The Brexit secretary unveiled his plan for a ‘no-deal’ Brexit earlier today, the insurance industry has reacted
New Brexit secretary, Dominic Raab has unveiled his ”practical and proportionate” plans for a ’no-deal’ scenario.
Raab emphasised that reaching a deal with the EU is an “overriding priority” but has laid out advice to businesses, just in case.
Among the announcements, Raab said card payments could become more difficult, hindering the whole of the financial services sector, including insurance.
The majority of the UK’s financial services legislation currently derives from EU law.
Raab did repeat the government’s commitment to introduce a Temporary Permissions Regime (TPR) that will allow EU firms currently passporting into the UK to continue operating in the UK for up to three years after exit, while they apply for full authorisation from UK regulators.
However, the industry has stepped up its urgent desire for a deal to be agreed before April 2019.
Hugh Savill, director of regulation at the Association of British Insurers (ABI) said: “Leaving the EU without a deal would cause major inconvenience to millions of pensioners, travellers and drivers. We urge the Government to agree on a deal as a matter of urgency.
Dr Matthew Connell, director of policy and public affairs at the Chartered Insurance Institute (CII) said: ”For insurance, the biggest issue by far is contract certainty, and here the Government has repeated its position, but can’t add anything new because the ball is in the EU’s court.
And Andrew Pilgrim, government financial services leader at EY, says today’s paper will not have much of an impact, as nothing can really surprise insurance companies in the current situation.
He said: “There is nothing that will take the financial services industry by surprise in today’s Brexit papers, and firms will continue preparing for a ‘no deal’ in March 2019, as they have been doing to date.
What has the industry taken from the paper?
Savill expressed concern at the idea of not being able to make payments to EU customers after March next year.
He said: “Today’s paper emphasises the risk of insurers not being able to make payments to customers based in the EU after the end of March next year. Obviously, insurers want to meet their commitments to their customers, but this problem has the potential to affect millions of insurance customers, including UK pensioners overseas.
But, he insists there could be an easy solution.
“It can be fixed by co-operation between the UK and EU regulators – if the EU authorities wish to do so,” he said.
”Insurers have of course been making contingency plans for their own operations for many months now, but this contract issue is not one that insurers themselves can fix.”
Connell praised the government on its commitment to allow EU companies passporting rights.
”The UK government’s decision to extend unilaterally the temporary permissions regimes for firms passporting into the UK from the EEA is sensible and constructive, and we would expect the EU to reciprocate with a similar arrangement, since it is in nobody’s interests for there to be no legal basis for the payment of contracts that were made when the UK was a member of the EU.
”We welcome the UK Government’s commitment to work with the EU to resolve this issue and urge all parties involved in the negotiations to reach a common-sense solution that is in the interests of all citizens of both the UK and the EU.”
Pilgrim, however, doesn’t feel any more secure or clear on what the plan is, no matter what kind of deal is made.
He said: ”While today’s papers reiterate that the UK government is doing all it can to maintain continuity in that scenario, there is a limit to what they can promise unilaterally. Whether there would be similar flexibility from the EU is likely to remain unclear for some time. Until then uncertainty remains the word of the moment.”
Andy Thornley, Head of Corporate Affairs at BIBA, said:
“The insurance broking sector contributes 1% of the GDPR to the UK economy and we receive £8 billion in revenue each year from the EU. The prospect of a no-deal situation with third country status is unthinkable and is causing great concern within the sector. This is far from an issue just for our capital city; three-quarters of people working in insurance are employed outside London.
“Government has sought to ensure UK customers are insulated from a no-deal by allowing EEA insurers who passport into the UK a temporary permissions regime so they can continue to serve customers. However, there is nothing in this paper to help the 38 million EU customers that have insurance risks placed in the UK market. Contract continuity is one of the highest priority issues for us right now as, under a no-deal scenario, it may be illegal to service and pay claims to customers after we exit the trading block.
If an agreement is not reached between the EU and UK Government, there will not be a transition period and the industry will face a regulatory cliff-edge after 29 March next year. Regulators, both in the UK and on the continent are already writing to firms calling on them to look at their plans for a no-deal and we will be joining that; asking BIBA members to plan for the worst and hope for the best.
“The Government’s White paper, published last month, provided no reciprocal market access for the insurance sector. We are also calling on Government to include market access for the UK insurance industry as, without it, we lose one of our biggest markets almost overnight.”