UK chancellor: ‘Alive to the risk’ of post-Brexit insurance ‘uncertainties’
UK Chancellor Philip Hammond has said the government was “alive to the risk” that the UK’s withdrawal from the European Union “could in some cases create legal uncertainties as to the status of existing cross-border insurance, pension and other financial services contracts sold under passporting arrangements”.
The chancellor’s comments were contained in a letter dated 20 September, which was in response to an earlier written query on the part of Treasury select committee chairperson Nicky Morgan, and which became public knowledge today in media reports.
As reported, Morgan had written to Hammond on 14 September to warn him that UK-based pensions and insurance companies “may be barred from making payments [to] or taking money from EU customers unless the Brexit negotiations address the issue of contracts”.
At present, insurers and pensions companies must be authorised to sell their products to EU customers, pay claims and receive premium payments, with British companies able to do this under the EU’s “freedom of services” rules. This requirement “would create a problem if the Brexit talks do not reach an agreement on how to deal with the issue of business that pre-dates the withdrawal”, Morgan warned Hammond.
Morgan told Hammond the situation affecting the pensions and insurance contracts in Europe of UK expats and others living in the EU after Brexit was “a stark example of the consequences of a ‘cliff edge’ Brexit”, and pointed out that the Association of British Insurers (ABI) had already raised concerns about the issue.
No magic solution
In his reply, Hammond didn’t provide any magic solution to the problems spelled out by Morgan in her letter, but assured her that the government had been “actively engaging with the financial services sector — including the insurance and pensions industry — to understand how the UK’s exit from the EU could impact financial services firms and their customers, including through the effect of withdrawal on existing contractual relationships”.
He also stressed that there was a “shared interest for both the UK and the EU” in obtaining a post-Brexit outcome that would avoid unnecessary costs and disruptions on individuals, and that the UK negotiators’ aim was “to secure a bespoke and reciprocal arrangement that preserves the greatest possible market openness”.
March 2019 deadline
The problem for expats and others living in the UK who have, for example, British pensions, and currently receive payment from them, is that legal uncertainty currently surrounds how the contracts covering these pensions might be affected by the UK’s departure from the single market, currently scheduled for March 2019.
In a separate development in London, many news organisations were reporting comments made by UK prime minister Theresa May in a radio interview on Tuesday, in which she refused to guarantee the right of EU citizens to remain in the UK if Britain failed to secure a Brexit deal with Brussels.
Responding to a question on LBC radio, the prime minister admitted “we don’t know what’s going to happen” to British citizens living in Europe if a no-deal scenario were to occur.