UK brokers that fail to finalise their Brexit plans risk not being ready to trade with underwriters’ new entities, which could result in disruption to their clients, trading partners and own businesses, according to the authors of a new report. Many might need to form a subsidiary company in the EU.
The report, from the London and International Insurance Brokers’ Association (LIIBA) and EY, is intended to help brokers deal with the significant uncertainty about their ability to place and service European risk from the UK post-Brexit. The report summarises the regulation for intermediaries and authorisation processes in ten of the main EU markets.
Christopher Croft, CEO of LIIBA, said: “The spotlight so far has been on the decisions of underwriting firms as to how they will navigate a post-Brexit marketplace. However, the broking industry also faces major challenges and we are working closely with members to help them make the right contingency plan to protect the interests of their clients. That may require them to create a subsidiary entity in the EU. This report will help them choose the most appropriate location for that entity.”
Mr Croft said a solution is needed for contract continuity so that clients with policies in play as the UK leaves the EU are not disadvantaged. “We support the call from the CEO of the FCA for a single, official solution to this rather than leaving firms to fend for themselves. But we also need to ensure that the flow of business into London can continue whatever the outcome of the negotiations.”
Benedict Reid, UK insurance Brexit leader for EY, said it is essential that Brexit plans are connected across the entire value chain, from client to broker to insurer and reinsurer, to avoid a situation where business cannot be placed with newly-authorised underwriting entities. “If brokers do not move with pace, they risk not being ready to trade with underwriters’ new entities, which could result in disruption to their clients, their trading partners and their own businesses,” he said.
“As underwriting firms continue to develop their Brexit plans, brokers should expect significant volumes of communication which will enable them to align with new models, and for their clients to be transferred to a new European or UK legal entity if required. Time is now very short for those brokers who need to develop their plans for authorisation to continue trading cross-border with the EU27,” Mr Reid warned.