While the UK has not been a member of the European Union (EU) since January 31, 2020, known as Brexit Day, the rules for the new UK-EU relationship are still undecided. The 11-month transition period ends on December 31, 2020, and the deadline for extending it has passed with no trade deal in sight.
On January 1, 2021, the UK will automatically drop out of the EU's trade agreements. If a new UK-EU trade deal is not agreed in time, then tariffs and border checks would be applied to both UK and EU goods, causing potentially massive disruption to economies already made vulnerable by the on-going COVID-19 pandemic.
Brexit’s Potential Impacts on the U.S. Insurance Market
The U.S. insurance market was born from the United Kingdom and Lloyd’s of London and the markets are still closely intertwined today—U.S. insurers invest in the U.K. more than any other country in the world. Brexit imposes a major impact to market efficiencies that Lloyd’s was able to provide through its Global License. Companies with international operations and exposures will need to prepare earlier and face even further increases in insurance costs.
The long-term impacts of Brexit are difficult to project and will be dictated by the outcome of trade negotiations and regulatory decisions between the UK and EU, along with both countries’ responses to the global pandemic. That being said, we do know that the inevitable disruption to policies, trade relationships, treaties, and taxes will affect U.S. insurers and their customers—the question is, to what extent. Potential scenarios include a European retraction of reinsurance capacity, which would limit U.S. insurers’ flexibility in writing coverage, greater losses on U.K. holdings of U.S. firms, and moderately increasing interest rates.
Why Falvey Is Well Prepared and Positioned for Brexit
Falvey Insurance Group has been monitoring Brexit’s effect on the industry to date. We’ve already seen shifts, such as overseas companies who do business in the U.S. facing increased challenges when obtaining coverage. In fact, 40-50% of North American cover holders can’t access coverage. Companies are being forced to get coverage from numerous providers versus just one. This also forces companies to set up entities in the EU, which drives up expenses and rates.
To prepare and position our clients for whatever changes Brexit brings to our industry, Falvey Insurance Group has worked over the last two years to insure in Europe via Lloyd’s Brussels. Collaborating with trading partners, Falvey has established platforms and agreements that allow us to access Lloyd’s Brussels, while also expanding our carrier relationships.
“One of the greatest strengths of Falvey is the ability to adapt to the changing market environment,” says Dan Sules, Products and Programs Coordinator at Falvey Insurance Group. We’ve become a leader in innovation, but this doesn’t just apply to technology. Falvey recognized the need to prepare for Brexit early on and put forth the efforts well in advance to stay ahead of the curve.”
We are able to offer this coverage via Lloyd’s Brussels because we are insurance experts who understand the intricacies of the market, and we have a long, successful history of working with Lloyd’s of London. We strongly believe in offering our clients comprehensive coverage that extends beyond U.S. borders, which is why we’ve made this concerted effort. In addition to these new coverage options, Falvey’s Worldwide Terrorism insurance is still possible, covering goods as they’re assembled, manufactured, stored, and distributed in their scheduled locations.
To learn more about our worldwide, comprehensive coverage options, contact us.