Insurance Jottings
Bank of England Warns Against Weakening Rules for Insurers, Banks After Brexit
Weakening rules for banks and insurers after Brexit would be “anathema,” but Britain could change its style of regulating to respond faster to change, Bank of England Deputy Governor Sam Woods said on the 16th May.
“So as far as the stringency of financial regulation goes, we at the Bank have a clear view of what would make sense for the UK in a post-Brexit environment: we should keep it calibrated roughly where it is now and have no desire whatsoever to weaken it,” Mr Woods said at a conference in Switzerland.
Britain has been forced to postpone Brexit twice and is still struggling to agree on the terms of its departure from the European Union before the next deadline, the 31st October.
Regulators want to head off calls from some lawmakers for a Brexit “dividend” which ditches some financial rules.
Britain’s finance ministry, parliamentary Treasury Select Committee and the Financial Conduct Authority have begun reviews of financial regulation after Brexit.
The bulk of rules applied in Britain come from the European Union, and some lawmakers say Brexit would allow Britain to revise its rules to keep London competitive as a global financial centre. The Bank of England and the Financial Conduct Authority have poured cold water on that idea.
Much will hinge on what form of access to the EU market Britain secures after it leaves the bloc.
Mr Woods said it would be undesirable if Britain became a “rule-taker,” meaning it continued to apply EU rules in some form, echoing FCA Chief Executive Andrew Bailey, who said last month that rule-taking would be “dangerous.”
Britain faces a tricky trade-off.
The EU’s default system of financial-market access for foreign companies is based on “equivalence” — aligning with the bloc’s rules — so any major divergence in UK rules could jeopardise access.
Brussels has begun toughening up equivalence conditions now that it faces a huge, foreign financial centre on its doorstep, forcing it to consider how much access to grant Britain after Brexit.
While Britain should not compromise on stringency, it could change the style of regulation, Mr Woods said.
The EU favours detailed rule-making given the need to create a single rulebook across 28 countries, Mr Woods said. In Britain, parliament has traditionally approved overarching changes, leaving the day-to-day application to regulators.
“Alternatively, we could adopt a hybrid approach which doesn’t replicate either of the pre-existing EU or British approaches,” he said. “Once you open this box, the possibilities are legion.”
Oil, Gas Shippers Brace for Rise in Insurance Premiums After Saudi Ship Attacks
Asian shippers and refiners have put ships heading to the Middle East on alert and are expecting a possible rise in marine insurance premiums after recent attacks on Saudi oil tankers and pipeline facilities, industry sources said on the 14th May.
On the 13th May, armed drones attacked two of Saudi Aramco’s oil pumping stations and forced the state producer to briefly shut its East-West pipeline, known as Petroline. The attack came two days after the sabotage of four oil tankers – two of them owned by Saudi Arabia – near the United Arab Emirates.
Asia gets nearly 70 percent of its crude oil from the Middle East, and any disruption to oil production, loading facilities or key shipping routes such as the Strait of Hormuz could have a severe impact on Asian economies.
Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore said: “There seems to be no increase in risk (insurance) premia as of yet.”
Risk premium increases would be inevitable, however, if security in the region continued to deteriorate, he added.
Beazley introduces cyber cover to marine portfolio
London carrier Beazley has launched a cyber product to cover loss of hire and physical damage to a vessel in the event of a cyber incident impacting its operational capabilities.
Clyde & Co launches parametric product for solar energy users
Contract will pay out in the event of poor weather.
Ensurance enters terrorism and sabotage market with Lockton duo
Specialist managing general agency (MGA) and Lloyd’s coverholder Ensurance has launched a new terrorism and sabotage offering in the UK, with US and Australian markets to follow later this year.