Yahoo Finance Most British company directors could face liability risks after Brexit
The majority of UK company directors could face significant liability risks for failing to adequately prepare for Brexit — particularly a “No Deal” Brexit, according to an insurance consultancy firm.
Mactavish, the UK’s leading expert on commercial insurance governance and disputes, said it believes directors have “massively overlooked” Brexit-related liabilities which are not covered by most existing insurance policies, and therefore could leave them open to legal action.
The firm said that there are limitations to Directors & Officers (D&O) insurance cover.
So far, the focus in the financial sector has been on protecting European passporting rights, which allow businesses in any EU or European Economic Area (EEA) state to trade freely in any other with minimal additional authorisation, Mactavish told the Press Association (PA).
Critical new insurance risks as a result of Brexit highlighted by Mactavish include:
Any company suffering a dip in performance — which would almost every company in the event of a “no deal” Brexit — will be liable to major scrutiny of whether its preparations were adequate
If its preparations compare badly with those of competitors or peers, a company could see a flood of new D&O actions against board members
The regulatory disruption caused by Britain’s withdrawal from the EU could leave long-term uncertainty about the details of new regimes applying on a sector by sector basis — increasing the risk of unanticipated regulatory action or censure
Bruce Hepburn, chief executive officer of Mactavish said an important insurance challenge affecting almost every UK business has remained under the radar when Brexit has been discussed.
He told the PA: “D&O insurance policies are extremely complicated and cover is bound up in a labyrinth of inter-connected policy definitions, policy triggers and cost categories, so that most company directors are far from clear on what they are actually covered for.
“This situation is becoming even harder for insurance buyers to manage in recent months because corporate D&O is one of the first areas of the insurance market to show signs of higher premiums and less flexible terms. What this means in practice is that once claims come in, it is usually too late to make any changes to policies and directors may not be covered.”
READ MORE: UK businesses are totally unprepared for Brexit, warns Bank of England
In November this year, the Bank of England (BOE) warned that British businesses are totally unprepared for a no-deal Brexit despite having years to plan ahead.
“Survey and other evidence suggests that many UK businesses are not well advanced in planning for a sudden transition to new trading rules,” the central bank noted in a report released at the end of last month, outlining the potential economic impact of Brexit under different scenarios.
In a report by Yahoo Finance UK’s senior economics correspondent Alanna Petroff, businesses began triggering their Brexit contingency plans as they saw the UK government in disarray and the Brexit deadline is around the corner.
READ MORE: British businesses are triggering their Brexit contingency plans
