LONDON (Reuters) - British and European Union insurers need transitional agreements and a “mutual market access” deal to preserve London’s place as a global hub after Brexit, an insurance lobby group said on Wednesday.
Britain also needs to negotiate a reinsurance agreement with the United States, one of the sector’s biggest markets, on a similar basis to a recent deal between the United States and the EU, Malcolm Newman, leader of the London Market Group’s Brexit task force, told Reuters.
The EU’s bilateral trade deal for insurance with Switzerland could be a template for an insurance deal between Britain and the EU as it contains a mechanism for resolving disputes, Newman said.
Around 30 insurers, including the Lloyd’s of London specialist insurance market, have already announced plans for an EU subsidiary in the event of a hard Brexit, as they wait for clarity on a Brexit deal.
“In some ways this is a game of poker,” Newman said.
In order to avoid a cliff-edge, the task force is calling for a transition period after Brexit in March 2019 to bridge the gap to new trading arrangements.
A mutual recognition and market access deal would then allow different regulatory regimes, said Newman, who is also managing director of reinsurer SCOR’s (SCOR.PA) EMEA hub.
It echoes a similar call from banks and UK regulators, but critics say no such deal has ever been negotiated on such a scale before and could take years.
LMG’s task force was set up to speak directly with the finance ministry and the department for exiting the EU as insurers “didn’t really have a voice” in broader financial sector talks, Newman said.
The largest market for LMG members, however, is the United States.
EU and U.S. regulators signed a “covered agreement” in September to accept each other’s insurance and reinsurance rules to cut costs for transatlantic business. Brexit means that Britain will need to agree a similar bilateral deal with the United States as well.
“We need a solution,” Newman said. The LMG was starting talks with the government’s trade ministry about this, he added.
In the immediate aftermath of the Brexit vote, insurers and banks pushed for a continuation of passporting, which allows financial services firms to sell their products across the EU without the need for locally regulated subsidiaries.
They dropped those plans earlier this year as they saw little realistic chance of success.
A Brexit working group of British and European insurers, the London Market Group, and the Association of British Insurers, have held regular meetings with the government over the past six months, Newman said.
Reporting by Carolyn Cohn and Huw Jones, editing by David Evans