Brexit: Your PI insurance position
With the focus of the Brexit deal having centred largely on trade and cooperation, remarkably little discussion took place in relation to UK Financial Services. Indeed, this hugely important sector to the economy, and a major contributor to our positive net export position was not included in the deal at all. Discussions involving our own professional body, British Insurance Brokers’ Association (BIBA), have emphasised the current agreement as a ‘thin deal’ and the position of financial services will be the subject of further discussion, and hopefully agreement later in 2021. A memorandum of understanding is currently being prepared by Government in consultation with the sector, with discussions set to open in April.
With that in mind, we felt it appropriate to set out the immediate implications of the Brexit Agreement for our clients in terms of their insurance position and explain the measures we have taken to protect their domestic and international interests.
What has changed following the end of the Brexit Transition period?
Historically, many financial services firms (including insurers and brokers) have relied upon ‘passporting’ rights, which allow firms regulated in one EU member state to undertake certain regulated activities throughout the EU. Following the end of the transition period, UK firms are no longer entitled to operate on that basis.
Whilst certain temporary permissions have been granted to EU firms operating in the UK, at this point there are no equivalent rights for UK providers operating in the EU. So, with the exception of limited operations under a ‘run-off’ regime, UK providers are essentially prevented from accessing the EU’s single market.
This has significant implications for the clients of UK insurers and brokers with operations in the EU and for EU domiciled clients in countries that have traditionally looked to the UK insurance market to provide solutions.
Has this come as a surprise to financial services providers?
No, none of this should come as any great surprise. The Trade & Cooperation Agreement was never intended to cover financial services. It was hoped that provisions would be put in place to overcome the removal of passporting; however, it has been increasingly apparent that it was important for insurers and brokers to be putting at least contingency plans in place.
What actions were taken by Griffiths & Armour?
As a broker operating across the UK and EU, we took steps to ensure that we could continue to support clients in both jurisdictions and where necessary, appropriate measures were also taken by our insurer partners.
Following the Brexit vote in 2016, and aware of the broad range of potential implications, we established Griffiths & Armour Europe, a designated activity company based in Dublin and regulated by the Central Bank of Ireland. Over the past 12 months, we have been managing the transfer of our EU clients to Griffiths & Armour Europe DAC and establishing the basis for split arrangements where firms have operations in both the EU and the UK.
Why was Dublin seen as the right location?
Having worked with clients and industry bodies in Ireland for several decades, we have a long and established local reputation, which builds upon the very strong business and personal connections that exist between the two countries. As a result, we believed Dublin to be a natural home from which to serve the interests of clients across the EU.
Whilst ensuring continued regulatory compliance, the establishment of Griffiths & Armour Europe was also about enabling us to continue to deliver on the specification and level of service our clients have become accustomed to over the last 40 years of us providing pan-European services. And for our clients in Ireland it has added significance, in ensuring continued access to our facilities at a time when the insurance market across the UK and Ireland is facing a severe capacity shortage.
What does the future look like?
The framework we have established leaves us well placed to deal with risks across jurisdictions but there will be challenges. To some extent, insurers are still finding their way, and much will become clearer when the wider financial services agreements are established at national levels.
In the short-term, careful consideration needs to be given to the structure of each individual client’s arrangements to ensure that they can respond in a practical, effective and compliant way within the territories that they choose to operate.
In the medium-term, the broader discussions regarding the future relationship between the UK and EU are likely to continue to evolve, and as they do, we too will continue to adapt.
In the meantime, we feel the actions we have taken are a reaffirmation of our commitment to offer proactive support to all Griffiths & Armour clients. We acknowledge the tremendous support we receive in return, and we look forward to maintaining and building upon our valued client relationships across the UK, EU and beyond.
If you have any questions concerning the update on your PI insurance position, please get in touch with your usual Griffiths & Armour contact who will be happy to assist.