MGAs with a large amount of EU business would seriously need to consider setting up a subsidiary
Top insurance law firm BLM has given advice to MGAs over Brexit, outlining how they can navigate a path through these difficult times.
Head of commercial law Jonathan Askin, speaking to a room full of MGAs during a lunchtime update briefing in London, said there were three types of MGAs when it comes to Brexit.
There were those that did no European business; others who did business through wholesale capacity arrangements; and finally, those that did a substantial amount of insurance European business.
He said the Brexit impact on those that did no European business would be minimal; those with wholesale arrangements might be able to get away with not too much work depending on passporting rights.
However, those with a large amount of EU business would seriously need to consider setting up a subsidiary, and would need six to nine months to prepare.
Askin said clients should be ready to act quickly if the general election and aftermath gives clarity on the UK’s Brexit position.
“It is important they get it done now, rather than wait for the day of a hard Brexit when the business could go under,” Askin added.
Action points that MGAs should consider, and there was a lot to do, are:
- Market access and passporting - understand the risk location, residence of policyholder and place of regulated activity. The MGA might no longer have the regulatory permission to transact business. Check also insurer and brokers have the permissions.
- Data - Consider how sensitive data is transferred between UK and EEA depending on the outcome of the Brexit deal. Firms could easily fall foul if the UK comes out hard of the EU regulatory orbit
- Staff qualification - Consider the impact on Brexit on staff qualifications, which may not be recognised if the UK fails to strike a deal here
- Clients - Consider updating policies and how clients’ circumstance might change. They could also face trade barriers, loss of passporting rights, and lack of mutual recognition of goods and supply chain issues amid a lack of contract certainty.
- MGAs must be prepared for the reality that clients trading with Europe could find their contracts unviable; struggle to get new contract terms; could lose copyright marks and intellectual property; English law may no longer prevail to assist them; and ultimately, they could find it very hard to trade.
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