Four detailed priorities from Brexit negotiations have been identified by companies in the London insurance market. The objectives, issued by the International Underwriting Association (IUA), outline arrangements that will help 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.
Members of the association’s Legal and Regulatory Committee believe it is vital 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.
Secondly, 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 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.
Finally, 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. In order 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.
Dave Matcham, IUA chief executive said: “The London company market’s priorities for Brexit are quite clear. 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 the London Market Group to present to government the concerns of its member companies about the Brexit negotiation process.
About the IUA
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.
The IUA’s London Company Market Statistics Report shows that overall premium income for the company market in 2015 was £21.645bn. Gross premium written in London totalled £15.150bn while a further £6.495bn was identified as written in other locations but overseen by London operations.