Commenting on the letter CEO of the Prudential Regulation Authority, Sam Woods, has sent to Chair of the Treasury Committee Nicky Morgan, Director General of the Association of British Insurers Huw Evans said:
“As the deadline for Brexit looms, many insurers’ biggest fear is that they will be left with a stark choice between breaking their promise to customers or risk breaking the law if the issue of how to fulfil existing contracts cross-border is not resolved. This is an urgent issue and we are pleased it is high on Sam Woods’ agenda. Agreeing terms to allow insurers to service contracts after March 2019 needs to be part of the exit negotiations between the UK and EU. We will continue to work closely with the Government, our membership and the PRA in an effort to ensure a solution is in place in time.”
Background to the issue
The problem revolves around millions of insurance and pension contracts written pre-Brexit that will still be in force post-Brexit and impacts a wide range of people and businesses:
- Companies in the UK paying pensions to people living in the EU, including expats.
- Anyone resident in the UK receiving a pension from the EU.
- Business insurance contracts, such as liability insurance sold from the UK to a company in the EU
- Business insurance contracts sold from the EU into the UK.
The risk has emerged because as a result of leaving the Single Market, some insurers will lose their automatic licence to insure in the customer’s jurisdiction. They therefore may not be legally able to pay what they owe without a replacement agreement.
RELATED READING: PRA Asked For Update On Preparedness Of Insurers For Brexit