The effects of BREXIT on Klapton

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The results of the referendum and the change of leadership of the Government in the UK could have financial impacts on Klapton Insurance Company Ltd.

Klapton holds an excess of liabilities over assets which are denominated in GBP but reports its results in EUR. BREXIT has had a significant impact on the exchange rate of the GBP to the USD and the EUR.

As the GBP has fallen relative to the USD and EUR, Klapton has seen an overall decrease in its net liabilities after their revaluation, which is a positive impact for the Company. In 2016 premiums were primarily accepted and received in USD and there has been minimal FX impact of this on results as the USD maintained its strength against the EUR..

However, the solid handling of the UK affairs by the new government under the leadership of Theresa May has resulted in a slow improvement in the strength of the GBP, and over time (estimated in 12 to 18 months), the drop in the GBP/EUR seen in 2016 is expected to be reversed.

Klapton’s view is that the BREXIT will have very little effect on its financials, and this exposure to the GBP and the UK economy will be reduced significantly by 2019, as Klapton’s is actively working towards reducing its GBP exposure.