Brexit - legal gaps and uncertainty
The legal complexity of the UK’s withdrawal from the EU is becoming clear, demonstrated by the UK Government’s White Paper published at the end of March 2017 and the eight separate Brexit bills in the Government’s legislative programme. One challenge comes where current legislation refers to an EU law or institution, or assumes UK membership of or access to an EU regime or body. Another comes from the sheer number of laws and regulations – it seems inevitable that some provisions will be missed or will be incorrectly applied. This is exacerbated by the fact that we do not know what the end-game will look like. If transitional terms are agreed in a number of areas, these will create further legal complexity that cannot yet be catered for.
GDPR – no bonfire of red tape
The General Data Protection Regulation (GDPR) comes into force on 25 May 2018 and we expect its terms to be largely replicated in corresponding UK laws following Brexit. Apart from the fact that the implementation costs will already have been incurred before Brexit takes effect, it seems likely that the UK would want its laws to meet the adequacy test under the GDPR (as is currently the case for Switzerland and the Channel Islands, for example) to facilitate the transfer of personal data between the UK and the EU post Brexit. However, there may be scope for greater flexibility, with a view to making the UK an attractive place to do business, while protecting individuals’ privacy.
InsurTech - change is inevitable, but more by evolution than revolution
InsurTech in all its forms seems certain to change the way insurance is priced, sold and how claims are paid. This will be an evolutionary process, albeit fast-paced. As new players, products and distribution methods emerge, insurers will remain essential because they are authorised to underwrite insurance and have the balance sheet and capital to support that. The changes may, however, pose a challenge and a threat to insurers struggling with legacy IT platforms and relying on others to distribute their products. Many insurers are alive to these threats and are themselves at the forefront of InsurTech either by internal innovation or external partnerships. The pressures of InsurTech may lead to some consolidation, but the unique position of insurance underwriting will provide some protection from the InsurTech whirlwind.
ILS – UK regime will make progress if it is competitive
Plans for a UK regime for insurance-linked securities (ILS) were delayed by the general election, but the UK Government has since announced it is to press ahead with its proposals largely unamended. Indeed, given the uncertainties for the UK insurance market following Brexit, creating a market in this area to rival those of, for example, Bermuda or Gibraltar, arguably takes on even greater significance. Given the absence of any obvious ‘killer’ legal or other elements of the UK proposals when compared with the existing regimes available in other jurisdictions, the success of a UK-based ILS regime will depend on the willingness of HM Treasury to ensure that the tax and regulatory aspects of the regime in particular are kept competitive with those of competing jurisdictions.