The German government is reportedly preparing a set of emergency laws to protect its insurance sector and insureds from the consequences of a hard Brexit.
Handelsblatt Global states that the government is working on two new laws protecting cross-border insurance agreements and derivatives contracts that aren’t processed by clearing houses.
Deals involving clearing houses are already protected as they act as a platform for trades and are backed by a default fund to ensure a transaction is completed even if one side goes bust.
One of the biggest Brexit uncertainties is what will happen to the clearing of euro-denominated derivatives deals. Most of the clearing is currently done in London but may have to be moved to the continent following the UK’s exit
The volumes involved are vast, totalling some £38 trillion, according to Bank of England figures.
“It’s clear that we need to start working on legislation now to prepare for a hard Brexit,” Deputy Finance Minister Jörg Kukies told a conference in Berlin on Wednesday.
“This is a preventive measure that we want and need to take due to the mounting time pressure.”
Germany is reportedly coordinating its Brexit efforts with countries including France, Spain, and Italy. Handelsblatt reports that Berlin is also in close contact with the European Union Commission to ensure that European and national legislation remain in harmony
“Rest assured that we will do everything to reduce friction and the risks to financial market stability,” added Kukies.
The new measures are in addition to financial laws that the finance ministry started preparing some time ago to address tax issues and the impact of a hard Brexit on mortgage banks.
Chancellor Angela Merkel told the Bundestag on Wednesday there was still a chance of successfully concluding an agreement but that Berlin was preparing for all options, including a no-deal departure.
Brexit negotiations remain strained following Theresa May’s failure to secure movement on the Irish border problem.
