The London Market Group (LMG) has issued a proposed Free Trade Agreement (FTA) that follows the EU-U.S. covered agreement model to enable post-Brexit mutual market access for UK and EU re/insurers.
The FTA would ensure that UK and EU governments maintain control over their regulatory systems, with a Solvency II equivalence outcome built into it and a framework for supervisory cooperation.
Malcolm Newman, Managing Director (MD) of SCOR’s EMEA Hub, Chairman of the International Underwriting Association (IUA) and sponsor of the LMG’s taskforce, said the proposal “creates a workable solution that would mean that neither the EU nor the UK would have to sacrifice market access or control over their respective regulatory regimes, solving the access versus control dilemma.
“The London Market plays a vital role in pooling risk across the EU and UK markets, and we are all focused on ensuring continued access to the broad range of insurance services, expertise and capital that we offer to EU businesses. Our goal is to ensure that clients are not left in a situation where there is contractual uncertainty and protection gaps post Brexit.”
The proposed FTA comes after the covered agreement that came into force on the 7th of November between the EU and the U.S., which aligns regulatory systems and removes cross-Atlantic collateral holding requirements.
The proposal includes a transition period in which the London market would be able to continue operating with current agreements until the FTA is agreed, thus providing EU and UK re/insurers with the stability needed to prevent business disruption.
In addition, it could relieve EU and UK firms of pressure to ensure post-Brexit contingency plans in the case of a hard Brexit.
