As of Jan. 31, 2020, Brexit is finally here. But the UK’s departure from the European Union shouldn’t have any immediate impact on UK or EU insurers, A.M. Best said in its latest commentary.
That could change in another 11 months because trade negotiations between the UK and EU must resolve regulatory equivalence and other post-Brexit issues.
First, there is an 11-month post-Brexit transition period, where, as A.M. Best points out, UK insurers will still be able to underwrite European Economic Area business through existing passporting rights. European Economic Area-based insurers will be able to do the same in the UK.
The end of that 11-month period is where changes will accelerate, when those passporting rights end between the EU and UK.
Of course, there are some insurers who have already plotted out their futures. A.M. Best noted that UK domiciled insurers including commercial lines writers and Lloyd’s have already made arrangements to continue writing business in the European Union after the transition period, mostly through new EU-domiciled subsidiaries. Other small insurers have formed relationships with local carriers that can front businesses for them.
Equivalence negotiations will focus on areas including reinsurance, solvency calculation and group supervision.
Even if passporting rights end, most life and P/C insurers primarily focus on domestic business or have subsidiaries in the UK and at least one EU country, A.M. Best said.
Source: A.M. Best