The International Underwriting Association (IUA) has published a second policy clause to help London market insurers deliver clients contract continuity for policies written on a subscription basis if a no-deal Brexit hits.
The IUA, which represents non-Lloyd’s international and wholesale insurance and reinsurance companies in London, said the new clause builds on its original Brexit continuity clause published last month.
The first wording is designed to allow a risk to be placed with both a UK-domiciled insurer and a ‘contingent’ EU-based insurer. In the event of any Brexit difficulties, the contingent insurer can step in and fulfil any policy obligations the original carrier is no longer able to cover.
This can now be adapted through the new clause released to accommodate risks placed with multiple insurers. Neither clause is compulsory. Insureds and carriers can adopt and adapt its provisions as they see fit, said the IUA.
Chris Jones, director of legal and market services at the IUA, said: “In the event of a no-deal Brexit, companies will fall back on their own individual contingency plans for a continuation of their services to clients. These plans are well advanced and IUA members are working hard to ensure market disruption is kept to a minimum.”
But he said contract continuity is a “key concern” and it is “vital that companies are able to fulfil commitments to clients whatever the outcome of Brexit negotiations”. “Our policy clauses are designed to address this issue and support firms as they prepare for the UK’s future outside the EU,” said Mr Jones.
In the event of a no-deal Brexit, insurers may not be able to pay claims or service certain contracts taken out before Brexit. UK insureds could be left unprotected by cover purchased from insurers based in the EU. Perhaps an even bigger problem given the importance of the London market for EU insureds, European buyers could find they are unable to receive payment from UK-only carriers.
With many London-based insurers preparing to write business from new EU subsidiaries next year, in the longer term the risk of contract continuity is less of a concern. But in the short term, it is potentially a big problem.
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