Insurers seek clarity on contract certainty post-Brexit.

Dublin

Insurers and reinsurers require clarity soon on whether passporting rights, or a workable equivalent, will remain in place in relation to cross-border policies after Brexit, or whether they will need to make alternative arrangements. The scale of the problem is potentially significant. Statistically speaking, 7% of general insurance (GI) contracts and 3% of life contracts undertaken in the UK are cross-border, according to the Bank of England.

Absent any transitional arrangement, 29 March 2019 will see UK insurers losing their authorisation to carry on business in EEA countries on a services or an establishment basis. Without an agreement, such insurers risk breaching regulatory requirements, as well as potentially committing a criminal offence for carrying on regulated business without the necessary authorisations.

At Insurance Ireland's annual lunch in Dublin yesterday president Anthony Brennan called for negotiators working on the UK’s exit from the EU  to provide certainty as soon as possible over the future of contracts in the event of a hard Brexit and post a transition phase. Mr Brennan, who is chief executive of Zurich Life in Ireland, said that “getting clarity on the future trading and regulatory arrangements is vital” as allowing existing contracts to run their course would uphold customers’ rights, ensure continuity and reduce uncertainty.

His comments come less than three weeks after the Central Bank of Ireland ('CBI')'s deputy governor Ed Sibley said that the insurance sector remains “astonishingly” unprepared for Brexit and that, without action, there are risks that UK and Gibraltar-based insurers passporting services into the Republic will lose their ability to continue to provide insurance coverage.

Mr Sibley said on April 12th that the Irish regulator had received 197 responses from insurance firms following a request for updates on their Brexit preparations. Of these, 38 companies deemed the event would have a “high impact” on their business models and a further 12 had rated it as having a “medium impact”. The remaining 147 – almost three-quarters – think Brexit will have little or no impact on them, he said at the time.

The UK's Prudential Regulatory Authority ('PRA') and the CBI are not expecting insurers to wait until Brexit has happened before they take action. As a result insurers should already be considering what actions they need to take to protect their ability to service existing cross-border policies. This may need to include acting quickly to complete any sales of transfers to subsidiaries.

Brexit Partners provide both a high-level Brexit Discovery and a 'deep-dive' Brexit Impact Assessment. The Brexit Discovery process - typically undertaken over a four week period - provides a high-level definition of Brexit impacts, strategy, business case & programme requirements. It enables a client to quickly kick-start its programme and provides focus on key issues which are either - or both - business and time critical.