In our September Edition 3 Bulletin1, we reported on a letter from the House of Commons Treasury Committee2 regarding their concerns about the impact of Brexit on insurance contracts whose duration extends beyond the proposed date for the UK’s withdrawal from the European Union. The concern is that, following Brexit, servicing insurance contracts sold before Brexit pursuant to reciprocal passporting rights within the EU will become illegal.
The Chancellor of the Exchequer, Philip Hammond, responded on 21 September 2017. His response, which was published on 11 October, will be unlikely to give the insurance industry or holders of affected policies much comfort. Mr Hammond admitted that the Government recognises that the withdrawal from the European Union could create legal uncertainty as to the status of existing cross-border insurance contracts.
Mr Hammond goes on to say that the Government is “ambitious in [its] aim to secure a bespoke and reciprocal arrangement that preserves the greatest possible market openness” as part of the Brexit negotiations, and that such ambition includes “the agreement of supervisory arrangements that are symmetrical, reciprocal and reliable”, without giving an indication of what such arrangements might look like.
He finishes by saying that, whatever the ultimate outcome of negotiations, the Government would be seeking to agree an interim period to allow businesses to transition to the new arrangements, and to avoid a “cliff-edge”.
As with much of the Brexit process, the position is replete with uncertainty, and insurers will no doubt continue to seek their own solutions in the event that the Government does not achieve its stated aims.
The full text of the letter can be found here.