One of London’s most senior insurance executives has warned that the industry may struggle to complete its Brexit preparations before the UK leaves the EU.
Mark Weil, UK chief executive of insurance broker Marsh, said a risk exists that some in the industry will be “timed out” as they try to set up new operations in other parts of the EU.
Large parts of London’s £60bn commercial insurance market use EU passporting rights to access continental European markets. These are expected to disappear after Brexit, so many insurers will need to set up new subsidiaries elsewhere. Dublin, Luxembourg, Malta and the Netherlands are expected to be popular destinations.
Geoffrey Maddock, partner at law firm Herbert Smith Freehills, said: “Clients are working on the assumption that there will be a pretty hard exit without any transitional period. That’s the prudent approach to take. That means at best they’ve got two years from March, but it could conceivably be sooner.”
Mr Maddock said that once an application for a new subsidiary has gone in, approval in some jurisdictions should only take three to six months. But before that, they will have to negotiate with the regulators about the size of the new business: “The issue that firms are going to have to agree with regulators is what people and functions are going to go into the subsidiary.”
The process could be even longer if the insurers want to transfer existing business into the new subsidiary as well as using it to write new policies. “This is what is causing people a timing issue,” said Ashley Prebble, partner at law firm Clifford Chance, who added that the process can take 15 months to plan and execute.
Mr Weil said that, even if some insurers miss the deadline, there could be ways of structuring new policies so that clients do not miss out on coverage. “There are solutions we’ve been working on,” he said. “In a ‘bridge’ solution, you would have an insurer with a licence in the EU which would provide a front, and then wholesale the business back to London where the capital is.”
One of the issues causing most concern to the industry is what happens to claims made on cross-border policies that were written before Brexit. Lawyers say there is a risk that insurers may not be able to pay out. “There are ways of structuring around some of these issues,” said Mr Prebble, “but they all take time.”
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