Karl-Johan Rodert is the Insurance Manager at Skanska Financial Services, which includes insurance activities and is located at the group headquarters in Stockholm.
From an insurance perspective, one of the main immediate consequences of the Brexit turmoil for Skanska was the decision to switch from direct insurance for UK business activities, placed within the scope of the group captive based in Sweden and operating under the EU Freedom of Service, to a reinsurance scheme. A British insurer now directly insures the UK risks of Skanska and cedes that same level of reinsurance to the captive.
The reason behind this was to anticipate new regulations that might come through a hard Brexit and force the captive to open a branch in the UK. After a review, consulting with both external and internal experts as well as with the captive board, this was considered the easiest solution without increasing the administrative costs for the captive. The issue was discussed extensively with other captive owners, as well as with a group for captive owners within SWERMA (Swedish national risk management association).
Under the temporary permissions regime set up by the Bank of England for cross-border financial services, historic contracts will continue to be serviced in the UK after exit day. The duration of this contractual run-off period is usually 5 years, with an exception for insurance contracts which will have a time limit of 15 years. That will give the captive a timeframe long enough for the pre-existing contracts to run out.
Over the next few months, further collaboration between the Skanska UK Brexit group and the insurance team in Stockholm will have to determine which insurance policies need to be adjusted to the updated Brexit planning.
At the moment, all direct insurances for the UK are purchased with local insurers within the UK. If other regulations are in place within a softer Brexit, new possibilities might yet again open up for new cross-border insurances similar to the previous Freedom of Service agreement.
This article is part of the FERMA/AIRMIC joint Brexit Newsletter which is designed to give risk professionals unique insight into Brexit related risks and mitigation strategies.
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