The UK government and the European Union have reached an agreement today on what they term a “large part” of the transition agreement for the UK leaving the EU.
The agreement on a so-called Brexit transition deal is designed to provide for a smoother exit from the EU for the UK and provide some certainty to countries and businesses during the transitional period, which is expected to last from 29th March 2019 to December 2020.
But comments from observers suggest that any certainty for business leaders, including insurance and reinsurance firms, is only temporary and the transition agreement fails to provide the all-important legal certainty that businesses require in order to adjust their plans.
Many re/insurers have already established new European operations in order to ensure trading continuity with the EU after Brexit and more are expected to do so as the date for the UK exiting the EU approaches.
A strong transitional arrangement had been hoped for to give some certainty for how issues such as financial passporting, the ability to access European markets with no hindrance, would work after Brexit. But the transition deal is not expected to provide any such clarity, meaning businesses are likely to continue with plans for a worse case scenario.
Association of British Insurers Director General Huw Evans commented on the agreement, saying, “It is a relief to hear that the Government and the EC are recommending a transition deal is agreed at EU Council this week. With annual insurance contracts coming up for renewal it was critical to provide some temporary certainty to insurance customers on issues like driving in the EU and the EHIC. However, we still need to see agreement that EU and UK regulators can fully co-operate during this period so they can begin to solve issues like continuity of insurance contracts.”
But James Stewart, Head of Brexit at KPMG said there is no legal certainty to key issues such as passporting, highlighting that the transition agreement has been just that, agreed, but not yet signed.
He said that KPMG would continue to advise clients to prepare themselves for a no-deal scenario, where the UK exits the EU with no arrangements for continuity of trading in-place.
Andrew Pilgrim, Director, Financial Services Government at EY, also said, “Financial Services firms across Europe will be pleased to hear that the terms of the transitional deal have been agreed between the UK and EU negotiating teams. Helpfully, the deal provides for continuing legal frameworks and market access between the EU27 and UK until the end of 2020. This includes ongoing recognition of passporting rights, data sharing and contract continuity.
“We will now await the response of financial supervisors in the UK and across Europe. In the light of this important agreement, which will be welcomed by all parties and could significantly mitigate cliff edge risks, authorities now need to decide if they need to wait for formal ratification of the agreement before they can adjust their Brexit implementation requirements. This would provide the industry with certainty months ahead of a signed treaty and support the smooth and efficient functioning of financial markets.”
For many the transition deal will help to provide greater clarity over how things may pan out once the UK leaves the EU. But for insurers are reinsurers who need certainty to be able to continue offering their clients products and trading with partners within the EU, a greater level of legal certainty is going to be needed before they radically alter their planning for a post-Brexit world.











