Yesterday, a hundred days before the UK bids the European Union goodbye, the latter’s executive body rolled out its no-deal contingency action plan. It includes measures for areas such as financial services, air transport, and customs. The Association of British Insurers (ABI), however, is not too pleased with the approach when it comes to insurance contracts.
“After a thorough examination of the risks linked to a ‘no-deal’ scenario in the financial sector, the Commission has found that only a limited number of contingency measures is necessary to safeguard financial stability in the EU27,” said the European Commission.
The executive body has adopted a temporary and conditional equivalence decision for a fixed, limited period of 12 months to avoid immediate disruption in the central clearing of derivatives; as well as another temporary and conditional equivalence decision but for a fixed, limited period of 24 months to ensure that there will be no disruption in central depositaries services for EU operators currently using UK operators.
Also coming into effect were two delegated regulations facilitating novation, for a fixed 12-month period, of certain over-the-counter derivatives contracts where a contract is transferred from a UK to an EU27 counterparty.
In response, ABI regulation director Hugh Savill stated: “So the European Commission says that derivatives contracts can be carried over if there is a no-deal Brexit, but has not lifted a finger to allow insurance contracts to be fulfilled.
“While the action on derivatives is welcome it is extraordinary that the EU authorities will act to help major financial institutions but not millions of ordinary people living in Europe whose insurance and pension contracts happen to be held in the UK.”
The insurance association is of the view that the European Commission’s approach is in contrast with that of the UK – citing an earlier proposal from the British side pushing for temporary permissions and recognition regimes for European Economic Area firms operating in the country.
