Biba launched its 2019 Manifesto in the House of Commons yesterday on the same day the Brexit deal was defeated

Following the Prime Ministers defeat on the proposed Brexit deal yesterday in Parliament the ABI has said that the industry faces a period of “unprecedented uncertainty.”

MPs voted by 432 to 202 to reject Theresa May’s deal which sets out the terms of Britain’s departure from the EU on the 29 March.

The Labour leader, Jeremy Corbyn has now tabled a vote of no confidence which could in turn trigger a general election.

Huw Evans, director general at the ABI, explained: “We need a way forward urgently that avoids no-deal. This is uncharted territory and we face a period of unprecedented uncertainty. It is critical that the Government, Parliament and the EU work together to avoid an outcome that would be bad for our economies and bad for our customers.”

The defeat means that the uncertainty for the insurance industry over Brexit continues.

Leading the way

Despite this the London Market insurance industry has “led the way in being prepared for all Brexit eventualities and has played to its strengths as a unique environment for covering risk,” said Jeanette Newman, partner at Clyde and Co and president of the Forum of Insurance Lawyers (London FOIL).

She said that this uncertainty is “not good news for business, especially for financial services firms.”

“Even if the deal had passed, our future long-term relationship with the EU remains unclear and will be subject to protracted negotiations.

”The London Market can’t and won’t wait for absolute clarity and needs to use Brexit as an opportunity to focus without distraction on some of the broader systemic changes in the sector,” she added.

It’s complicated

But Newman warned: “The situation with the broking community is more complicated due to the equivalence rules - but negotiations continue with the EU, and it is envisaged a pragmatic solution will be agreed before the 29th March as no continuity is in no one’s interests.

“Notwithstanding remaining issues around contract certainty in some jurisdictions in the event of no deal, I am confident that it will continue to provide vital insurance and reinsurance business in the EU, even if that will be made harder by Brexit.”

“It must redouble its modernisation efforts to ensure it’s as efficient an insurance centre as possible, continue to place itself at the heart of the innovation taking place in the sector, and appeal to a more diverse talent base that will provide the broad range of new skills that will be needed in the insurance sector in the next ten to twenty years,” Newman advised.

Biba yesterday launched its 2019 Manifesto in the Houses of Commons, the advisory organisation made five calls to action to support brokers with Brexit

Claims rejected

On top of this is the dilemma with claims. Bruce Hepburn chief executive at Mactavish warned that a bad Brexit could lead to a flurry of commercial insurance claims being rejected.

Hepburn explained that this is likely to lead to heightened business interruption risks, and a surge in D&O (directors and officers) claims being rejected.

He said: “Directors of listed UK companies face major liability risks for failing to prepare adequately for Brexit, especially if there is a ‘No Deal’ outcome.

“Looking at the longer term, the regulatory disruption caused by Brexit will leave large swathes of uncertainty for many years as to the details of new regimes applying on a sector by sector basis.”

This could increase the risk of “unanticipated regulatory action or censure” – a key area of D&O cover.

“Unless a company’s D&O policy has been specifically reviewed and negotiated, it is unlikely to be reliable because there will likely be far too many exclusions to cover and ‘outs’ for insurers, and as the market hardens more such arguments will be taken by insurers,” Hepburn warned.

Mactavish’s research indicates that UK directors have overlooked new liabilities exposing them personally to legal action because of traditional limitations applied to to D&O cover.

David Whitmore, chief executive of law firm Slater and Gordon, added: “Insurers are already grappling with the implications of the Civil Liability Act and the looming risk of consumer detriment if the new claims portal isn’t fit for purpose.

”Further political and regulatory uncertainty is not what they, their partners or, least of all, customers need right now.”

More questions than answers

This was echoed by the Motor Insurer’s Bureau (MIB), which said it is working hard to prepare its members for the possibility of needing to issue green cards to policyholders in the event of a no-deal Brexit.

At present UK driving licenses are valid within the EU.

Mark Hemsted, partner with Clyde & Co and expert on motor insurance, added that yesterday’s vote has answered no questions and is now raising others.

He said: “With regard to motor insurance, we’re still awaiting clarification on a range of issues including what happens when a UK motorist driving their own vehicle has an accident in the EU.

“Firms complain about the lack of certainty around Brexit – and for those firms with vehicles and drivers moving regularly between the UK and mainland Europe, that lack of certainty is being compounded by the rapidly diminishing time left before the UK is due to leave the EU.”

Unchanged outlook

However, Omar Ali, UK financial services leader at EY said that the result does not change the outlook for the city.

He added: “The city has been planning on the basis of no-deal for some time and made clear it would need certainty to allow it to change tack.

“Whilst this result was widely expected, it means there is still no clarity, with just 73 days until the planned exit date.

“Firms have no choice but to fully implement their no-deal plans.”

EY’s most recent survey of financial services firms found that almost a quarter of respondents (24%) already do not believe they have time to execute their Brexit plans by the March deadline.