Some comments from Ivor Edwards, Clyde & Co Partner, London
It will be pretty much business as usual during the transition period and attention will focus on the details of the future trade deal that is due to come into force next year. There is limited expectation that passporting rights will be maintained under a freedom of service agreement but hope that market access arrangements based on equivalence will be agreed quickly.
However, this is not a cause for concern. The London market has been fully preparing for a hard Brexit scenario and the vast majority of UK carriers have set up subsidiaries in the EU location they believe best supports their business and their clients’ interests going forward. These subsidiaries have already begun renewing 2020 business, so the industry is well prepared for the post-Brexit world.
That is not to say that there won’t be teething problems. Regulators will be on the front foot and it will take time for things to bed down.
EIOPA has provided non-binding guidance on how business should be conducted, but there is already evidence that the French and German regulators will decide their own course of action and many EEA regulators already have a differing approach. Fortunately, there is the transition period where the status quo is maintained, which will allow time to ease a market dislocation on this scale.
Perhaps the final concern is regarding jurisdiction. Will UK judgements be enforceable in the EU? Will lack of certainty cause disputes or litigation to be delayed or speeded up in order to try and deal with matters that are in dispute before the transition period ends? Court guidance suggests it may be necessary to commence proceedings suddenly where delay “might prompt forum shopping in other jurisdictions” but also that there will be flexibility. Companies should take advantage of these arrangements while they can.
Yannis Samothrakis, Clyde & Co partner, Paris
The most likely areas for concern are in personal lines, motor and the reinsurance markets.
In personal lines and motor policies there are potential regulatory blind spots and points of tension. For example, EU member states may consider payment of claims or benefits on a cross-border basis as a regulated activity. There is also concern regarding certain covers included in insurance policies provided in the UK but delivered by EU insurers, for example assistance and legal expenses insurance.
Even if there are no longer passporting rights, having equivalence will be very helpful especially from a reinsurance perspective and in particular intra-group reinsurance arrangements. This would require legal ratification by each of the 27 EU member parliaments. Evidence from Bermuda, Japan and Canada suggests this process may some time, although as the UK and the EU are one and the same in terms of equivalence this, one would hope, will make the process much quicker.
As the year progresses, we are likely to see much speculation about progress and timing of a new trade deal between the UK and EU. It seems unlikely that re/insurance is going to be top of any government agenda. Even if trade in services were to be prioritised more broadly, a plan would need to be put forward for consideration and discussion by July 2020 before governments’ and legislatures’ summer recess. Any final proposals would then need to be re-presented in September to allow sufficient time for parliamentary processes to complete before the new trade deal could be passed into law in all 28 countries (EU27 + UK) by December 31 2020.