Dave Matcham, the Chief Executive Officer (CEO) of the International Underwriting Association (IUA), has said that were the UK to leave the European Union (EU) under a no-deal scenario, the London market is well prepared.
With the March 29 Brexit deadline fast-approaching, widespread uncertainty, confusion and generally an overall lack of clarity remains. In response to the ongoing chaos that is Brexit, the UK’s financial services sector, which is extremely important to the UK economy, has taken matters into its own hands, with numerous companies (including insurers and reinsurers) establishing offices in remaining EU countries, ultimately to ensure continuity for clients post-Brexit.
In a recent note, the IUA’s Matcham noted the establishment of new branches as the London market prepares for whatever the Brexit outcome might look like. While places like Dublin and Luxembourg have been popular choices for new domiciles, Matcham states that for many firms, the underwriting expertise that underpins them will remain in London.
“For companies operating in London as branches of parent companies or subsidiaries within the EU 27 preparations have been relatively straightforward, thanks to the Bank of England’s announcement of a Temporary Permissions Regime. It allows firms to continue operating as normal post-Brexit whilst they undergo the process of seeking a new regulatory authorisation,” he explains.
He continues to note that despite the efforts of the London market and its participants, the “EU has failed to reciprocate this move.”
What this means is that companies that service European contracts in London have been transferring these policies to operations in their remaining EU branch, so that they can continue to service clients post-Brexit. The process isn’t quick, so in turn the London market has called on European regulators to understand the importance of contract continuity and address the issue.
“We are still hopeful also that the European Insurance and Occupational Pensions Authority (EIOPA) will eventually issue central guidance so that regulators across the continent can approach this issue in a harmonised manner,” says Matcham.
Some steps in the right direction have been taken, notably with the UK/US covered agreement on reinsurance operations, and also moves from supervisors in Germany and France to manage contract continuity post-Brexit.
“Many Brexit questions are still to be resolved, of course, but the insurance industry exists to help manage uncertain future events and is, I believe, better prepared than most for the changes to come,” says Matcham.
