Aviation insurers have launched a model contract continuation clause to ensure policies remain in place after Britain leaves the European Union. The wording has been published by the Aviation Insurance Clauses Group (AICG), a group established in 2005 by the International Underwriting Association of London and the Lloyd’s Market Association.

Chris Jones, Director of Legal and Market Services at the International Underwriting Association, said: “The aim of the new clause is to provide additional certainty for clients as the UK leaves the European Union. Without any new trade agreement or business continuity arrangement, it is possible that some insurers may not be in a position to continue providing cover or pay claims on cross-border contracts.”

Insurance policies typically last a year but some can last for two years or longer. With Britain and the EU commencing Brexit talks this week ahead of the UK leaving the EU in March 2019, insurers are keen to minimise any potential disruption to existing cover.

“Though it is still relatively early in the negotiation process, multi-year policies incepting now may potentially extend beyond the deadline for Brexit to take place,” added Jones. “An effective policy response, therefore, seems a prudent course of action.

“The basic principle underpinning the new clause is simple: to allow for a transfer of an insurer or reinsurer’s participation in the contract. However, this is subject to specific criteria, applying only where cover cannot be provided because of the UK leaving the EU. The clause cannot apply in any other circumstances.

He adds that although the clause has been drafted with aviation policies in mind, its wording is relatively generic and could be adapted for use in other classes of business if required.

The issue has been brought into focus because insurers need to set up EU subsidiaries to carry on business in the EU if Britain does not remain part of the European single market. The clause allows an insurer to transfer its policy to another insurer which is still able to trade in the EU and has the same or higher credit rating.

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