In a position paper published in June, the German Insurance Association (GDV) made an attempt to answer the pressing question regarding what should German insurers and competent authorities focus on the next months ahead Brexit.
Although the British government has underlined that they want to keep a “deep and comprehensive partnership” with the EU, GDV warns that a “Cliff Edge” for insurers remains a viable option, advises Eva-Maria Goergen from Ince&Co law firm.
The paper notes:
- Both sides should realise the access to financial markets by stabilising consistent regulations. A single license will be unlikely as outside the EU there is no guarantee for a joint regulatory regime. All governments should work to establish third party equivalence taking the necessary steps as soon as there is a transition period and also try to create an Art. 171, 175 Solvency II-Agreement (maybe following the tracks of the covered agreement with the US).
- Supervisory authorities should cooperate as closely as possible for guaranteeing a uniform and swift approval procedures when insurers are realigning their overseas business. The common ground must be that no one drops below the solvency II level. Arbitrage will not help anyone’s industry.
- Insurer should closely monitor the effects of Brexit on UK approved/rated derivates within their capital requirements. Many insurers have derivatives which need to be cleared and many clearing houses are located in Great Britain. European insurance companies have to think about restructuring their portfolios.
- For keeping the insurance business between the EU und the UK alive, both parties should realise a uniform level of protection of personal data which could be based on the recent General Data Protection Regulation.
- It is everyone’s interest to allow highly qualified employees to move freely between UK and EU27. The UK proposed an application procedure to guarantee the right to stay for all people who have been working in the UK the past five years. EU-citizens arriving during the transition period need to be registered. If that will be the future, there would be no immigration for EU-habitants to the insurance markets after Brexit – a detriment for all involved.
- European governments should complete capital markets union before Brexit. Insurers – as one of the biggest group of investors – depend on harmonised and deep integrated capital markets.
- Insurers and governments should also be prepared for a “Cliff Edge” and think about establishing subsidiary companies because this process is very time-consuming. Time is key: Brexit is the new way of working as of 30 March 2019.
Hope for the best and plan for the worst, and remember: the best for the insurance industry might be a transition period to adjust to changes. Even if the best is a free trade agreement it is very likely that it – like agreements with other jurisdictions show – focuses on trade and leaves little room for simplification for the financial industries,
…notes Ms. Goergen.
