Insurers are calling for greater clarity over a Brexit deal on financial services that could see a loss of passporting.
The draft deal, which was approved by the UK Cabinet yesterday, will see the UK gaining access to European Union markets under rules of ‘equivalence’.
However, there is the possibility that the insurance companies outside of reinsurance could see a loss of access to the EU.
Experts and trade bodies are calling for greater clarity on what equivalence means in terms of market access.
“While it is encouraging to see a dedicated section on financial services, we have to hope that the fact the draft is solely built around the concept of ‘equivalence’ is for the sake of brevity and simplicity,” said Christopher Croft, CEO of the London and International Insurance Brokers’ Association.
“Otherwise, those of us who have no equivalence regime have cause for serious concern. As do our clients.”
Norton Rose Fulbright insurance partner Bob Haken said: “This focus on equivalence is unfortunate for the insurance industry as, unlike some other financial services, equivalence under Solvency II does not grant market access for insurance business.”
He said however that reinsurance is treated differently under Article 172 of the Solvency Directive, which means that equivalence does bring market access.
He added: “At present therefore it seems unlikely that the withdrawal agreement or political declaration will preserve passporting rights for UK insurers.”
The agreement, if approved by Parliament, would include a 21-month transition period, beginning on March 29. During that period, the UK would have to abide by EU laws on financial services.
The Association of British Insurers has warned that the UK risks becoming a ‘rule taker’ in the long term.
Huw Evans, director general of the Association of British Insurers, said: “It is vital for our industry’s customers that we have an orderly withdrawal process and transition period and any progress towards that is welcome. Regulatory co-operation is very important and must follow from any political agreement.
“The crucial longer-term test is whether our future relationship with the European Union avoids our world-leading insurance & long-term savings sector becoming a rule-taker. The publications today begin a process of establishing what that relationship is but it is far too early to judge whether we will be able to avoid that fate.”
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