To continue to meet commercial clients’ needs, insurance brokers caught up by Brexit may need to create new subsidiaries
The UK’s looming exit from the European Union and its impact on broking for the commercial insurance buying market is the topic of a report issued by the London and International Insurance Brokers’ Association (LIIBA) and advisory firm EY.
LIIBA, which represents London market insurance brokers, emphasised uncertainty concerning the ability of intermediaries to place and service European risk from the UK post-Brexit.
The report summaries the regulation for intermediaries and authorisation process in 10 EU countries.
“The spotlight so far has been on the decisions of underwriting firms as to how they will navigate a post-Brexit marketplace,” said Christopher Croft (pictured), LIIBA’s CEO.
“However, the broking industry also faces major challenges and we are working closely with members to help them make the right contingency plan to protect the interests of their clients. That may require them to create a subsidiary entity in EU. This report will help them choose the most appropriate location for that entity,” said Croft.
He emphasised the need for confidence and continuity regarding contract certainty, so that clients with existing policies are not disadvantaged by Brexit
“We support the call from the CEO of the FCA for a single, official solution to this rather than leaving firms to fend for themselves. But we also need to ensure that the flow of business into London can continue whatever the outcome of the negotiations. This report will support our members plans to achieve that,” added Croft.
Benedict Reid, UK Insurance Brexit Leader for EY, commented: “Brokers have a fundamental role to play to maintain client service and insurance trade flows between the EU27 and the UK post-Brexit.
“This should be front of mind for brokers. It is essential that Brexit plans are connected across the entire value chain – from client to broker to insurer and reinsurer – to avoid a situation where business cannot be placed with newly-authorised underwriting entities,” said Reid.
He warned that brokers risk being left behind in the ability to trade with underwriters’ new entities, which could result in disruption to their clients, trading partners, and their own businesses.
“As underwriting firms continue to develop their Brexit plans, brokers should expect significant volumes of communication which will enable them to align with new models, and for their clients to be transferred to a new European or UK legal entity if required,” said Reid.
“Time is now very short for those brokers who need to develop their plans for authorisation to continue trading cross-border with the EU27,” he added.