The clause aims at helping companies manage insurance contracts as the UK leaves the EU
Just over two years since the EU referendum, the International Underwriting Association (IUA) has today published a Brexit clause aimed at helping companies manage contracts as the UK leaves the EU.
The IUA hopes its Brexit Contract Continuation Clause will clarify how firms will continue to pay claims despite any business disruption caused when transitional agreements are not made.
Insurers currently relying on the EU financial services passport to conduct cross-border business between the UK and Europe may not be able to continue providing cover, or pay claims on existing contracts after March 2019.
The new clause, therefore, will allow a risk to be placed with both a UK domiciled insurer and a partnering EU-based insurer.
In the event of any Brexit difficulties, this ’contingent’ insurer will step in and fulfil any policy obligations that the original carrier is no longer able to cover.
Chris Jones, the IUA’s director of market and legal services said: “The Brexit process continues to be quite uncertain in the nature of its final outcome and the future trading relationship trading relationship between the UK and remaining EU states.
“A number of other market clauses have already attempted to address the issue of contract continuity, but it has proved difficult drafting a solution that covers all political eventualities. Another problem has been catering for the many different corporate structures, both currently present in the London Market and planned by firms as part of their Brexit contingency responses.
“Consequently, a key concern of the IUA’s new clause has been to ensure that the legal principles underpinning the contingent insurer approach are sound and that the terminology and intent of the wording is as clear as possible.”