Policies bought by European Union customers from British insurers would still be valid if the UK crashes out of the bloc next month with no deal, the EU’s insurance watchdog said on Tuesday.
The European Insurance and Occupational Pensions Authority (EIOPA) published recommendations for national insurance watchdogs on how to treat policies that EU customers have bought from UK-based insurers.
The Bank of England has warned that “contract continuity” problems could arise, such as it becoming illegal to pay out on a claim, if the EU made no contingency plans for a no-deal Brexit.
With fewer than 40 days to go, Britain has no deal with the EU to ensure a smooth exit and avoid a rupture in business ties until new trading terms are agreed.
EIOPA said that in principle, insurance contracts concluded before March 30 by British insurance companies in the EU27 remain valid after that date.
“However, the insurance undertakings would not any more be authorized to carry out insurance activities with regard to these cross-border insurance contracts,” EIOPA said in a statement.
The guidance goes some way to reciprocating steps already being taken by Britain, whose “temporary permissions” regime would allow EU27 insurers to continue serving UK customers in the event of a no-deal Brexit.
“Besides the fact that UK insurance undertakings have taken appropriate measures for most of the cross-border insurance into the EU27, there is a residual amount of business that would become unauthorized when the United Kingdom leaves the European Union,” said EIOPA chair Gabriel Bernardino.
This residual business is worth 7.4 billion euros ($8.4 billion) and centered on a handful of UK insurers, EIOPA said in November.
Huw Evans, director general of the Association of British Insurers, said the guidance helps reduce legal uncertainty over paying some insurance contracts post-Brexit.
“Allowing contracts signed before Brexit to run off and extra time for insurers to transfer portfolios into the EU27 are also pragmatic decisions which we welcome,” Evans added.
Aviva, Britain’s second largest insurer, said on Tuesday it had obtained court approval to transfer around 9 billion pounds in assets to a new Irish company at 2259 GMT on March 29.
Several insurers are transferring policies of EU based customers to new hubs in the bloc, though Lloyd’s of London won’t complete the transfer of business to its new Brussels subsidiary before March 29.
The EIOPA guidance said that provided a transfer of a portfolio to the EU was begun before Brexit, national regulators in the bloc should allow it to be finalised.