Why Brexit will have a big impact on the Captive insurance market
From: Airmic, August 29, 2018
By Simon Burtwell, Jenny Coletta, Ben Reid and Martin Powell, Ernst & Young
With just under a year to go until the UK leaves the EU a lot of attention has been paid to how the insurance industry is responding to Brexit and the disruption it will cause. There has been much less information about Captives – yet the implications for them are far-reaching. Simon Burtwell, Jenny Coletta, Ben Reid, and Martin Powell of EY provide an overview of the key challenges.
The scale of the Brexit challenge for the insurance industry is very substantial. (Re)insurers, brokers and MGAs who write EU or UK business cross-border through Freedom of Services or Freedom of Establishment are all potentially impacted if these freedoms disappear upon Brexit. Insurance firms are having to restructure their UK and European operations to continue to trade cross-border with the EU27. Some of these organisations have been planning for Brexit since before the 2016 referendum, with many now very firmly in the implementation stages.
On 19 March 2018, the UK and EU issued a draft Withdrawal Agreement that provides an agreed draft legal framework for the treatment of key issues during the Brexit implementation period. Some of the text has been agreed in full but there are significant areas where the detail has to be finalised. The transition period will end with the UK formally leaving the EU on 31 December 2020. Legal certainty on the agreement, including the transition period, will come only with legal ratification. The UK and the EU negotiating teams aim to finalise the entire Withdrawal Agreement by October 2018.
Assuming the Withdrawal Agreement is ratified, the deadline for completing restructuring will therefore become 31 December 2020. This is a welcome delay but key details concerning insurance regulation, in particular the Free Trade Agreement sought by the UK with the EU27, remains undecided leaving insurers faced with the choice of continuing their implementation plans or waiting for regulatory issues to be decided and hoping that there is sufficient time to implement any necessary changes.