue and be part of the corporate team looking into the implications. And they also need to keep an eye on the insurance market,” she added.

Worryingly, a poll of UK business leaders suggests that boards are not taking the threat of Brexit as seriously as they should. A survey of FTSE 350 companies by FT-ICSA found that fewer than half of respondents (43%) rate a UK exit from Europe as potentially damaging and barely half (49%) of boards have considered the implications of the UK leaving.

Brexit was hotly debated by Airmic members at an event co-hosted by insurer AIG. Members discussed different Brexit scenarios, how risk managers can respond and the tools at their disposal.

At the event, CBI director of campaigns, Andy Bagnall, noted that only about 50% of FTSE companies have made contingency plans for Brexit. That percentage was mirrored almost exactly by the proportion of risk managers attending the event who said they had Brexit on their radars.

“There is a lot of complacency around Brexit. Some people think this issue is not immediate or that risk managers cannot do anything about it. But there is quite a lot that they can be doing and it pays to be ahead of the competition and the game,” said Ms Graham.

According to Charles Beresford-Davies, head of the UK risk management practice at Marsh, there are potentially significant implications for the insurance market and insurance buyers to consider if the UK votes to leave the EU. For example, a ‘leave’ vote could cause key aspects of an insurance buyer’s business or planned transactions to change, resulting in a material change to the buyer’s risk profile.

“In the event of a ‘leave vote’, insurers should, as a matter of priority, be prepared to review their risk profiles and insurance programmes,” said Mr Beresford-Davies.

Brexit would have implications for a wide range of issues relevant to risk managers, including regulatory, employment, environmental and product law, as well as for trade and investment. A vote to leave would also raise questions around the application of yet to be enacted EU laws, such as the General Data Protection Regulation. [...]

Full article on Commercial Risk

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