A letter from Nicky Morgan MP, Chair of the House of Commons Treasury Committee, to Philip Hammond MP, Chancellor of the Exchequer, concerning the potential impact on cross-border insurance contracts of the United Kingdom’s proposed withdrawal from the European Union, has been published on the UK Parliament’s website.
The letter refers in particular to insurance contracts extending beyond 29 March 2019 (the date of the proposed withdrawal), which have been sold under current EU passporting arrangements. The letter notes that, if insurers were to lose their legal right to service these contracts, they would have to terminate the contracts or be in breach of the law.
One possible solution identified in the letter would be for an insurer potentially caught by this dilemma to establish a subsidiary elsewhere in the EEA, and use the provisions of Part VII of the Financial Services and Markets Act 2000 to transfer the contracts to the new entity. However, as the letter notes, this would be costly and may not be achievable for all in the time available.
The letter requests answers to the following questions:
- Does the Treasury consider that this problem poses risks to a smooth and orderly exit from the EU, and does it therefore consider it to be a matter for the first phase of the Article 50 negotiations?
- What proposals are being considered to preserve stability and certainty in respect of insurance contracts that straddle “Brexit day”? In particular, does the Treasury wish to see arrangements that allow contracts written before “Brexit day” to retain the same regulatory treatment for their duration? This concept of “grandfathering” is discussed further below.
- Does the government intend to publish a position paper on this issue?
The letter requests a response by 21 September 2017. At the time of writing no such response has been placed into the public domain. It therefore remains to be seen how the government intends to tackle these important issues.
A copy of the letter may be found here.