Revealed: FCA and PRA unprepared for a Brexit

Neither the Financial Conduct Authority nor the Prudential Regulatory Authority have carried out assessments into the impact of the UK deciding to vote to exit the European Union on regulatory regimes; the insurance industry generally; or how their role as regulators might change.

The news comes as a Brexit becomes more likely. A Guardian/ICM poll this week found voters 52/48 in favour of a vote to leave.

Post submitted a detailed Freedom of Information request to both regulators, including questions on how much they had spent on assessments if there had been any.

The PRA response, which took 20 working days, was brief: "The answer is no. Therefore, any subsequent questions relating to those questions fall away."

Geoffrey Maddock, partner at Herbert Smith Freehills, said it was disconcerting that there hadn't been any formal review.

"It's a little surprising the PRA hasn't looked into it, because we know it has done it with banks and looked into economic uncertainty, market shocks and so on," he said.

"My understanding is that it has had banks doing some of that analysis and so the fact that it hasn't asked big insurers to do the same is slightly surprising. Or perhaps it is just reading across from what it has learnt from the banks."

He said many insurers were likely to have carried out their own risk assessments of a potential Brexit.

Allianz said it has carried out an assessment, while Axa, RSA and Aviva did not immediately respond for a request to comment.

The FCA gave a more detailed response to the FOI query, saying it had not carried out a review of its role as it was "for the government to determine its preferred model".

However, the FCA said in its recent business plan for this year and next that it was looking at the impact of Brexit "as part of our normal activities".

It added: "This includes considering the immediate and short-term consequences of any vote to leave the EU, such as the potential for increased market volatility. The longer term consequences of any vote to leave would depend on the UK's eventual relationship with the EU, which would depend on the outcome of negotiations between the UK government and the EU."

However, the regulator said it had not carried out a review of the impact or cost to the insurance industry as a result of Brexit, or whether EU regulation specifically the Insurance Mediation Directive would remain UK law in its complete form or on equivalency basis.

The British Insurance Brokers Association, the Association of British Insurers and the International Underwriters Association declined to comment on what they thought of the regulators apparently lack of preparation.

Melanie Hampton, managing director at Alexander Miller, said it was no surprise the FCA hadn't carried out a review.

"Nearly everyone in the banking and finance world has thought about it," she said. "It's classic of the FCA not to have done.

"I would have thought that a prudent review would have been carried out, I believe they [PRA and FCA] just aren't reactive or proactive enough."

Read what the rest of the market thinks of Brexit in June's Post issue.