There are no guarantees that insurance policies will not be affected by Brexit, according to the EU’s financial services chief, Reuters has reported. The news agency quoted Valdis Dombrovskis, vice-president for the euro and social dialogue, and in charge of financial stability, financial services and capital markets union, saying it is up to firms to take preventive measures.
Mr Dombrovskis was asked by EU lawmakers whether he could offer EU citizens guarantees that policies they had bought from insurers in Britain would still pay out if there is a hard or no-deal Brexit next March, when Britain is due to leave the EU. “I would be somewhat hesitant to give guarantees because negotiations are still ongoing and the outcome is still not 100% clear,” he told the European Parliament. However, he added: “We are working towards an orderly exit and to minimise disruption,” Reuters reported.
Reuters explained that Britain and the EU have agreed on a ‘standstill’ transition period whereby EU rules remain in force in Britain until the end of 2020, which would ensure continuity in cross-border financial contracts like insurance policies. But this transition is part of Britain’s broader EU divorce settlement, which is still being negotiated and will not be legally watertight until October or later. It added: “Without transition, it would be illegal in some cases to make payouts on insurance contracts or amend derivatives contracts after March.”
Reuters said insurers have urged the EU to formally agree to ‘grandfathering’ or allowing the stockpile of existing multiyear financial contracts to run their course. But Reuters quoted Mr Dombrovskis as saying that it was up to industry rather than EU authorities to play a “major role” in avoiding contract disruption. He said insurers in Britain could transfer insurance policies to EU entities, while clearing of contracts was already being looked at.
On the issue of regulations and supervision of the financial sector, Mr Dombrovskis, speaking to City AM, said: “We expect close cooperation in the financial sector with the UK after Brexit – close regulatory and supervisory cooperation. We hope there will be a forum with various countries and the more important the interconnections between the countries, the more the need for that kind of regulatory dialogue.”
The City of London has put forward a proposal for a mutual recognition regime, but Mr Dombrovskis told City AM this could be a step too far, preferring a system of ‘equivalence’ as the way for the UK and the EU to work together in the future.