Insurers in Britain face crunch time within weeks if the government and the European Union do not allow millions of cross-border policies to continue to run undisturbed beyond Brexit.

While Britain is not due to leave the bloc until March 2019, insurers say they need to know by November whether they must move contracts with EU customers out of Britain, due to the lengthy legal process involved.

Britain and the EU are currently negotiating divorce terms.

“The preferred option would be something in the negotiations that gives the regulators the appropriate political approval to start working on a mechanism to allow these existing contracts to continue operating as they are,” Hugh Savill, director of regulation at the Association of British Insurers, told Reuters in an interview.

Leaving contracts to operate unchanged after Britain has left the EU is known as “grandfathering.”

Without this, an insurer would have to move contracts for EU customers to a new EU subsidiary after 2019 for them to remain in the same legal jurisdiction as the customer, or sell that portion of their business. Both options involve a court process, which takes time to implement with Brexit only 19 months away.

“You have to go to court to get approval for transfer, and you also need the approval of the regulator at both ends. That means the transfer has to start by November 2017 otherwise you run out of time,” Savill said, adding that the process could affect millions of contracts.

“If the government has not negotiated something that looks reasonably trustworthy in the next couple of months, companies will have to start putting this alternative contingency planning into action.”

The issue is particularly acute for long-term insurance contracts such as pensions, or contracts where policyholders can make claims for years after the policy expires, such as professional indemnity cover.

The specialist Lloyd’s of London market has also called for grandfathering of contracts, saying it would be impossible to transfer all the contracts in time.

Insurers in Britain are regulated by the Bank of England’s Prudential Regulation Authority. A PRA spokesman referred to a letter from PRA chief executive Sam Woods to parliament this month in which he said there is a possibility of a significant increase in the volume of transfers.

“We are engaging further with firms and trade bodies to examine the possible mitigants to these risks and determine which are likely to be most effective,” Woods told parliament.

But Paul Merrey, a partner at accounting firm KPMG, said some insurers have already begun court transfers, with others expected to start later this year.

“It’s an issue both ways, for UK and EU insurers, but it’s fair to say that the process might be easier for EU insurers transferring portfolios to the UK than for UK insurers transferring to the EU,” Merrey said, adding that the process can vary between countries.

The BoE has said that about 7 percent of general insurance contracts undertaken in Britain and 3 percent of life insurance contracts are written by insurers elsewhere in Europe.

Early movers want to avoid potential court bottlenecks.

“There is not enough court time, there are not enough independent experts – the scale of the challenge and demands on the regulators’ time are significant,” Merrey said.

Topics Carriers Europe