The UK Government published a whitepaper laying out its solution for future UK-EU trade on financial services.
The proposals suggest that enhanced equivalence between directives such as Solvency II could provide part of the answer.
LIIBA’s CEO Christopher Croft welcomed the paper because it “increases clarity” of the UK government’s position and recognises the limitation of some existing equivalence regimes.
The UK Government believes equivalence is insufficient to deal with a third country whose financial markets are as deeply interconnected with the EU’s as those of the UK. This is a position shared by many in the financial services industry who are, in part, concerned that equivalence can be withdrawn at short notice.
The UK has therefore put forward a proposal that includes enhanced equivalence between various financial services directives. The proposals call for treaty-based commitments to deliver certainty and stability, not provided under existing EU equivalence regimes.
However, Mr Croft said insurance intermediaries have no equivalence provisions at all under the Insurance Distribution Directive (IDD), so have “no feel for the level of market access it could afford”.
LIIBA chairman Roy White has therefore sent a letter to Ms May raising concerns that “any agreement to an ‘enhanced equivalence’ regime will create uncertainty for insurance intermediaries”.
“As you will be aware, there is no equivalence framework either under [the] Insurance Mediation Directive or the Insurance Distribution Directive, which comes into force on 1 October. Clearly, in the absence of an existing equivalence regime, enhancements will not work,” he told Ms May.
The letter goes on to propose that the UK Government seeks an equivalence regime similar to that enjoyed by investment managers under the Markets in Financial Instruments Directive. This allows firms to provide services to professional clients in the EU, as long as they are registered with the European Securities and Markets Authority. Investment firms do not need to have an establishment in the EU under this regime.
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