As insurers continue to grapple with the potential consequences of the UK’s exit from the European Union, Aviation insurers have taken steps to provide their customers with a degree of certainty in the event that UK insurers are barred from writing business in the EU as a result of the loss of passporting rights.
The Aviation Insurance Clauses Group (AICG) has developed an EU Contract Continuation Clause, which provides that, in the event of an insurer becoming barred from writing EU risks in mid-way through a policy period, the insurer shall have the right to transfer the policy to a EU permitted insurer within the same corporate group. The transferred policy will continue on the same terms as prior to the transfer.
The clause envisages that the transfer will be completed a set number of days before the insurer is no longer permitted to write risks in the EU. In the event that no transfer of the policy will take place, the insurer’s participation in the policy is terminated well in advance of the relevant date. The timeframes envisaged in the draft clause are 45 and 30 days respectively, and this will give the insured an, albeit limited, opportunity to seek alternative cover.
Whilst the AICG has taken the lead in producing the clause, the wording is relatively generic and, according to Chris Jones of the Insurance Underwriting Association (IUA), it is envisaged that it can be readily adapted for use in other lines of business. Mr Jones also commented that, although it is still early days in Brexit negotiations, multi-year policies being written now could easily straddle the date on which the UK finally leaves the EU.