Brexit – deal or no deal?

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Insurers and reinsurers are bracing themselves for a hard Brexit as the possibility of the UK crashing out of the European Union without a deal grows. Negotiations are still taking place, and an agreement that provides extensive cross-border trading with minimal regulatory hurdles could, in theory, still happen. But the stark possibility of the UK’s ties with the EU being cut definitively in March next year is beginning to bite. The UK could strike a deal that keeps it in the EU's trade arrangements - the customs union and the single market – if it agreed to free movement of people and the jurisdiction of the European Court of Justice. In a widely derided White Paper on Brexit, Prime Minister Theresa May said she wants to keep close ties with the EU in certain areas, such as trade in agricultural products and allowing skilled migrants access to jobs in the UK. But at the same time, Britain would take back control of its laws, money and borders, while also allowing as "frictionless" trade as possible and avoiding a physical border for Northern Ireland. Supporters of Remain, Leave and also the EU negotiators themselves have said her plan is unworkable. Leaving without a deal and making a clean break with the EU means that the UK would fall back on its membership of the World Trade Organization (WTO), the body that governs international trade. UK exports to the EU would be subject to the same customs checks and taxes the EU currently imposes on countries like the US. So-called "hard Brexiteers" say it would create a genuinely independent nation that can strike its own beneficial trade deals around the world. In an interview with the BBC, Lloyd’s chief executive Beale criticised the Government’s White Paper saying that it was “disappointing”. “Professional and financial services are really not catered for at all and it’s very disappointing,” Beale said. “Lloyd’s is to open a subsidiary in Brussels so we will be full steam ahead, and many other banks, insurers and other financial services firms will be moving at pace now.” In a letter to the Financial Times newspapers, former Lloyd’s chairman John Nelson said a no deal exit from the EU would result in the UK becoming a much poorer and less influential country. “As a businessman, recently retired as chairman of Lloyd’s of London, I can see all too clearly the consequences for the economy, for employment and for the provision of basic services,” he said. Christopher Croft, chief executive of the London Insurance and International Brokers Association (LIIBA), agreed: “We are disappointed that the Government has not reflected the strong feedback from our industry that both EU clients and UK business would be best served by a mutual market access regime.” London market players have planned on the basis that there would be no deal and most have been busy establishing EU entities to retain passporting rights. In July, Chubb European Group was the latest to announce that it was redomiciling to an EU country – France in Chubb’s case - and adopting Societas Europaea (SE) status. No transition adds urgency Up until recently it seemed like there would be a transition period included in any agreement, possibly taking the deadline the end of December 2020. Hopes for a grace period are evaporating for UK re/insurers as no deal means “no transition period”, however. “The current level of uncertainty means that UK headquartered insurers are focussing on their existing plans to ensure they can activate their EU entities in Q1 2019,” says Ben Reid, associate partner in EY’s UK insurance business told Reactions. “It should mean they’re looking at aspects like recruitment in the EU 27 with more urgency.” “Also, there’s limited flexibility in their plans for a Part VII portfolio transfer – if they’re doing that,” he... CLICK HEADLINE TO READ MORE

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