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21 March 2019

Commercial Risk Europe: Rated UK insurers well prepared for Brexit, says Best


UK insurers rated by AM Best are generally well prepared for Brexit, even a no-deal Brexit, according to the ratings agency, despite the uncertainty over the terms and timing of the UK’s withdrawal from the EU.

Best noted that although UK insurers have welcomed the vote of the UK parliament to reject a no-deal Brexit under any circumstances, the industry is frustrated that the terms of an orderly withdrawal are still not agreed.

Best said rated insurance groups affected by Brexit that intend to continue to underwrite European Economic Area (EEA) business have ensured that they will have these arrangements in place before 29 March 2019. “However, fronting agreements or the creation of a licensed EU subsidiary or affiliate do not address the issue that a UK insurer may not be able to service existing EEA contracts following a loss of passporting rights. Therefore, the majority of these rated groups have either completed or initiated a transfer of their EEA business from their UK insurer to an affiliated EEA insurer under Part VII of the Financial Services and Markets Act 2000 (FSMA),” said Best.

The ratings agency pointed out that the Part VII transfer process “is expensive and time-consuming, with transfers subject to extensive regulatory scrutiny and court approval”, adding: “Consequently, a number of Part VII transfers will not necessarily be completed before Brexit. In view of this, affected companies have welcomed announcements by HM Treasury in the UK and the European Insurance and Occupational Pensions Authority, which support the orderly run-off of insurance business if there is no withdrawal agreement between the UK and the EU.”

Best also noted the announcements made by a number of European countries, including France and Germany, that new rules will be put in place to allow claims to be paid by UK insurers post-Brexit. It said these will further support the orderly run-off of existing EU business by UK insurers.

Full article on Commercial Risk (subscription required)



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