The Association of British Insurers (ABI) has revealed what’s keeping its members up at night amid the whole turmoil surrounding the UK’s departure from the European Union.
“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,” said ABI director general Huw Evans.
The ABI released the statement in response to the Prudential Regulation Authority’s (PRA’s) letter to the Treasury Select Committee. PRA chief executive Sam Woods said the Brexit task – while burdensome – is currently the top priority for the regulator.
Evans continued: “This is an urgent issue and we are pleased it is high on Sam Woods’ agenda. Agreeing terms to allow insurers to service contracts after March 2019 needs to be part of the exit negotiations between the UK and EU.”
With millions of insurance and pension contracts written prior to Brexit that will still be in force post-Brexit, the ABI explained that some insurers will lose their automatic licence to insure in the customer’s jurisdiction as a result of leaving the single market.
“They therefore may not be legally able to pay what they owe without a replacement agreement,” noted the ABI.
Last month, the financial affairs committee of the House of Lords said it is looking into how the EU market can still be accessed by insurance companies even after Brexit.
The committee aims to scrutinise whether an equivalence regime is the way to go. Public hearings will begin in September.
The London Market Group (LMG), for its part, wants a new trade deal that will give both UK and EU insurers, reinsurers, and brokers continued rights to undertake cross-border activity. It also recommended the early agreement on an implementation period to avoid a cliff edge.
Meanwhile, Evans said the ABI will continue to work closely with the Government, the trade body’s membership, and the PRA in an effort to ensure a solution is in place in time.
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