How Could a No Deal Brexit Affect The British Insurance Industry?
An Urge To Define The Future of the Financial Landscape in the UK
London market brokers using the current method of ‘passporting’ rights to trade cross-board with EU countries stay there is no framework in place to replace those rights after leaving the EU, meaning brokers are having to set up expensive European subsidiaries to continue to trade in those areas. Clive O'Connell, a lawyer with McCarthy Denning, told Insurance of setting up European subsidiaries “That means that the English broker couldn’t, say, run around to lots of European insurers and reinsurers and do business with them, (which) hitherto was done through passporting,” he said. “What the UK broker would have to do is set up a subsidiary in Europe to do that work.”
Many top London firms have already made Brexit financial services plans for setting up subsidiaries in Europe, such as in Brussels, Luxembourg and Frankfurt, but there is still much uncertainty how insurers will legally service existing countries in the EU, even at such a late stage in Brexit negotiations.
Lloyds Accelerates Its Plans Over a No Deal Risk
Lloyds of London CEO Inga Beale has stated that the company is ‘accelerating’ plans to move its insurance contracts to their new HQ in Brussels. This will help them protect the impact of Brexit. She also insists they the move to create this new subsidiary was forced due to the risk to 15% of its contracts being with European clients. London will still be the heart of Lloyds, but this is a solution for post Brexit Lloyds and the ability to continue contracts within EU countries.
Are European Policy Contracts Safeguarded?
The Financial Times has reported that a no-deal Brexit may leave millions unable to make insurance claims on their policies. Due to the uncertainty of Brexit, insurers planned on obtaining new regulatory permissions for existing units or transferring new contracts to a new entity. The latter requires court approval. UK courts are unable to realistically finish officially singing over insurers books by the Brexit deadline of March 29th, 2019 the date that the UK is scheduled to leave the EU. The UK has taken steps to ensure that UK customers of EU insurers will hold valid contracts no matter the outcome of Brexit. The EU as a whole is yet to take the reciprocal steps, meaning 9million policy holders in the EAA continue to be at risk.