Hugh Savill, Director of Regulation at the Association of British Insurers (ABI) has criticised the contingency plans released today by the European Commission, which outline the European Union’s (EU) response to a potential ‘no-deal’ Brexit scenario for re/insurers.
Savill argued that the plans fail to provide adequate support for the millions of insurance customers in Europe that could face disruption if the UK fails to secure a comprehensive agreement before leaving the EU in March 2019.
“The European Commission says that derivatives contracts can be carried over if there is a no deal Brexit, but has not lifted a finger to allow insurance contracts to be fulfilled,” said Savill.
“While the action on derivatives is welcome it is extraordinary that the EU authorities will act to help major financial institutions but not millions of ordinary people living in Europe whose insurance and pension contracts happen to be held in the UK,” he added.
The approach outlined by the EU governing body contrasts with the UK’s Treasury and regulators, who announced in December 2017 that there would be a ‘temporary permissions’ regime in the event of a no-deal scenario.
This temporary regime would allow EU firms to continue to service contracts for UK customers after the official leave date.
The issues addressed in the European Commission’s contingency plans centre around the millions of insurance and pension contracts that were written pre-Brexit and which will still be in force after March 2019.
Once the UK leaves the single market, some insurers will lose their automatic licence to insure in their customer’s jurisdiction, and therefore may not be legally able to pay what they owe without a replacement agreement.
The contracts in question will potentially impact a wide range of people and businesses, the ABI noted, such as companies in the UK paying pensions to people living in the EU (including expats).
A no-deal Brexit will also have implications for business insurance contracts, such as liability insurance sold from the UK to a company in the EU, the ABI added.
