Brexit secretary goes as insurance industry reaction to deal pours in
Just when you think we’ve turned a corner in Brexit negotiations, with a deal finally on the table, the story that just won’t end offers another twist.
This morning Brexit secretary Dominic Raab quit the UK cabinet citing Theresa May’s handling of the negotiations in what is seen as a serious blow to the Prime Minister and one that may put her own position in threat.
“Today, I have resigned as Brexit Secretary,” Raab said on Twitter. “I cannot in good conscience support the terms proposed for our deal.”
By quitting over the issue, Raab is now seen as a frontrunner for a potential leadership contest.
Meanwhile, reaction from the insurance industry has been pouring into Insurance Business all morning.
“While it is encouraging to see a dedicated section on financial services, we have to hope that the fact the draft is solely built around the concept of ‘equivalence’ is for the sake of brevity and simplicity,” said LIIBA CEO Christopher Croft. “Otherwise, those of us who have no equivalence regime have cause for serious concern. As do our clients.
“The current European legislation covering insurance brokers – Insurance Distribution Directive – has no concept of equivalence or the market access rights it might grant. Without this it is unclear what the agreement published yesterday would mean for our sector.”
Norton Rose Fulbright insurance partner Bob Haken did not hold back with his views on how the sector may be impacted, describing the focus on equivalence as “unfortunate.”
“What the Political Declaration does say about financial services in general is that there will be commitments to “preserving financial stability, market integrity, investor protection and fair competition, while respecting the [UK’s and the EU’s] regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest”,” he said. “This focus on equivalence is unfortunate for the insurance industry as, unlike some other financial services, equivalence under Solvency II does not grant market access for insurance business (reinsurance is treated differently under Article 172 of the Solvency Directive pursuant to which equivalence does come with market access). At present therefore it seems unlikely that the Withdrawal Agreement or Political Declaration will preserve passporting rights for UK insurers.
“For reinsurance, there is a glimmer of hope in that there is a commitment to reaching equivalence decisions as soon as possible after 29 March 2019, endeavouring to conclude those assessments by 30 June 2020. However, in a missed opportunity, neither document recognises the important issue of contract continuity following the expiry of the transitional period, meaning that the contingency plans that many hoped would be unnecessary will have to be deployed by the end of 2020.”
A cautious stance was put forward by the London Market Group, which offered an outline as to what the future may hold for insurance brokers.
“The LMG welcomes the Cabinet’s decision on the draft withdrawal agreement as it is an important step closer towards avoiding a cliff edge that would cause significant disruption to clients across the UK and the EU,” stated Claire Lebecq (pictured), CEO of the LMG. “The Political Declaration on the Future Relationship” starts the process of longer term negotiations.
“The LMG has consistently highlighted the mutual benefits for both the EU and the UK in an enhanced equivalence regime for commercial (re)insurance trading, including a provision for insurance broking services. We will continue to play an active role in representing the interests of our clients and firms as we work with the Government on a suitable framework.”
We’ll bring you more on this story as it develops.