Best’s Briefing: U.K. Insurers Rated by AM Best Well Prepared for Brexit

Benzinga

The terms and timing of the United Kingdom’s withdrawal from the
European Union (EU) remain uncertain following the vote in the House of
Commons on March 12, 2019 rejecting the deal agreed with the EU by Prime
Minister Theresa May’s government, and the subsequent vote in favour of
requesting an extension of Article 50. If an extension is granted by the
EU, Brexit will be delayed beyond March 29, 2019.

In a week of significant activity, the U.K. Parliament also voted to
reject a no-deal Brexit under any circumstances. Although U.K. insurers
have welcomed this outcome, the industry is frustrated that the terms of
an orderly withdrawal are still not agreed. Nevertheless, AM Best
notes in a new briefing, “U.K. Insurers Rated by AM Best Well Prepared
for Brexit”, that regardless of when or under what terms the U.K. leaves
the EU, rated U.K.-domiciled insurers are generally well prepared.

When the U.K. withdraws from the EU, and at the end of any transition
period, passporting rights that currently exist between the U.K. and the
European Economic Area (EEA) are expected to cease, and U.K.-domiciled
insurers will no longer be able to issue insurance contracts in the EEA.
It is also possible that if there is no trade deal encompassing
financial services, U.K. insurers will not be able to service existing
contracts in certain EEA countries by settling and paying claims.
Companies domiciled in other EU countries that conduct insurance
business in the U.K. also will be affected by a loss of passporting
rights. However, the impact will be cushioned by the U.K. government’s
Temporary Permissions Regime, which will allow EEA insurers to operate
in the U.K. for a maximum of three years post Brexit while they seek
authorisation from U.K. regulators.

Catherine Thomas, senior director, analytics, said: “Companies have
welcomed announcements by HM Treasury in the U.K. and the European
Insurance and Occupational Pensions Authority (EIOPA), which support the
orderly run-off of insurance business if there is no withdrawal
agreement between the U.K. and the EU.

“In further support of the orderly run-off of existing EU business by
U.K. insurers, AM Best notes the announcements made this year by a
number of European countries, including France and Germany, that new
rules will be put in place to allow claims to be paid by U.K. insurers
post-Brexit. AM Best will continue to monitor closely political
developments in the U.K. and the EU, and the ability of rated insurers
to fulfill their contractual commitments, irrespective of the terms on
which the U.K. leaves the EU.”

To access the full copy of this briefing, please visit www3.ambest.com/bestweek/purchase.asp?record_code=283758.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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