With just nine months until the UK’s departure from the EU on 29 March 2019, businesses see continuing uncertainty of certain aspects of Brexit. It can be an opportunity for risk managers to play a leadership role.
An agreement announced by the UK cabinet of Britain’s terms for departure from the EU, generally regarded favourably by business, soon led almost immediately to the resignation first of Brexit minister David Davis and then Foreign Secretary Boris Johnson. Davis has been replaced by Dominic Rabb, another prominent leave supporter. It is not clear how this will affect the negotiations with the EU.
The joint statement from the European Commission and UK Government published on 18 June 2018 indicates that there has been progress on the Withdrawal Agreement, but the deadline for arrangements for a transition period up to December 2020 is only months away. On 29 June, Michel Barnier, the chief negotiator for the European Commission, stated that there had been some agreement but that “huge and serious divergences” remained. “Time is very short,” he said.
“Risk managers have an important role to play to help companies navigate in this new environment and with their risk management expertise, support the implementation of appropriate measures until a new relationship between the UK and the EU is established.” said Jo Willaert President of FERMA
Benno Reischell, Head of Europe for Lloyd’s, supports this view in his article on managing Brexit written for FERMA: “Brexit poses a number of challenges for businesses but also represents an opportunity for risk managers to get on top of the issue, raise their profile within their companies and make sure their business can thrive -whatever the post Brexit business environment.” See the article for some key questions that risk managers working in UK companies and transacting business in Europe, and European companies transacting business in the UK, need to ask.
A situation of hard Brexit, where there is no deal, will have serious consequences for European insurers and could affect commercial insureds, as explained in a FERMA previous newsletter. On 19 May, the European insurance authority EIOPA called its national supervisors to start assessing the risks and solvency situation for their insurers in the case the UK becomes a third country. This relates to a previous warning from EIOPA about the continuity of service in insurance if no transition period is agreed.
The Clauses Committee of the London market International Underwriting Association (IUA) has now drafted a voluntary policy clause that is designed to manage the insured risk as and when the UK leaves the EU, working on the assumption there will be no equivalent passporting rights for UK insurers. There is also an accompanying commentary explaining the key technical considerations and issues arising in the drafting process.
Companies in other industry sectors have expressed their concern about the continuing uncertainty, including Airbus and Nissan. Carlos Ghosn of the Renault-Nissan alliance indicated that Nissan is “in the dark” over Brexit and announced that long-term business decisions have been postponed. Honda has expressed fears that customs delays caused by Brexit could damage its UK-based just-in-time production.
The European Commission published a draft Withdrawal Agreement on 28 February 2018, updated in March, but the issue of the Irish border and the application of EU law during the transition period up to December 2020 remain obstacles. Arrangements for the transition period will have to be agreed by the EU and the UK by October 2018 to allow for timely ratification by the European and UK Parliaments.
FERMA will continue to monitor developments at European level.