General concerns surrounding the coronavirus pandemic started to be aired at the very beginning of this year. Many were in denial that it would travel abroad at all, assuming the Wuhan lockdown would be wholly effective. Nearly half a year later we are facing sporadic global quarantine, and therefore facing regular interruption to our daily lives. It can be easy to forget that the world, unlike our social lives, isn’t actually on pause. The media landscape has been entirely eaten up by news of the virus, meanwhile the UK has continued along its course towards a transformative political deadline, the outcome of which is still uncertain.
The transition period for Brexit, which was implemented at the start of the year, is due to formally end on December 31. This transition period was negotiated as a mechanism to allow the UK and the European Union to iron out the finer points of the future relationship, but as this deadline nears, it seems that the priorities have shifted, and little progress has been made. While these last few months have indeed seen the country, and the world, managing unprecedented circumstances, much of the public in the UK is still very concerned about what Brexit may or may not deliver. Recent research conducted by Canada Life showed that for over 50s who are approaching retirement, the majority consider Brexit to be their biggest worry.
As it currently stands, the likelihood of a no-deal Brexit, the eventuality which was most contested by business leaders in the UK, remains a high probability. This will result in drastic changes to the UK’s entire business landscape. Irrespective of industry, all professions will be affected. The insurance profession as a whole will need to navigate new third-party rules with EU states. For the insurance profession in the UK, operating under these new rules means that for the established underwriting processes, we may be looking at starting completely afresh. Even with a trade agreement with the EU, there will be some gaps in the trading relationship that existed when the UK was a member. For example, there won’t be any arrangement for brokers operating cross-border between the UK and EU.
This will inevitably create greater costs for insurers and consumers, as firms will potentially have to establish themselves as trading entities in both the UK and the EU in order to continue to write business. Underwriters and brokers have been working hard to minimise the impact of a ‘no-deal’ scenario for the last four years. Crucially, they have restructured their legal entities to ensure that contracts written in the UK while it was a member of the EU can still be honoured in the EU.
They have also worked hard with regulators to ensure that they can establish entities in Europe, while still maintaining a critical mass of wholesale market expertise in London.
However, there is still the risk that a particularly acrimonious split with the EU at the end of the year could undermine these arrangements. For example, Barnier has complained about the UK wanting rules that allow ‘back-office functions that could create a significant risk of circumvention of financial services regulation.’ The current arrangements established by UK insurers in the EU do not fall into this category, but it is possible that they could be caught in the crossfire if the relationship between the UK and EU turns very sour.
The CII has been taking part in this effort, for example taking steps to help participants in new EU entities retain access to the high quality CPD that is now required under the Insurance Distribution Directive. We will need to keep working hard to make sure as possible, many insurance jobs are retained in the UK, and even more importantly, to ensure that the market continues to deliver for consumers.
