Companies in the London insurance market have identified four detailed priorities from the UK’s forthcoming Brexit negotiations when it relinquishes its membership of the European Union (EU).
The objectives, issued by the International Underwriting Association (IUA), outline arrangements that will help London’s financial district, the City, maintain its position as the largest global centre for commercial and specialty risk. They cover access to the single market, legal considerations, tax issues and uncertainty around the transition process.
The four key areas that members of the IUA’s legal and regulatory committee regard as vital are:
- To maintain existing freedoms for insurance services. Any trade agreement between the UK and EU should first preserve passporting and branching arrangements and recognise the equivalence of regulatory regimes.
- No barriers should be created that impede the use of English law contracts and standard London Market contractual forms in cross-European business. It will be important to provide clarity on which law UK courts will apply to contracts and to eliminate any doubts about the validity of contracts written prior to Brexit.
- Tax issues must also be addressed with an early indication of the future value added tax (VAT) regime for insurance companies operating in the UK. The UK and EU should agree that consistency, fairness and transparency should apply for companies to any tax implications arising from Brexit.
- Customer concerns about future arrangements for providing cover mean that insurers will be seeking to establish branches or subsidiaries both in the UK and various other European jurisdictions. Regulators will need to prepare to deal with an unprecedented increase in licence applications. The IUA adds that to minimise uncertainty “it would be desirable for the UK and EU to reach an understanding at an early stage about where their discussion should lead.”
A level playing field
“The London company market’s priorities for Brexit are quite clear,” said Dave Matcham, the IUA’s chief executive officer (CEO). “It is essential to maintain a level playing field so that insurers can operate across the continent without the need for local licences.
“At the same time, the competitiveness of London as a global hub will be preserved by allowing European firms to easily maintain a presence here through branch offices. The UK’s regulatory regime should remain equivalent to the EU Solvency II system and there should also be continued mutual recognition of portfolio transfer and data protection arrangements.
“Brexit negotiations will, of course, take at least two years and it is important to mitigate as much as possible the uncertainty that this process will inevitably engender. In particular, regulatory authorities, both in the UK and continental Europe, should work together to help insurers put smoothly in place whatever contingency plans are required to maintain client services.”
The IUA is working with insurance market body the London Market Group (LMG) to present to the UK government the concerns of its member companies about the Brexit negotiation process.
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