Insurance Jottings

London Market needs EU equivalence regime change in Brexit deal: LMG

The UK government has recognised that the London Market does need to see significant changes to the EU equivalence regime but there are no equivalence frameworks for insurers under Solvency II or for brokers under the Insurance Distribution Directive, said Clare Lebecq, CEO of the London Market Group (LMG).

 

Earlier in November, The Association of British Insurers (ABI) welcomed the prospect of a Brexit deal which includes a regulatory equivalence regime for financial services with the EU enabling mutual market access.

 

An equivalence regime would mean that the EU recognises the financial services standards and their enforcement in the UK as equivalent to the EU. In theory, both parties would remain free to set their own standards and market access as long as regulatory outcomes are broadly the same.

 

The EU has developed an equivalence approaches for financial services with Japan, the US and Canada.

 

But such a standard approach may not work for the London Market.

 

“The EU has long recognised that the treatment of firms providing financial services to sophisticated, commercial clients should be more flexible,” Ms Lebecq said. She stressed that access to the right markets is key if EU clients should continue to benefit from competition amongst service providers.

 

“In other sectors, such as investment management, this is recognised, and appropriate equivalence regimes exist to preserve EU client access to appropriate third countries. We are keen to ensure that both sides of the negotiations see the mutual need to extend this sort of arrangement to insurance and insurance intermediation,” Ms Lebecq explained.

 

The LMG is working with the UK government to show how these precedents could be leveraged to allow a mutually beneficial trading relationship to continue in insurance, Ms Lebecq noted.

 

“We have had a positive response so far and will continue to develop these proposals because we need a solution that works for the whole market; for brokers, carriers and reinsurers,” she said.

 

The Brexit deal which the UK government has negotiated with the EU will be put for vote in parliament on the 11th December.

 

There is a good chance that the deal will be voted down, according to market observers, which may mean that the UK leaves the EU without a deal.

 

“If we do see the deal voted down, then the government and parliament may well need to consider other options,” Ms Lebecq said. “LMG has been clear, however, about the negative consequences of a ‘no deal’ for the industry and where this would leave our clients,” she added.

 

The LMG has been warning about the challenges regarding the fulfilment of contracts in a ‘no deal’ scenario. “It would be unacceptable to see EU clients left in a detrimental position, not knowing whether their claims would be paid or not,” Ms Lebecq said.

 

Some member state governments such as France and Germany are introducing contract continuity laws in the event of there being no deal with the UK.

 

“If the current deal goes through, the next stage is for the government to see if they can find a future arrangement which preserves as much cross border trading as possible,” Ms Lebecq said.

 

“Our Brexit Taskforce, representing all elements of the market, was disappointed that the government felt it could not pursue a mutual market access agreement, but we have continued to work with them to propose alternatives,” she said.

 

RSA secures approval for Brexit plan

On the 4th December UK-based RSA Insurance Group announced that it is transferring its European insurance business to its new Luxembourg office in preparation for Brexit.

 

AM Best picks Amsterdam for new Europe unit post-Brexit

Rating agency AM Best has unveiled its new subsidiary AM Best (EU) Rating Services, based in Amsterdam.

 

The new office will enable the agency to continue to provide ratings to be used for regulatory purposes post-Brexit across the EU member nations. AM Best (EU) has been registered with the European Securities and Markets Authority (ESMA) as a credit rating agency (CRA).

 

The agency’s London-based subsidiary AM Best Europe — Rating Services is at present registered with ESMA in Paris, which allows it to provide rating services throughout the EU on a cross-border basis.

 

The London office will continue to act as its hub for the EMEA region. AM Best plans to register it with the UK Financial Conduct Authority (FCA) which is assuming responsibility for the supervision of UK-based credit rating agencies post-Brexit.

 

AM Best said it selected Amsterdam for its new European office because of its well-established financial centre, excellent talent pool and good transport links to all the major European locations.

 

“We welcome this news that our application has been successful. ESMA’s registration of AM Best’s Amsterdam office enables us to prepare for any kind of Brexit outcome, to ensure continuity of our rating services for our clients,” said Roger Sellek, chief executive of AM Best’s Europe, Middle East, Africa and Asia Pacific operations.

 

Nick Charteris-Black, managing director, market development for AM Best Europe, Middle East and Africa, added: “The Amsterdam office reinforces AM Best’s ambitious growth agenda for continental Europe and demonstrates our commitment to providing continuity of rating services throughout the EU post-Brexit whilst developing our coverage in other international markets across the broader EMEA region from London.”

 

New maritime environmental regulations will stretch limits of P&I cover

The maritime sector has seen a recent increase in stricter environmental regulations. Each of them has their own set of challenges and prospects for the industry.

 

Perhaps the most prominent at present is the upcoming 2020 global sulphur cap, which involves a significant reduction in the sulphur content of fuel oil used on ships – from 3.50% m/m to 0.50% m/m.

 

Akshat Arora, Senior Surveyor, discusses the impact of this regulation for shipowners and the ways to comply with it, in an article published in Insurance Day.

 

The article is available on the right, reproduced with kind permission, and on the Insurance Day website.

 

New Lloyd’s broker prepares launch

Marken Re Specialty is a new specialty insurance and reinsurance broker that is set to be launched soon by Pieter Vlasbloem.

 

Marken Re will be an authorised representative of Dublon Insurance Brokers which was formed in 2006 and is approved by the UK’s Financial Services Authority (FSA) and admitted as a Lloyd’s broker in 2007, according to the website.

 

“I am pleased to announce the establishment of a specialty re/insurance broker,” said Vlasbloem, managing director at Marken Re on his LinkedIn profile.

 

The specialty areas which Marken Re wants to target include trade & investment credit, surety and political risks, as well as agriculture and energy.

 

Robus opens Malta office to access single market post-Brexit

Independent insurance manager and financial advisor Robus Group has opened an office in Malta to give clients the ongoing ability to access the single market after Brexit.

 

Licensed by the Malta Financial Services Authority, the office is based in San Gwann and complements Robus’ offices in Guernsey and Gibraltar.

 

Spearheading this operation is Jonathan Abela, an insurance and risk professional with almost 30 years’ experience in the Middle East and Europe. He and his colleagues will service clients seeking an EU solution to their domiciliary requirements.

 

Richard Le Tocq, CEO of Robus, commented: “Obtaining our Malta licence at this pivotal time for business in Europe is extremely timely and will mean that we can offer genuinely independent advice to our clients whether they need to be in a European jurisdiction or otherwise.”