Out-Law News | 30 Oct 2017 | 3:54 pm | 2 min. read
According to a report in the Financial Times (subscription required), BaFin wrote to UK insurers with operations in Germany in the summer. It asked insurance companies for details of their “emergency plans” for Brexit, taking into account all scenarios including that in which there is no deal between the UK and EU – a so-called hard Brexit.
Insurance law expert Bruno Geiringer of Pinsent Masons, the law firm behind Out-Law.com, said the passporting rights which allow UK insurers to underwrite risks and provide other insurance services in the European Economic Area (EEA) would come to an end in March 2019 when the UK left the EU, unless a trade deal was agreed.
“Faced with this drastic outcome, regulators around the EU are therefore rightly asking UK insurers to disclose their contingency plans,” Geiringer said.
“However, the collection of data about contingency plans is all well and good, but 16 months after the referendum, nobody still knows what exactly is going to happen when the two-year exit period comes to an end,” Geiringer said.
No deal is yet in sight over continued access to the EU single market after Brexit, although industry leaders including the Financial Conduct Authority CEO Andrew Bailey have called for such a agreement to be made.
Geiringer said Brexit will also have an impact on European insurers doing business in the UK, as they will also lose passporting rights in the case of hard Brexit.
“Whilst a number of suggestions have been proposed, such as so-called 'grandfathering' the policy contracts post-Brexit or paying claims into a UK bank account for EEA-resident policyholders, or via an agent in the UK, none of these are complete solutions to providing the level of services that policyholders have been used to receiving from cross-border providers up to now,” Geiringer said.
“As time is ticking away, there is a tremendous sense of increasing exasperation being felt by insurers and their trade bodies at the apparent lack of progress or publicly available details about the Brexit negotiations and any transition period to allow workable solutions to be developed and put into place in the next 17 months before the passporting rights are lost,” Geiringer said.
Geiringer said UK and EEA-based insurers could not keep waiting for a deal to be signed and some would begin implementing contingency plans in order to preserve value for shareholders and provide some certainty for their businesses.
“It is high time for regulators around Europe to take the lead to agree a process that would protect policyholders who will otherwise be caught in the potentially huge mess of having paid for an insurance policy but having no legal mechanism for their insurer to administer that policy and deal with them properly,” Geiringer said.
“If nothing is done soon regulators in the UK and the EEA could have some explaining to do to show that they are taking appropriate action in the lead-up to Brexit to protect policyholders,” Geiringer said.