Legal perspective: The UK legal picture for 2017

Digitalisation, technology, low interest rates and ongoing legislative and regulatory reform create a uniquely demanding and competitive environment for risk managers, insurance buyers and insurers trying to navigate this changing landscape. Many of the larger insurance markets have plans in place to enact further reforms in the coming year, as successive governments recognise that enhanced regulation and clearer codification of the legal frameworks are necessary for a successful insurance market.

In the UK, 2016 finally saw the next step in a long process of law reform and codification of insurance law, with the enactment of the Insurance Act. The true impact of the Act will not be seen until claims start to emerge; it is only during the coming year when we will start to see the impact of the Act in practice.

To a large extent, the Act has codified existing market practice and legal precedent, however there are areas where disputes might arise, such as around the meaning of ‘fair presentation of risk’, determining the application of the proportionate remedies, and around the precise operation of Section 11. The damages for late payment provisions will come into force on 7 May 2017 and while successful claims may be few, the prospect of a claim could bring the payment timetable into focus.

The UK government has continued with its consultation to bring forward a package of measures to drive down minor, exaggerated and fraudulent soft tissue injury (‘whiplash’) claims stemming from road traffic accidents. The reform package could save the industry around £1bn a year. These reforms are proving controversial in some quarters, with the claimant lawyer lobby in particular campaigning against them. They are broadly welcomed by insurers though, particularly in the battle against fraud.

The Treasury is now consulting on draft risk transformation regulations, which will provide for the formation and registration of protected cell companies to facilitate the development of multi-arrangement insurance-linked securities vehicles in the UK and associated tax regulations. Both regulators are jointly consulting on the details of their proposed authorisation and supervision framework.

Brexit will dominate in the UK for the coming year. At the time of writing, we await the Supreme Court’s decision on whether parliament will vote on the triggering of Article 50. The Prime Minister’s statement and her specific focus on maintaining freedom to provide financial services across borders and talk of a phased approach will be welcomed by insurers and other financial services firms, all of whom crave clarity, stability and a sense that their interests are being represented.

The longer-term impact of Brexit on UK insurance law is difficult to predict. The exercise of disentangling EU law from UK legislation is expected to be long and arduous. The current proposal is to enact the Great Repeal Bill, which will retain most of the current EU legislation until such time as primary legislation can be enacted.