Britain’s split from the European Union finally happened at 11pm on January 31. While the status quo in the UK-EU field won’t be disrupted too much in the next 11 months – thanks to the Brexit transition period – there are “most likely areas for concern” on the insurance front.
According to Paris-based Clyde & Co partner Yannis Samothrakis, these areas span personal lines, motor insurance, as well as reinsurance.
“In personal lines and motor policies, there are potential regulatory blind spots and points of tension,” he noted.
“For example, EU member states may consider payment of claims or benefits on a cross-border basis as a regulated activity. There is also concern regarding certain covers included in insurance policies provided in the UK but delivered by EU insurers, for example assistance and legal expenses insurance.”
Samothrakis also pointed to “evidence that the French and German regulators may decide their own course of action,” even with the European Insurance and Occupational Pensions Authority already providing non-binding guidance on how business should be conducted.
“Even if there are no longer passporting rights, having equivalence will be very helpful especially from a reinsurance perspective and in particular intra-group reinsurance arrangements,” he went on to say. “This would require legal ratification by each of the 27 EU member parliaments.
“Evidence from Bermuda, Japan, and Canada suggests this process may take some time, although as the UK and the EU are one and the same in terms of equivalence this, one would hope, will make the process much quicker.”
In addition, Samothrakis concedes the industry might not be first in line of things to consider when it comes to striking a new relationship with the single block.
He said: “As the year progresses, we are likely to see much speculation about progress and timing of a new trade deal between the UK and EU. It seems unlikely that (re)insurance is going to be top of any government agenda.
“Even if trade in services were to be prioritised more broadly, a plan would need to be put forward for consideration and discussion by July 2020 before governments’ and legislatures’ summer recess. Any final proposals would then need to be re-presented in September to allow sufficient time for parliamentary processes to complete before the new trade deal could be passed into law in all 28 countries (EU27 + UK) by December 31, 2020.”
Meanwhile Ivor Edwards, a Clyde & Co partner in London, thinks “it will be pretty much business as usual” during the period of transition, with the attention focussed on the details of the future trade deal.
“There is limited expectation that passporting rights will be maintained under a freedom of service agreement but hope that market access arrangements based on equivalence will be agreed quickly,” stated Edwards.
“However, this is not a cause for concern. The London market has been fully preparing for a hard Brexit scenario and the vast majority of UK carriers have set up subsidiaries in the EU location they believe best supports their business and their clients’ interests going forward. These subsidiaries have already begun renewing 2020 business, so the industry is well prepared for the post-Brexit world.”
While Edwards isn’t too worried, he admits there will be troubles along the way.
He continued: “That is not to say that there won’t be teething problems. Regulators will be on the front foot and it will take time for things to bed down.”
