UK insurance companies that have not yet developed a sufficient contingency plan to ensure service continuity in the event of a ‘no deal’ Brexit do not pose a significant risk to the financial stability of the European Union (EU), according to The European Insurance and Occupational Pensions Authority (EIOPA).
A report from the EU watchdog found that, to date, 124 insurers from the UK and Gibraltar with cross border business in EEA30 (European Economic Area without the UK) jurisdictions do not have an adequate plan in place to ensure continuity of service post-Brexit.
Currently, a no deal Brexit may result in 9.1 million EEA30 policyholders facing uncertainties and delays in receiving payments, EIOPA said, although this is significantly below the total 38 million EEA30 policyholders with cross-border contracts, showing the extent of UK insurers’ actions so far.
The residual cross-border business concerned has insurance liabilities of €7.4 billion and represents just 0.16% of the overall insurance business in the EEA30 countries, EIOPA said.
Additionally, the report found that the majority of this business relates to only a handful of insurers in the UK and the remainder has mainly low value and short-tail liabilities.
Overall, 75% of the contracts belong to portfolios with average written premiums of less than €100 per year and 76% have a remaining duration of less than two years.
“To avoid disruptions in service continuity, immediate and reinforced actions from undertakings and supervisory authorities are required,” EIOPA stated. “Insufficient contingency planning that may result in consumer detriment is a severe governance failure.”
However, it added: “Based on the data collected through the monitoring of the contingency planning and in particular due to the nature and scale of the business concerned, EIOPA’s assessment is that the service continuity issue does not give rise to financial stability risks.”