On 11 September, Insurance Europe published a position paper calling for the “grandfathering” of existing insurance contracts after Brexit. The paper makes an important point: that a transitional deal will not resolve the problems that many insurers face if passporting rights are lost as a result of Brexit.
The paper (which at the time of writing is no longer available on Insurance Europe’s website) warned that, following Brexit, passporting rights between the EU and the UK will cease to apply, and that UK insurers may require authorisation in relevant EU member states (and vice versa) in order to continue to service existing contracts after Brexit.
This analysis is not new, but the position paper goes one step further, identifying that a transitional arrangement (which would most likely last for only two or three years) will not be sufficient to enable insurers to fulfill completely their obligations under policies that have already been written. Not only will many of these policies relate to long-tail liabilities, some insurers have already issued policies which do not even incept until after Brexit.
Our preliminary discussions with counsel in other EU member states suggest that many member states will (at least unilaterally or on an individual basis) permit UK insurers to service existing business, on the basis that allowing claims to be paid is in the interests of policyholders. However, assuming that the UK’s exit deal will not preserve passporting rights indefinitely, it must be hoped that insurers will not have to rely on individual member states making this decision, and that instead a grandfathering deal is agreed.