The best response is to remain calm and avoid hasty decisions that may not be in your best interest. Lockton is tracking the issues and will update this report as events unfold. We will help you deal with the implications for your risk management, employee benefits, and retirement programs as those issues become clearer.
GLOBAL INSURANCE IMPLICATIONS
- Some carriers may face some investment portfolio risks and foreign exchange concerns because of market volatility. Rating agency A.M. Best has said that it does not expect to take ratings actions in the near term as a direct result of the vote. Lockton and the rating agencies will be watching these issues closely.
- The Lloyd’s market is a unique entity with operations based in the UK and operating globally. Lloyd’s has expressed confidence in its contingency planning and has noted the two-year time frame for change.
- Future negotiations are likely to focus on “passporting” and licensing issues for insurance carriers. Carriers in the coming months will be reviewing the locations of their operations and adjusting as needed to comply with new rules. There is no immediate issue for clients to address.
US Retirement Plan Implications
- Clients should expect some short-term market volatility, but as with any near-term market movement, this should generally not change the asset allocation strategy for long-term investment objectives such as retirement plans.
- Now may be a good time to remind employees of the importance of maintaining their investing discipline and a long-term view with communications that reinforce this message.
- During regularly scheduled second-quarter reviews of retirement plan investment lineups, now may be an opportunity to evaluate international options in the plan and the international exposure in domestic funds.
Lockton will remain focused on delivering insight to clients on how to deal with the risks and changing dynamics of the new environment. For the moment, calm and patience are watchwords.
This post is made on behalf of Lockton Companies.
Sources: CNBC, J.P. Morgan, Neuberger Berman, Lockton, BBC, Financial Times, A.M. Best, Lloyd’s, Migration Watch UK