Nov 19, 2021

Brexit continues to cause problems for insurance, says Aviva

Insurtech
Aviva
Brexit
riskinsights
3 min
Report by UK insurance giant reveals Brexit still poses a major risk to insurers as a result of supply chain issues

The UK insurance giant Aviva has revealed data that shows 25% of British businesses believe Brexit to be one of the biggest problems they face as they enter 2022. 

Aviva report interviewed 1,251 leading executives from SMEs and large UK corporations from all over the UK and leading executives concerns include economic issues, staff shortages, Brexit, and reputational loss in 2022.

Aviva report cites major economic risks

According to Aviva’s Risk Insight Report, business leaders have ranked the UK’s exit from the EU as the fourth largest risk to insurance companies.

A further 78% of companies surveyed for the report placed Brexit as their number one concern, and 70% stated that it was the second biggest risk factor to face the insurance industry after the pandemic. 

A breakdown of the data also reveals that:

  • 53% of businesses are undertaking, or plan to undertake, changes to de-risk their supply chain.
  • 26% of businesses are managing the increased supply chain risk by investigating cost-cutting (26%) or by avoiding potential reputational risks (14%).
  • 19% of company leaders said Brexit forcibly changed their supply chain
  • 18% revealed they found new supply chains after COVID-19 pandemic induced disruption
  • 77% of businesses in the manufacturing sector were most likely to review or change their supply chain operations

Aviva industry insights and the impact of Brexit

It has long been known that the insurance industry would be on the receiving end of the directives issued by the EU Commission. Issues with supply chains have had the greatest impact, as regulatory bodies have taken years to argue out the fine details of the UK’s divorce from the bloc, arguably, without the greatest of success for a number of key industries. 

The impact has come in many forms, but most notably can be attributed to supply chain issues and staff shortages due to visa requirements, which doubly compounds the problem. 

Aviva’s research reports the shortage of skilled labour is the main risk for 28% of businesses. This increased to 38% for mid-sized businesses and 40% for corporations.

Interestingly, the shortage of skilled workers was listed as the eighth largest risk for UK businesses in 2020, but this skyrocketed 11percentage  points in 2021 to second place.

A robust 69% of businesses said they were worried about staff shortages while 71% say a resolution to the situation is urgent.

Business resilience in the face of Brexit and the pandemic

Speaking about the findings, Aviva’s chief executive of general insurance for the UK and Ireland Adam Winslow, explained, “Businesses have really shown their mettle over the last couple of years, adapting to an ever-changing set of urgent risks.

”The year ahead is likely to pose continued challenges, including the threat of flu and Covid-19 this winter, as well as seasonal weather events, both of which could put additional pressure on staffing shortages and supply chains.

He continued, “Now is the time for businesses to double down on their risk management and business continuity planning to prepare for a wide range of potential stresses and risks.

”Business continuity plans should be regularly tested. And risk management strategies should – if not already – be at the centre of an organisation’s planning and strategy so that [it] can best prepare and protect themselves from a range of extreme and high-risk events.”

Ongoing risks caused by Brexit and compounded by the pandemic

According to Winslow, climate change did not figure highly in the concerns of business leaders, mainly because economic concerns resulting from Brexit and COVID-19 have pushed it way down the list. Data revealed UK SMEs and big businesses must manage a “host of pressing and interconnected risks” emerging from the Covid-19 pandemic.

He continued, “Climate change is noticeably absent in business leaders’ top risks. It cannot be dismissed as someone else’s responsibility.

Winslow added, “COP26 has shown us that businesses have a key role to play in tackling climate change and their commercial operations and reputation will be under threat if they fail to take action.”

 

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