ABI slams European Commission’s inadequate no-deal contingencies
Written by staff reporter
Reacting to no-deal contingency plans published by the European Commission today, Hugh Savill, Director of Regulation at the Association of British Insurers said the European Commission had “not lifted a finger to allow insurance contracts to be fulfilled. “While the action on derivatives is welcome it is extraordinary that the EU authorities will act to help major financial institutions but not millions of ordinary people living in Europe whose insurance and pension contracts happen to be held in the UK,” he said.
The Commission approach is in contrast with the UK approach, where HM Treasury and the UK regulators announced in December 2017 that there would be a "temporary permissions" regime in a "no-deal" scenario which would allow EU firms to continue to service contracts for UK customers.
The problem revolves around millions of insurance and pension contracts written pre-Brexit that will still be in force post-Brexit and impacts a wide range of people and businesses, including business insurance contracts, such as liability insurance sold from the UK to a company in the EU; and companies in the UK paying pensions to people living in the EU, including expats.
The risk has emerged because as a result of leaving the Single Market, some insurers will lose their automatic licence to insure in the customer’s jurisdiction. They therefore may not be legally able to pay what they owe without a replacement agreement.