Hold Brexit, We Need an Election

Hold Brexit, We Need an Election

Hold Brexit, We Need an Election
By David Worsfold

It was inevitable. Changing Prime Minister from Theresa May to Boris Johnson did absolutely nothing to alter the simple fact that Parliament has been deadlocked over Brexit ever since May came back from Brussels with her first Withdrawal Agreement nearly 18 months ago. Sooner or later MPs were going to have to turn to the country, either in a General Election or a second referendum on Brexit to seek a potential resolution to the crisis that has dominated British politics since the referendum in June 2016.

There were a dozen votes in Parliament on a possible second referendum and none of them came close to producing a majority so one-by-one the opposition parties came to the conclusion that they would have to support a General Election. That will now happen on 12 December and the volatility of British politics makes the outcome almost impossible to predict this far away from polling day.

In the meantime, we have Boris Johnson’s new Withdrawal Agreement deal lying on the table with the EU having agreed to give the UK until the end of January next year to ratify it. The mood music from Brussels says there will be no more extensions to the Article 50 withdrawal process but we have heard all of that before.

The deal itself is almost identical to May’s. Only Johnson seems to believe the 5 per cent or so that is different is an improvement. Crucially, the proposed changes to the arrangements for managing the Irish border have sent Johnson’s onetime allies into the Democratic Unionist Party into a tailspin of rage because they are now looking at a nominal border in the Irish Sea. The DUP represents the pro-British Protestant half of Northern Ireland and they fear this could be a step on the way to Irish re-unification after 100 years of partition. The Catholic Irish nationalist community elect MPs but as they represent Sinn Féin they will not take their seats in a British Parliament.

The Johnson deal does at least have a transition period running until the end of 2020 which offers some chance of ironing out issues around health insurance, travelling to Europe with a car and the position of the large British expatriate community in Spain. There is, however, a huge amount of naïveté suggesting that the full Future Trade Relationship (the second phase of the leaving process) can be concluded in that time. Not a chance. It will take at least ten years to negotiate a full trade agreement covering all goods and services.

This means there are two potential cliff edges for Brexit.

The first would come at the end of January when the current extension of the Article 50 process to agree a Withdrawal Agreement expires. The current thinking is that if the Conservatives get an overall majority on 12 December then the deal negotiated by Johnson will go through the UK Parliament quite quickly, followed by ratification by the relevant European institutions straight after Christmas, facilitating a moderately orderly exit in January.

Anything short of an overall Conservative majority but with them as the largest party would leave us in a similar position to one we have today. This stalemate would see the UK crash out on 31 January without a deal unless the EU blinks again at the very last minute and offers another extension. A No Deal Brexit has damaging implications for members of the EU, especially those countries whose ports do the most trade with the UK so they do not relish a No Deal Brexit.

If Labour emerges as the largest party they will probably seek support from the Liberal Democrats and SNP – Scottish Nationalists (both expected to do well in the election) to ask for a longer extension to negotiate a radically different deal which could then be put to the country in a second referendum towards the end of 2020 with remaining in the EU as the alternative. The complication with that scenario is that the SNP are getting impatient to hold another referendum on Scottish independence next year.

Even if Johnson is re-elected at the head of a majority Conservative government and passes the Withdrawal Agreement, there will be a second No Deal cliff edge at the end of 2020 if the Future Trading Arrangements are not in place. If that happens trade between the EU and the UK will revert to World Trade Organisation terms with tariffs on a wide range of goods and services.

There are so many ifs and buts that the one constant of the last three and a half years remains: businesses are frustrated and confused about what they should plan for. Investment decisions are being deferred and major decisions are being put off. At the same time, consumers are growing cautious about spending money which is starting to have a depressing effect on the economy.

It would be a fool who said everything will be clearer after 12 December.

Subscribe to the Insurance Research Letter here. Each issue features articles written by experts that you won’t read elsewhere. Stay current with major developments with Global Briefs; monthly Synopsis of insurer and broker news; and the popular BackPage with a variety fun and interesting subjects.
IRL Preview – November 2019

IRL Preview – November 2019

Highlights

Transfer of Legacy Insurance Exposures: Why a Coverage Review Matters

For a variety of reasons, such as a desire to exit a non-core line of business or to redeploy capital, an insurer may decide to shed certain legacy exposures, rather than continue to manage related claims and carry the exposures on its balance sheet. A well-structured transfer of those legacy exposures, via a loss portfolio transfer (LPT) or adverse development cover (ADC), can allow the insurer to achieve those results, while also providing significant benefits to the acquiring party. Learn more on page 11

Introducing The ARIAS-US Panel Rules For The Resolution Of Insurance And Contract Disputes

In April 2017, ARIAS-US undertook a project to create arbitration rules for use in non-reinsurance disputes including direct insurance disputes and those involving captives. Following many meetings, drafts, and revisions, the new ARIAS-US Panel Rules for the Resolution of Insurance and Contract Disputes are here and went into effect as of September 16, 2019. Learn more on page 12

Use Effective Meeting Strategies to Build Relationships

Mediocre meetings that lack purpose and clear next steps have no place in a time-strapped, fast-paced culture. Follow these effective meeting strategies to ensure your meetings lead to results on page 14

The Family CFO and the Family Office Insurance Program

Leveraging the expertise of a Family Office and guidance of a Family CFO, high-wealth families can conduct the due diligence necessary to identify insurance coverage gaps before crisis occurs. Learn more on page 14

Is Your Online Cloud Storage Secure Enough?

Having cloud storage is a reality of living and working in an ever more connected world, where we expect to have access to our data anywhere with an Internet connection at the drop of a hat. Cloud storage makes it easier for us to travel, to share and most importantly keep our data safe. However, not all cloud storage solutions are created equal. Learn why on page 16

Hold Brexit, We Need an Election

It was inevitable. Changing Prime Minister from Theresa May to Boris Johnson did absolutely nothing to alter the simple fact that Parliament has been deadlocked over Brexit ever since May came back from Brussels with her first Withdrawal Agreement nearly 18 months ago. Read the latest on page 17

Subscribe to the Insurance Research Letter here. Each issue features articles written by experts that you won’t read elsewhere. Stay current with major developments with Global Briefs; monthly Synopsis of insurer and broker news; and the popular BackPage with a variety fun and interesting subjects.
IRL Preview – October 2019

IRL Preview – October 2019

Highlights – October 2019

Managing Earthquake Risk in Peru
An overview of three challenges facing Risk Managers
Earthquakes in Peru are frequent events, because the country is in a highly seismic region placed over the Nazca plate within the so called South America subduction zone. This subduction is the key to the formation for one of most defining geographic peculiarities in Peru: the Andean Mountains. Read more on page 9

Two-Thirds of Businesses Are Unprotected from Tremendous Risk: The Case for Cyber Insurance
Although businesses should actively protect themselves against this threat, that is not reality. Cyber risk never sleeps. Read more on page 11

Cyber Insurance Review: Why It Matters
Cyber and privacy risks continue to proliferate, leading more and more companies to turn to cyber insurance as a means of transferring some of those risks. Read why a well-designed cyber insurance policy should be a key component of a modern enterprise’s cyber and privacy risk management program on page 12

Transportation Innovation 2019
What effect will autonomous technologies, such as robot technologies and autonomous vehicles, have?
Automated Guided Vehicles (AGV) are common in the logistics industry. Autonomous technology has been used in manufacturing and distribution centers for years where AGV are used for moving product throughout a warehouse. Robotic units are common in fulfillment operations to assist in the pick and pack process. Experts believe the next wave of progress in logistics automation will be in final-mile delivery. Autonomous technology is swiftly being developed by major automotive OEMs and new start-ups. Read this fascinating article on page 12

Brexit – is the end in sight?
Brexit is due to take place on the 31st October, according to the new Prime Minister, Boris Johnson, with- or without a deal. He is not the only one who is saying that. Read more on page 15

India’s general insurance market to cross US$40bn by 2022
A growing middle class, increasing awareness of the need for protection and favorable regulatory landscape are expected to drive the general insurance market in India from INR1.6 trillion in 2017 (US$24.1bn) to INR2.9 trillion (US$40.1bn) in 2022, according to GlobalData. Read this article to gain a better appreciation of the opportunities and challenges in a developing market on page 16

Subscribe to the Insurance Research Letter here. Each issue has interesting articles written by experts that you won’t read anywhere else. Stay current with major developments with our Global Briefs; monthly Synopsis of insurer and broker news; and our popular Back Page with all sorts of non-insurance fun and interesting subjects.

September 2019 – Brexit approaching an endgame – but only of chapter one

September 2019 – Brexit approaching an endgame – but only of chapter one

Brexit approaching an endgame – but only of chapter one
By David Worsfold

Brexit has broken the British political system. The absence of a written constitution has meant that almost daily conventions that have been respected for decades – even centuries – have been tossed aside, especially by the new Prime Minister Boris Johnson.

His focus is exclusively on forcing the United Kingdom out of the European Union on 31 October whatever the terms, whatever the costs and regardless of the determination of Parliament to stop him. No-one knows what the outcome will be. Predictions are pointless. Learned analysis is rendered useless almost as soon as it is delivered. The country becomes daily more deeply divided with no-one offering any prospect of healing, let alone creating a single sense of national purpose again.

Parliament passed a law prohibiting the UK from leaving the EU on 31 October with a deal, just hours before Prime Minister Johnson ordered its suspension for five weeks from 9 September. However, Parliament offered no clear definition of what might constitute a “deal” and Prime Minister Johnson positioned himself to do everything he can to ignore Parliament short of blatantly breaking the law.

Meanwhile, businesses are in despair. The government tells them to prepare for Brexit but it cannot tell them what type of Brexit, when or how it will impact them.

Whatever the outcome of Brexit, decisions are being made that will change the UK forever.

The three years of intense focus on how the UK will leave the EU have diverted attention away from the sobering reality that the current phase of negotiations only mark the first stage of a process that could dominate most of the next decade. This is just the close of chapter one. There are many more chapters still to be written.

Only once the UK has left the EU can the serious negotiations about the future trading relationship with the EU and the rest of the world begin. If the furore surrounding the basis on which the UK’s membership of the EU should end has left businesses uncertain, nervous and often confused, the prospect of politicians trying to negotiate detailed trade deals sector-by-sector and country-by-country is a chilling one.

Business, including the financial services sector, has lost patience with politicians and with good reason. The widespread ignorance across the political spectrum about the impact Brexit could have has left firms with little option but to prepare for an abrupt, brutal and possibly chaotic No Deal exit, while hoping for something a little softer. For insurers and brokers, this has meant making decisions about which clients and contracts need to be serviced from within the EU and where to base the operations that service that business.

Dublin has been one of the most popular choices but the local economy there is now over-heating with property prices rising rapidly and school places under pressure. Luxembourg has been another popular choice for insurers, while Lloyd’s decision to pick Brussels as its new EU base has attracted some London market firms to follow it there.

With other locations such as Paris, Frankfurt and Malta still working to attract firms, the final picture has still to emerge but there hasn’t been a clear winner which shows that London cannot be easily replaced.

Much of the political debate in the UK has surrounded the customs union and providing a cushioned exit from that but it only covers trade in goods – just 15% of the UK’s gross domestic product ­– and excludes financial services.

The single market, often referred to as the internal market, provides the basis for insurers and brokers to trade freely throughout the EU and the European Economic Area using what is often referred to as passporting. Hope is fading that any transitional phasing out of passporting will survive the current Brexit mayhem.

Whether or not there is a withdrawal agreement, national regulators do have scope to make things easier and the UK has been leading the way on this front creating regulations to allow EU firms to continue to trade in the UK after Brexit.

Some EU member states have proposed or implemented transitional arrangements that would help UK firms. However, many of these are short term and are limited to the running off of existing insurance policies. They may help with the issue of contract continuity, at least for a limited period, but for all other purposes insurers and brokers are now looking at a regulatory cliff edge.

As well as major international insurance business, there are several personal lines insurances that will be adversely affected by Brexit, especially travel with around 60 percent of UK travel insurance cover passported in from the EU. UK drivers travelling to the continent will probably have to obtain a Green Card – the pre-EU regime – to show their insurance covers them for driving in the EU, while the European Health Insurance Card could go, meaning Brits travelling to Europe will need extended health insurance cover.

These details – and many more – are being completely overlooked as the politicians lock horns in a battle that has rocked British politics to the core, split both major parties, especially the governing Conservative Party, and brought closer the prospect that the United Kingdom will break up with Scotland seeking independence.

There are many chapters still to be written. They will not be for the faint-hearted or those who seek stability, unity and predictability in politics in the next decade.

Subscribe to the Insurance Research Letter here. Each issue has topical articles written by experts that you won’t read anywhere else. Stay current with major developments with our Global Briefs; monthly Synopsis of insurer and broker news; and our popular Back Page with all sorts of non-insurance fun and interesting subjects.

IRL Preview – September 2019

IRL Preview – September 2019

September Highlights

Three Key Challenges for Insurance brokers in the Andean Region: Peruvian Perspective

Learn of the challenges that might keep decision-makers in Peru from accomplishing this mission, because in insurance, as in life, there are good choices and there are bad ones on page 10

Reframing Social Media Surveillance Practices

Self-insured employers and small mutual insurers embraced social media surveillance years ago, and have reaped substantial benefits to their bottom line from the practice. However, there’s now a niggling dialogue about whether employees should be “spied on” (their words, not mine, obviously). Learn what a social media investigations firm owner has to say on page 12

Lessons from Fintech Applied to Insuretech

Read what this author witnessed the fintech wave forming, cresting, and eventually crashing into the financial ecosystem.  If there is a fraternal twin to banking, it’s the insurance industry.  Both industries are built on managing risk, capital, compliance, and distribution.  Not everything in fintech will apply to insuretech, but there’s a lot we can learn by assessing the impact of fintech on the banking system. Page 12

After the Storm: How To File An Insurance Claim For Your Home or Business

After a storm or hurricane, every homeowner or property owner needs to file an insurance claim. There’s much to learn and lots that needs to be done by the policyholder. Read more on page 13

Brexit 1 – a lose/lose situation? (The situation up until the 5th September)

The UK Prime Minister, Boris Johnson, is trying to close down Parliament so that he can stymie opposition to his plan to leave the European Union on the 31st October – without a deal. If there is a deal out there, he has not found it. Read more on page 14

Brexit 2 – the end of yet another prime minister? (As of the 8th September)

With emergency legislation blocking a no-deal Brexit becoming law on the 9th September, Mr. Johnson faces jail if be breaks that law by refusing to ask the EU to delay Article 50. Will he go to jail or will he resign and go down in in as the country’s clumsiest prime minister ever? Read the latest on page 14

Brexit approaching an endgame – but only of chapter one

Here is a piece that attempts to sum up where we are and also draw out some of the implications for the insurance industry. Brexit has broken the British political system. The absence of a written constitution has meant that almost daily conventions that have been respected for decades – even centuries – have been tossed aside, especially by the new Prime Minister Boris Johnson. Read this informative piece on page 15

Data protection breaches and the implications for the insurance industry

News of data breaches seem a regular occurrence these days and over the summer we started to see the first fines for the breach of the General Data Protection Regulation (GDPR) by the UK supervisory authority, the Information Commissioner’s Office (ICO). Prior to that, the only fine of real significance under the GDPR was by the French data supervisory authority against Google France for approximately EUR50 million. Read more on page 16

Subscribe to the Insurance Research Letter here. Each issue has interesting articles written by experts that you won’t read anywhere else. Stay current with major developments with our Global Briefs; monthly Synopsis of insurer and broker news; and our popular Back Page with all sorts of non-insurance fun and interesting subjects.

IRL Preview – August 2019

IRL Preview – August 2019

Subscribe to the Insurance Research Letter here. Each issue has interesting articles written by experts that you won’t read anywhere else. Stay current with major developments with our Global Briefs; monthly Synopsis of insurer and broker news; and our popular Back Page with all sorts of non-insurance fun and interesting subjects.

August Highlights

Understanding Blockchain, Part 2

In part one of this article, published in the June 2019 issue of the Insurance Research Letter, we provided an overview of how blockchain technology works and how smart contracts are employed to make this technology relevant in this modern economy. Here in part two, we discuss the broader and more global risks of the technology as a whole, and by way of example, the risks as they may present themselves for more specific lines of business. We also present issues to consider as it pertains to the restriction or refinement of policy terms and conditions. Page 10

E-Scooters Are Everywhere Now, but Insurance Coverage for Riders Is Nowhere

In 2018, many major U.S. cities saw electric scooters become ubiquitous. Lime reportedly had 26 million rides in 2018. E-scooters rented out by companies like Lime, Bird, Razor, Lyft, and Spin are part of the growing on-demand economy that includes ride-sharing companies like Uber and Lyft. But are users covered by insurance if they hurt someone or damage property while operating an e-scooter? Probably not. As this industry continues to grow, the importance of clarifying the scope and availability of insurance coverage also grows. Page 11

IRL Contributor Introduces Tall Tower Guide

We live in very interesting times. Anti-law enforcement rhetoric, mental illness and terroristic threats are becoming more prevalent. This Guide has been developed to establish guidance and best practices and stimulate conversations around protecting our buildings from tomorrow’s uncertainties. Page 12

unisonSteadfast Independence Day Conference 2019: Vienna

On June 26, more than 200 brokers of the global unisonSteadfast community, representatives of major insurance carriers and independent insurance experts from all over the world gathered unisonSteadfast’s annual Independence Day Conference 2019 in Vienna. With more than 270 attendees from over 40 countries, the IDC has again grown enormously in size, promising to become one of the leading conferences of the global insurance industry. Page 16

An Update to Restrictive Covenants

Restrictive covenants are a common feature in employment contracts. Their aim and purpose is to protect the employer’s clients, customers and its business. Tillman v Egon Zehnder Ltd was the first Supreme Court decision in almost 100 years to consider restrictive covenants. The judgment has changed the accepted interpretation and overrules the previous Attwood decision. Page 13

GDPR – One year on

The General Data Protection Regulation (EU) 2016/679 (GDPR) came into force on 25 May 2018. This date marked a dramatic change in data protection and privacy. The Information Commissioner’s Office (ICO) is the UK’s independent body set up to uphold information rights. The ICO has recently published an overview of its work regarding the implementation of the GDPR in the last year (May 2018 – May 2019) and future priorities for the year ahead. In this short article, we look at some of the key points of this report and a few of the things to consider in terms of GDPR compliance for businesses for the year ahead. Page 13

British Insurance Awards hits 25th anniversary

It was a night of celebration at London’s iconic Royal Albert Hall at the beginning of July as the British Insurance Awards marked its 25th anniversary. The first British Insurance Awards took place in Grosvenor House but they quickly outgrew that venue and moved to the Royal Albert Hall in 1999. They now attract 2000 guests to the black tie dinner with nearly 30 awards for the general insurance market supported by sparkling entertainment that has people dancing until midnight. Page 16