LMG urges ministers to back Brexit deal based on 'equivalence'
As Michael Gove, a senior minister in Prime Minister Boris Johnson’s new government, told the UK’s Sunday Times newspaper that the government was working to the assumption of a no-deal Brexit, the London Market Group (LMG) has published its Brexit update report ‘A new relationship with the European Union’.
The LMG said that with the new UK government now in place, and positions in the Treasury filled, it would again reach out to ministers and officials to ensure they understand the implications of no-deal to the London insurance market. In its report the group also highlighted what it would like to see in the Brexit Withdrawal Agreement.
Clare Lebecq, LMG CEO, said: “We have built up strong relationships with Westminster and Whitehall in the last several years, and many of them now understand the importance of the London insurance market to UK plc. With John Glen returning as City Minister there is a degree of continuity, but we are still seizing the opportunity to reach out to new ministers so they know what the market is looking for in each possible scenario. We will continue to ensure that the market’s voice is heard on Brexit.”
The report reiterated that the consequences of a no-deal Brexit on October 31 2019 would be significant even though UK-based brokers and insurers have activated contingency plans, which involved setting up a new company in an EU27 country.
“While these contingency plans have ensured service continuity for London Market clients, the creation of these structures has come at significant cost to the industry,” the report said.
“[In the event of a no-deal scenario] the Market’s successful model of centralisation of capital and expertise would be undermined, making the UK a less attractive place to do insurance business.”
LMG emphasised that currently, EU economies benefit from access to London and said it is the “go-to location for specialist insurance knowledge” as well as being "one of the few markets that can offer the EU27 clients the market capacity to cover the full range of liabilities in a single policy”.
With more than £8 billion of premium brought annually to the London Market by brokers on behalf of EU customers, and more than £6 billion international business written in London by firms with a parent company or principal base located elsewhere in the EU, the group said it was crucial for mutual market access between the UK and EU post Brexit to continue.
LMG warned that business could be lost from the London Market as commercial clients with complex risks and service requirements have “greater freedom to access markets across borders and in third countries to obtain the most effective and efficient service”.
The group proposed that the government considers a “new economic and regulatory agreement based on equivalence between the UK and EU for those professional and commercial clients seeking cross-border services for ‘large risks’, permitting non-life insurers in both the UK and EU to offer large risks insurance on a cross-border basis without hindrance to policyholders.
“Critically, it must be extended to brokers. If a new economic and regulatory arrangement does not permit UK-based brokers to provide broking services in the EU, their access to EU markets will depend on the legal position of individual member states. This could result in EU business flows passing through EU27-based brokers only, reducing access for EU clients to the London Insurance Market and the most suitable commercial (re)insurance products (and vice versa).”
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