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“We are going to fulfil the repeated promises of Parliament to the people and come out of the EU on October 31, no ifs or buts. And we will do a new deal, a better deal that will maximise the opportunities of Brexit while allowing us to develop a new and exciting partnership with the rest of Europe based on free trade and mutual support.”
Those were the words of Boris Johnson on July 24 in his first speech as Prime Minister of the UK. “A new deal,” however, seems unlikely, if you ask the European Commission.
As it stands, the withdrawal agreement drawn up with Johnson’s predecessor Theresa May is what Jean-Claude Juncker’s camp will go for. Yes, the proposed exit plan rejected not once but thrice by the British Parliament.
Meanwhile, the insurance industry in the UK – including the London Market – waits with bated breath.
The London Market Group (LMG) has released a Brexit update outlining its proposals aimed at achieving a workable and deliverable solution to maintain cross-border insurance trade with the European Union moving forward.
In the eight-page document seen by Insurance Business, the LMG also put a spotlight on the impact of a no-deal Brexit, which it noted is the default position come Halloween.
“UK-based brokers and insurers have activated their contingency plans, which have involved setting up a new company in an EU27 country,” said the trade body. “While these contingency plans have ensured service continuity for London Market clients, the creation of these structures has come at significant cost to the industry.”
Still referring to the no-deal scenario, it added: “The Market’s successful model of centralisation of capital and expertise would be undermined, making the UK a less attractive place to do insurance business.”
The LMG is of the view that is in both Britain’s and the EU’s interests to ensure that London Market firms have access on a cross-border basis. It noted how more than £8 billion (€9 billion) of premium is brought annually to the London Market by brokers on behalf of EU clients, and over £6 billion (€7 billion) of business is underwritten in London by branches of European operations.
“An EU determination of reinsurance equivalence under Solvency II is vital in case a future agreement does not provide adequate EU market access for UK-based reinsurers,” stated the LMG.
“A new agreement may be based upon equivalence. If so, existing equivalence tests should be enhanced and their scope should be extended to allow sophisticated commercial customers to seek cover for large and complex risks on a cross-border basis from equivalent third countries.”
Also, it believes the country should retain a similar regulatory regime to that in the block so that the likelihood of obtaining an arrangement permitting access to EU markets and allowing EU supervisors to continue to rely on UK regulators is increased.
Representatives of the LMG have met with over 100 Members of Parliament, peers, officials, and advisers over the last three years to discuss the implications of Brexit for the London Market.
