Bank of England wants Brexit solution for cross-border insurance

The Bank of England (BoE) has warned that a political solution is needed to address continuity of cover for millions of policyholders on either side of the Channel, when the UK leaves the European Union.

In a report concluding that the UK’s banks could withstand the “unlikely event” of a no-deal Brexit, the BoE states that 6 million UK policyholders currently buy insurance from EU insurers, while more than 30 million policyholders in European Economic Area countries are covered by UK providers. This protection is at risk from loss of passporting rights between the EU and UK, following Brexit. Furthermore, the BoE report estimates that the value of financial insurance between EU and UK banks totals £26trn.

Meanwhile, the BoE has said the UK’s seven largest banks passed its stress test for the first time since the financial crisis. BoE governor Mark Carney said in the event of a no-deal Brexit, the UK’s economy would experience “pain” but that banks would withstand a “disorderly Brexit” and even the worst-case scenarios of a 33% fall in house prices and a rise in interest rates to 4% over two years.

In its analysis, the BoE lists three main areas to clarify in Brexit negotiations to ensure financial stability. These are: a clear EU-UK regulatory framework and agreement on an implementation period, as well as legislation in both the UK and EU to allow cross-border insurance and derivative contracts to continue.

- Commercial Risk