Brexit and its impact on your insurance

The UK will leave the EU on 29 March 2019. Membership of the EU single market and customs union will cease at the same time, marking the end of the free movement of goods, capital, services and people for the UK.

EU membership currently means that the UK can operate within the European Union’s internal market. British insurers have also enjoyed this freedom. This has meant that they can work in any member state, regardless of the country in which they are registered, under what are known as ‘passporting rights’. These rights enable financial service providers to offer their services cross-border to the 500 million consumers and estimated 22 million businesses in the EU. But the French EU chief negotiator in the Brexit negotiations, Michel Barnier, made it clear from the start that these passporting rights will be withdrawn when the UK leaves the EU.

This is a daunting prospect for the financial sector. It is still unclear whether insurers will be able to continue their cross-border activities after Brexit.

What’s more, insurers will not only be prevented from writing new cross-border insurance, but may also be prevented from fulfilling their contractual obligations after Brexit.

Not all insurance policies will be affected by Brexit. Some insurers already have subsidiaries in both the UK and the EU, for example. The policies underwritten by these insurers will probably not be impacted by Brexit.

It remains to be seen what will happen with insurance underwritten by an insurer without an affiliated entity to do business in a country in which the risk is located. This will depend on the specific regulations adopted by each individual country.

All classes of insurance which can be underwritten on an international basis (public liability, fire/business interruption, financial lines (including cyber, D&O), marine, travel, etc.) may be impacted by Brexit.

The summaries below help to shed light on the impact of Brexit on your insurance policies.

We distinguish between a hard and a soft Brexit. By a ‘hard Brexit’, we mean that trade agreements no longer exist between the EU and the UK. A ‘soft Brexit’ means that there is no freedom to provide services between the UK and the EU, but there are trade agreements which enable the placing of cross-border contracts.

It is impossible to predict at present what form Brexit will actually take. Hybrid models of the scenarios described below could therefore emerge.

Despite the fact that the Brexit negotiations are still in full swing, some insurers are already adopting provisional measures, for example:

• FM Global, RSA: they recently announced that the current covers under the freedom to provide services (e.g. a cross-border cover without a local policy) are to be replaced by local policies.
• Zurich: is not making any changes to existing contracts until it is known for certain how Brexit will turn out.

The insurance industry is on tenterhooks to see what the precise impact of Brexit will be. But as already stated in the previous paragraph, insurers are working hard to prepare and make the necessary adjustments.

Vanbreda Risk & Benefits is keeping a close eye on the political situation and the evolving positions of insurers. We will make sure that your insurance policies are well covered and that you experience as little inconvenience as possible from the consequences of Brexit for your international programmes.

Whatever form Brexit takes, we will guarantee continuity of service. We can also rely on our international partnership with Lockton Global for this.

Any further questions? Please get in touch with our experts Dominique De Clercq (dominique.declercq@vanbreda.be) or Ingrid Ceyssens (ingrid.ceyssens@vanbreda.be).