In light of Brexit-related concerns over continuity of service in the insurance sector, the London Market Group (LMG) has issued a proposal to the UK government detailing a mechanism whereby both the UK and EU are permitted mutual market access and mutual recognition of respective prudential regimes following Brexit.
The proposal centres on a free trade agreement with a built-in Solvency II equivalence outcome. The agreement would recommend a cooperative supervisory framework, and builds on the EU-US bilateral agreement that came into force on 7 November 2017 for reinsurance business. The LMG has suggested a complementary transition period to allow for continuity of client service, until such time as the agreement is agreed upon.
Malcolm Newman, sponsor of the LMG taskforce, stated the proposal’s goal as ensuring “that clients are not left in a situation where there is contractual uncertainty and protection gaps post Brexit.” Further LMG proposals are designed to:
- Prevent disruption and financial instability for EU clients that rely on the London
Market for essential risk mitigation services; - Remove the risk of gaps in vital insurance cover;
- Provide contractual certainty for business transitioning to new UK-EU models, and
for businesses in run-off at the time of Brexit; - Deliver an orderly transition – by providing EU (re)insurers and brokers/intermediaries with sufficient time to transition and secure coverage certainty for clients, and maintain client service standards; and
- Remove pressure from EU & UK firms to make premature decisions to move
business bases prior to the Brexit negotiations being concluded.