“That applies to all consumers wherever they are located,” was the assertion made by Andrew Bailey when the Financial Conduct Authority (FCA) chief executive reiterated the regulator’s commitment to prioritising consumer protection in financial services while providing an update on Brexit preparations.
In a speech yesterday at Bloomberg, Bailey illustrated this point by using UK insurers as an example, saying they should pay claims on existing policies regardless of the policyholder’s location.
The FCA boss pointed out: “To be clear, I have never met an insurer who disagrees with this statement, and I doubt that policyholders would either. For our part, we are clear that our consumer protection objective applies equally in respect of consumers wherever they are resident.”
Bailey added that the majority of UK firms have confirmed their intention to maintain existing products and services to customers residing in the European Union.
However, there’s a caveat.
“Firms’ positions have generally been informed by the relevant transitional regimes offered by member states as well as their understanding of the legal and regulatory position, and a good dose of common sense,” stated the CEO. “But there remains a risk that lack of legal certainty in some jurisdictions will create adverse outcomes for consumers.
“Our approach to these issues has been a mix of engagement with other authorities and seeking to ensure firms are prepared. We have been clear that we expect firms to do what they can to act consistently with local legal and regulatory requirements and expectations while being driven by the right consumer outcomes.”
Bailey concluded the address with “we have made considerable progress, but we do not underestimate the task ahead.”
Commenting on the speech, Personal Finance Society chief executive Keith Richards pointed to what a no-deal outcome would possibly look like.
“Some countries, such as Germany and Italy, have introduced a mechanism to make sure if an insurance business becomes unauthorised as a result of Brexit, insurers can still pay claims on existing policies wherever the policyholder happens to be located,” he noted.
“However, as the FCA has highlighted today (September 16), some member states may choose to insist that insurers become established in their member state in order for them to carry on paying contracts.”
Richards conceded that some of the proposed mechanisms could be changed over time in a hostile no-deal Brexit.
“To be clear, this is only likely to affect a very small number of consumers: even in January this year, the EU identified that issues would only exist for ‘a handful of non-life insurance undertakings in the UK’,” he said. “However, there is no way all clients can be guaranteed of a permanent seamless transition of the payment of claims in a no-deal scenario.”
