The British Insurance Brokers’ Association (BIBA) has told Commercial Risk Europe there is “concern” that some policies running with a renewal date beyond Article 50’s 29 March 2019 negotiating period may not be valid if no Brexit agreement is reached, with no silver bullet solution.
The association’s CEO, Steve White, said: “Millions of clients who rely on insurance cover to comply with the law, to fulfil conditions of contract and to protect their businesses, themselves and their families will be affected if the ability to continue trading freely with both UK and EU firms is lost.”
He explained that BIBA, which represents general insurance intermediaries across the UK, has been lobbying several of its government’s departments and regulators to express the concerns of its members, find an official solution and deliver clarity.
Separately, market solutions are being put forward, but BIBA explained there is no silver bullet. For example, some multinational insurers are using the International Underwriting Association of London’s (IUA’s) Brexit clauses, which may prove to be an effective solution in many cases, Mr White told CRE.
However, individual contracts of insurance will vary and insurance providers will have differing circumstances, approaches and solutions, he continued.
“Each scenario will need to be considered on its own merits and any insurance buyer can seek advice from their insurance broker about their specific insurance arrangements,” said BIBA’s CEO.
“What is clear, is that there are many uncertainties around Brexit and many different models raise many different risks. Circumstances and degrees of concern will vary from insurance buyer to insurance buyer and from insurer to insurer, so there is not one single solution to mitigate these risks,” he explained.
Making sure insureds enjoy contract certainty in the increasingly likely scenario of a no-deal Brexit is a growing concern, London market representatives have previously warned. Some fear that a watertight market solution might not be feasible and are lobbying regulators to come up with an official response.
Ongoing disagreement on the Northern Ireland border and lack of consensus within its government on Brexit has increased fears of a disorderly UK departure from the EU.
The London Insurance and International Brokers’ Association told CRE that Brexit clauses, which tend to involve the creation of a contingent liability for an EU entity, will likely only offer a partial solution.
“Where this is an entity that is only in the process of being set up, it may not be in a position to accept such liability,” explained the association’s CEO Christopher Croft. “We are working with our members to try and agree a standard clause – based on the useful proposal from IUA – but again it may not be a panacea,” he added.
The IUA’s contract continuity clause is designed to enable risks to be placed with both a UK-domiciled insurer and “contingent” EU-based insurer. The wording means a contingent insurer can step in and fulfil policy obligations if the original carrier is no longer able to provide cover post-Brexit.
The IUA published a second policy clause late last month to help London market insurers deliver contract continuity for policies written on a subscription basis. It allows interested parties to adapt the original clause’s wording to accommodate risks placed with multiple insurers.
BIBA has taken concrete steps to help its members deal with Brexit and continue to serve clients across the EU.
In recognition that some members are concerned about their ability to serve existing EU customers post-Brexit, BIBA has struck a deal with the Worldwide Broker Network.
The agreement will facilitate the introduction of BIBA members with one of the network’s member firms across the EU. This will help BIBA members continue to work with clients in EU member states.
BIBA has also worked with KPMG to create the Broker Brexit Navigator tool and said the firm can advise members if they choose to create an EU office.