A quarter of captive professionals have not yet even considered contingency planning for the UK’s exit from the European Union, according to a webinar hosted by Captive Insurance Companies Association (CICA).
Attendees of the webinar, focused on Brexit and its impact on the captive insurance industry, were asked where they were in terms of planning for Brexit. Some 41 percent of respondents said they have thought about it but didn’t think it would affect them, and 35 percent said they have begun planning but don’t have a finalised contingency plan in place.
Moderator of the webinar, Dennis Harwick, president of CICA, revealed that webinar attendees were from various countries including Anguilla, the UK, the US, Malta, Gibraltar, the Isle of Man, Bermuda, Cayman and more.
Attendees were also questioned on the main action they will take in the event of a hard Brexit. Almost a quarter, 24 percent, said would obtain fronting, 6 percent said they would move their captive, and 6 percent said they would reconsider their overall captive strategy. However, 65 percent said they are still unsure, or that the question was not applicable to them.
Panellist Peter Mullen, CEO of Aon Captive and Insurance Management, said: “The biggest impact of Brexit over the next few years will be the uncertainty of the outcome. While the stock market has recovered since the initial vote, another market reaction is likely when Article 50 is invoked.”
Another panellist Derren Vincent, executive director of Willis Towers Watson, agreed with Mullen that changes to passporting, which allows captive insurers to write business across the European Economic Area (EEA), is likely to have an impact on captive insurance companies and certain captive domiciles.
According to Vincent, a hard Brexit would mean the inability of an EEA-authorised captive to write direct insurance into or outside the UK.
He also suggested that captives, in theory, might have two years to make alternative arrangements, from the triggering of article 50, which is currently expected to happen by the end of March 2017.
Vincent, however, explained that a soft Brexit could allow for an EEA-authorised captive to continue to direct insurance into or out of the UK. He also noted that a UK regulatory regime equivalent to Solvency II would most likely be the only way that this would work.
He suggested that, because nothing has legally changed yet, definitive forecasting is “impossible” due to its “extreme political uncertainty in the UK”.
Vincent advised that when boards and captive owners are contingency planning for Brexit, they should identify the most critical risk and plan accordingly. He warned that if companies are planning to redomicile a captive, or set up a new captive, they must be aware of time scales.
He explained that a key consideration for EEA captives will be the final decision on passporting and Solvency II equivalence.
