UK insurance industry urges government to ‘get on with’ Brexit transition

Major players in the UK insurance industry are calling for “urgent progress” on post-Brexit transition plans, warning their government to stop “overcomplicating” matters and “get on with it”. Meanwhile, the UK regulator has said it is unlikely to overhaul Solvency II rules after Brexit.

Speaking at a dinner event in London last night, where guests included regulators and politicians, Huw Evans, director general of the Association of British Insurers (ABI), said the terms of a transition period should and could be agreed now. They should not be left as part of the final exit agreement or as a bargaining chip in negotiations, he added.

“A transitional agreement only reached at the 11th hour as part of horse trading over the final agreement will be of no value to businesses that have had to implement contingency plans by then instead. We need a straightforward transitional and we need it now,” Mr Evans said.

He noted that the ABI hoped a transitional deal would be confirmed before Christmas 2017, with a final version ready a month later, but progress has stalled.

“Since then, we seem to have gone backwards with, at times, our own government seeking to overcomplicate a deal by putting extra demands on the table such as extra restrictions on EU citizens,” Mr Evans said. He stressed that businesses and regulators need a transition agreement to manage the scale of change involved in Brexit.

“My message to the government and MPs tonight is simple: ‘please, get on with it’,” said the ABI’s director general.

The British Insurance Brokers’ Association (BIBA) has also spoken out on the urgency of transition plans. According to reports, BIBA said the insurance sector needs immediate certainty on the issue.

“Insurance renewals are being prepared which span the date we leave the EU,” said BIBA chief executive Steve White. He said BIBA is concerned by the lack of detail and progress over a transition. “In the absence of a transition, we’re faced with the prospect of breaking an agreement with the customer or breaking the law by honouring it,” Mr White reportedly said.

Brexit is high on the agenda at the ABI’s annual conference, which starts today and includes a keynote speech from Scottish First Minister Nicola Sturgeon. Opening the conference, deputy governor of prudential regulation at the Bank of England, Sam Woods, said regulators will not “go soft” on applying Solvency II capital rules to insurers after Brexit.

The Prudential Regulation Authority (PRA), which is headed up by Mr Woods, has opened a consultation on the application of Solvency II post-Brexit. But Mr Woods told delegates that the regulator is unlikely to overhaul the rules. He said the PRA has not seen evidence that Solvency II has negatively impacted insurers’ bottom lines.

“We can tell the difference between feedback about a genuine technical flaw and generalised lobbying for lighter-touch regulation,” Mr Woods said.

However, he conceded that the regulator would address ways to make the licensing process easier for new market entrants and consider ways to improve implementation of the directive.

Meanwhile, a key cross-party committee of MPs has criticised the UK Government’s response to its recommendations for a Brexit transition plan, calling on Theresa May to seize the opportunity at the European Council’s meeting next month to seal the deal, or risk jobs and business leaving UK shores.

“Transition is not yet a done deal,” said Nicky Morgan, MP and chair of the Treasury Committee. She said her government must resolve disagreements about the duration and governance of the transition period at the European Council’s March meeting or “dramatically diminish the value of whatever is eventually negotiated”.

The Treasury Committee published a report on Brexit transitional arrangements on 14 December 2017. In a response to the report, the government said this week it wanted to reach political agreement with the EU on transition at the March meeting, adding that the EU has put mandates in place to forward transition agreements with the UK.

The government also agreed that during an implementation period, the UK and EU will have access to markets under the same EU rules and regulations.

“The committee is pleased that the overall framework for transitional arrangements recommended in this report has largely been accepted by the government. Businesses are now crying out for the certainty of having a transition period secured,” Ms Morgan said.

However, she was critical of the government’s outlook for a future relationship between the UK and EU, post-Brexit transition. “Key questions remain unanswered and details are in short supply. ‘Canada plus plus plus’ is not a basis for long-term decision making,” she said. Ms Morgan added that businesses cannot begin to understand the impact of regulatory change, as recommended by the government in its report, until they know the detail. “Brexit uncertainty for businesses still looms large,” Ms Morgan said.

“In the absence of clarity, they will have no choice but to prepare for the one eventuality that they can understand: the worst-case scenario of a trade relationship based on WTO commitments,” continued the MP. This is a scenario that the Treasury Committee warned would prompt relocation of jobs and businesses from the UK to mainland Europe.