According to a 2019 Digital Insurance report: “As much as £61 billion of business is shifting to rival financial centres in the European Union as a consequence of Britain’s vote to leave the EU.” This is inevitable regardless of the terms of the final Decree Absolute.
UK insurance companies will be impacted by Brexit as their “passporting” rights will be revoked. Passporting refers to the right of a company in the European Economic Area (EEA) to conduct business in any EEA country without authorisation from that country. Simply put, losing passporting rights means that companies will no longer be able to operate in the UK unless they establish subsidiaries within the EU and apply for a local license. According to several leading UK insurers, EU insurance companies are heavily impacted as a major portion of their business is routed via syndicates.
The following functionalities are essential for insurers to prepare for Brexit:
- Insurance lines of business must be implemented as channel/territory agnostic
- More companies must be enabled to underwrite more business across all LoBs
- New business underwriters must capture and distribute financial transactions, exposures, claims and accounting between various insurers
- Reverse commission (for outsourcing business between the insurer’s insurance companies) must be fully supported and accounted for per transaction
- Claims liabilities must be segregated between the insurer’s insurance companies, and the platform dynamically decides (based on the underlying risk) from which of those insurance companies the financial transactions will be generated and where the liabilities and exposures should be allocated.
Leveraging flexible, adaptive systems, insurers can emerge stronger without the need to invest significant amounts of time and money or rewrite a lot of code.
It is essential for insurers to seek an experienced partner with a Brexit-friendly, end-to-end solution that can help them manage disruptive external events and turn them to their competitive advantage. That solution must have the functionality to apportion exposures for different lines of business to different territories. Insurers can then account for them under corporate umbrella accounts.
Although no one can be certain of the outcome of Brexit, the insurance sector is empowered by its historic foundation in the UK. The industry has emerged from great fires, plagues and influenza, and will surely not let a small matter like Brexit interfere with its progress.