An insurance lobby group has called for transitional agreements between Britain and the European Union and a “mutual market access” deal to preserve London’s global reinsurance hub post-Brexit and ensure stability in the short-term.
Malcolm Newman, leader of the London Market Group’s Brexit task force, told Reuters that with the U.S. being one of the sector’s biggest markets, its paramount a deal is negotiated to secure the market share.
Newman said the EU’s bilateral trade deal for insurance with Switzerland could be a template for an insurance deal between Britain and the EU as it contains a mechanism for resolving disputes.
Many UK based re/insurers have announced plans this year for shifting operations to the EU by opening an EU subsidiary in case of a hard Brexit.
The covered agreement signed between the EU and U.S. in September has helped to level the cross-Atlantic playing field by removing collateral requirements that European reinsurers face when placing business in the U.S., cutting costs for transatlantic business.
With the UK leaving the EU, Britain will have to negotiate a similar bilateral agreement with the U.S. to maintain momentum for re/insurers operating in both markets.
A.M. Best expects the UK to remain a global re/insurance hub post-Brexit, but warned the long-term impact of Brexit on the country’s insurance and reinsurance industry will be subject to trade deal negotiations, which may or may not be beneficial to the UK marketplace.
Companies established in the UK will also no longer be directly subject to Solvency II regulation, but A.M. Best predicts the UK to both seek and gain equivalency status post-Brexit.
“Much uncertainty remains, with key issues surrounding Brexit that need to be addressed through 2017 including the shape of future insurance regulation, how to maintain access to EU business and talent, and the potential transfer of business,” explains A.M. Best.
