Re/insurers ‘should prepare for the hardest of Brexits’

Re/insurers should now assume that the UK will not complete a deal with the EU before it leaves the union in March next year, and prepare for the worst, Clive O’Connell, partner and head of insurance and reinsurance at law firm McCarthy Denning, told Monte Carlo Today.

O’Connell said most re/insurers have already established plans for such a scenario, and those that have not should act now.

“Assume the hardest of Brexits. Assume no deal. Establish operations that give the flexibility to cope with that scenario. Most reinsurers already have, and can switch the place from which they accept business very quickly,” he said.

He said the worst-case scenario would be no deal with the EU and no trade deal with the US. He explained that the EU and US have entered into a treaty on reinsurance which will be implemented over the next four years. The effect, when implemented, is that EU companies will be able to reinsure US entities with no collateral obligations.

This could be bad news for the UK, he said. “It means that it will be cheaper to write reinsurance of US entities from within the EU and not London. This could be an existential threat to London. A no-deal Brexit would mean no equivalence. This could damage London’s role.”

All UK re/insurers can do is prepare for such a scenario and develop a good working relationship with the appropriate EU regulators, he concluded.