Brokers risk being cut off the EU market due to Brexit

As it is more likely than not that the UK will leave the EU without any alternative arrangements in place, UK brokers are at risk of losing access to the EU market, according to specialist law firm Carter Perry Bailey.

Currently, similarly to insurance companies, insurance intermediaries with headquarters in the UK, and authorised and regulated by the Financial Conduct Authority of the UK, have the right to provide services as an intermediary across the single market.

Such intermediaries are entitled, under the EU’s passporting arrangements, to register with the regulatory authorities of other member states and then provide their services in those member states.

UK insurance brokers trade some £7.8 billion annually in European revenues, which means that the UK holds the number one position in the European insurance market.

Nearly 3,000 UK intermediaries take advantage of European Economic Area (EEA) passporting. Nearly 6,000 EEA-based insurance intermediaries are passported to trade in the UK.

A number of commentators believe it is more likely than not that the UK will leave the EU without any alternative arrangements in place – or that transitional arrangements will only be agreed at the last minute, according to the law firm.

In the area of direct insurance, local law often states that a local risk can only be written by an EEA-authorised insurer or with the benefit of an EEA passport. In the absence of a new trade agreement, brokers may have to find new markets to place risks for their clients and the pattern of business may change accordingly.

Focusing on the issue of access, in the event that no transitional arrangements are made, the main options for a UK-headquartered broker wishing to continue doing business in the EEA, or for an EEA-headquartered broker wishing to continue doing business in the UK, there are two options, according to Carter Perry Bailey.

They can either apply on a bilateral basis in the country in question for a licence or authorisation to continue business in that jurisdiction. Or they can establish or acquire an authorised intermediary in one or other of the remaining member states and rely on that entity’s passporting rights.

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