BREXIT: Passporting rights 'fundamental' to insurers, Lloyd's chair warns

Out-Law News | 07 Sep 2016 | 10:04 am | 2 min. read

Maintaining 'passporting' rights, which allow UK financial firms to market and sell their products and services across the EU, will be "fundamental" for UK insurers during the Brexit negotiations, the chairman of Lloyd's has warned.

This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing business and sign up to receive our 'What next?' checklist.

Speaking at Lloyd's annual dinner, John Nelson said that the insurance market would be forced to move some of its operations from London to other parts of the EU if it was no longer able to access the single market. He made similar points earlier this week on BBC Radio Four's Today programme, in which he called on the government to make its position on single market access clear as soon as possible.

"At Lloyd's we are very much of the view that retaining access to the EU single market is fundamental, not just for Lloyd's but for the City in general," Nelson said, in comments reported by the Financial Times.

"If we are not able to access the single market, either through passporting rights or other means, the inevitable consequences for Lloyd's – and indeed other insurance organisations – will be that we will transact the business onshore in the EU and that obviously will have an impact on London," he said.

Nelson did, however, stress that the market itself would continue to be based in London, according to the Financial Times.

Passporting arrangements enable firms based in one EU member state to trade anywhere in the bloc without having to seek multiple authorisations. The UK's financial services industry has made it clear that its preferred option as part of the Brexit process would be for the UK to seek access to the single market, and to continue to benefit from passporting rights.

However, numerous reports have suggested that this type of single market access would almost certainly require the UK to agree to freedom of movement of EU workers, and to comply with relevant EU regulations. Some financial contribution to the EU is also likely to be required, as is currently the case for the non-EU countries that form part of the European Economic Area (EEA), including Norway.

Insurance law expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com, said that passporting rights were an area of "key focus" for insurers and the Lloyd's market, as well as the wider financial services industry, following the Brexit vote.

"If their continuation, or some form of equivalent rights, cannot be agreed, this will inevitably lead to changes for businesses relying on the existing passporting regimes," he said.

"There are already clear indications of competition between the requirements of different industries and groups, and passporting rights and freedom of movement of people is just one example of these potentially diverging interests. As the government and Brexit ministry decide behind the scenes on their negotiating strategy and priorities, it is vital that the financial services industry lobbies hard on this type of issue to ensure that it is given sufficient priority amongst all of the interests the negotiators will be taking into account when agreeing a way forward for the UK outside of the EU," he said.