Earlier this month, the Association of British Insurers (ABI) warned of legal issues surrounding insurance contracts and the UK’s departure from the European Union. Now the trade body has said insurers should act no later than November.
With Britain and the EU still in the middle of negotiations, the industry needs to know in the coming weeks whether grandfathering – honouring existing contracts despite Brexit – will be allowed.
In an interview with
Reuters, ABI director of regulation Hugh Savill said: “The preferred option would be something in the negotiations that gives the regulators the appropriate political approval to start working on a mechanism to allow these existing contracts to continue operating as they are.”
Otherwise, these contracts – millions of them – would have to be transferred so that policyholders and their providers are within the same jurisdiction. If the contracts are not grandfathered as proposed, insurers may not be legally able to compensate without a replacement agreement.
“You have to go to court to get approval for transfer, and you also need the approval of the regulator at both ends. That means the transfer has to start by November 2017; otherwise you run out of time,” Savill told Reuters.
According to the report, a number of providers have already started the transfer process to avoid bottlenecks. It also cited
KPMG partner Paul Merrey, who said the process will likely be more difficult for UK insurers transferring their portfolios to the EU than the other way around.
ABI director general Huw Evans said three weeks ago: “As the deadline for Brexit looms, many insurers’ biggest fear is that they will be left with a stark choice between breaking their promise to customers or risk breaking the law if the issue of how to fulfil existing contracts cross-border is not resolved.”
Related stories:
PRA hit by mounting Brexit workload
