Brexit Continuity Clauses: what policyholders need to know

We have assisted Airmic to produce a guide for policyholders on Continuity Clauses, which some in the insurance market are using to prepare for the impact of Brexit.

The clauses aim to provide a level of contract continuity in the event that the UK leaves the EU without suitable transitional arrangements being put in place or without an agreement allowing UK insurers to perform cross-border business into the EEA.

The guide explains those Brexit issues of particular relevance to policyholders and explains what Continuity Clauses aim to do. Policyholders are encouraged to discuss the implications of Brexit for their insurance programme with their broker and this guide should assist policyholders in those discussions. Click here to access the guide.

Herbert Smith Freehills is Airmic’s Preferred Service Provider on insurance law issues and has assisted Airmic in producing a number of its technical guides over the past few years.

Paul Lewis
Paul Lewis
Partner, London
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+44 20 7466 2138
Geoffrey Maddock
Geoffrey Maddock
Partner, London
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+44 20 7466 2067
Sarah Irons
Sarah Irons
Professional Support Lawyer, London
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+44 20 7466 2060
Alison Matthews
Alison Matthews
Consultant, London
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+44 20 7466 2765

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COURT OF APPEAL DECISION IN ENRC: ORTHODOXY RESTORED ON LITIGATION PRIVILEGE, BUT NARROW INTERPRETATION OF “CLIENT” REMAINS FOR NOW

The Court of Appeal has handed down its eagerly awaited decision in the ENRC appeal: The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006. At first instance, the High Court took a restrictive approach to both litigation privilege and legal advice privilege (see our summary of the decision here). The Court of Appeal has allowed the appeal on the question of litigation privilege but has, with apparent reluctance, dismissed the appeal on legal advice privilege, concluding it is a matter for the Supreme Court.

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Green light for new Automated and Electric Vehicles Act

Last week the Automated and Electric Vehicles Bill received Royal Assent. The new Automated and Electric Vehicles Act represents the first legislative step towards the UK Government’s aim of establishing the UK as a world leader in the development of driverless car technology and creating “the most advanced and regulatory framework for driverless cars in the world.” The establishment of an insurance framework for automated vehicles is an important step towards the creation of a regulatory framework for this dynamic and rapidly evolving sector.

Anthony Dempster, Phil Pfeffer and James Allsop have written a briefing considering the key provisions of the new Act relating to automated vehicles. Click here to read the briefing.

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HIGH COURT RULES THAT BROKER WAS NOT IN BREACH OF DUTY IN FAILING TO PROVIDE ORAL ADVICE IN RELATION TO THE DUTY TO DISCLOSE

In holding that a broker was not in breach of duty by failing to give oral advice in relation to the disclosure of criminal convictions the Court has provided a useful reminder of the extent of a broker’s duty to advise in relation to disclosure. The Court also held that a lack of expert evidence materially limited, but did not exclude, the possibility of a finding that the broker breached its duty to act with reasonable care and skill.

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Near-final rules for extension of SMCR to insurers and brokers published

Near-final rules for the extension of the Senior Managers & Certification Regime (SMCR) to all financial services firms, including insurers and insurance intermediaries, have been published today by the PRA and the FCA.  The FCA has also confirmed that the extension of the SMCR to insurance intermediaries will take effect from 9 December 2019.

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EIOPA issues second warning about the impact of Brexit on insurance contracts

EIOPA has published an opinion and FAQs emphasising the need for insurers and insurance intermediaries to explain to policyholders how Brexit will affect their insurance cover.

At first sight, EIOPA’s comments appear to reinforce concerns that political compromise cannot be expected on policies written (or performed) on a cross-border basis before the UK’s withdrawal from the EU (so-called “legacy contracts”). The particular issue for UK insurers is whether they will have the authorisation they need, post-Brexit, to continue to meet their obligations to EEA policyholders under these contracts. Closer examination of the words used by EIOPA may, however, mean that fewer policies are caught by this issue than has been assumed to date.

Our discussion of EIOPA’s latest opinion can be found here.

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AML/CFT COMPLIANCE A KEY FOCUS OF RECENT SUPERVISORY INSPECTIONS BY THE HONG KONG INSURANCE AUTHORITY

Late last week, the Hong Kong Insurance Authority (IA) published a circular setting out its key findings from anti-money laundering and counter-financing of terrorism (AML/CFT) onsite inspections of authorised insurers carrying on long term business.

The IA conducted visits of more than 20 insurers to review their AML/CFT policies, procedures and controls and their compliance with the relevant legislative and regulatory requirements. Continue reading

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BREXIT UPDATE – EEA (RE)INSURERS

EEA insurers and reinsurers doing business in the UK under the insurance passport must prepare for the UK’s withdrawal from the EU. We consider, in our latest “At a Glance” guide, the impact of Brexit on the cross-border activities of EEA (re)insurers, including how firms might respond to the European Council’s recent agreement to a transition period.

The “At a Glance” guide can be found here.

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PRA AND FCA CLARIFY IMPACT OF BREXIT TRANSITION FOR INSURANCE SECTOR

Recent announcements made by the PRA and FCA clarify their approach to Brexit following the European Council’s agreement to a transition period for the UK’s withdrawal from the EU. In particular, insurers, insurance intermediaries and other financial services firms have been encouraged to assume that they will continue to benefit from passporting rights until December 2020. Whilst this is a welcome development, firms cannot be complacent:

  • As “nothing is agreed until everything is agreed”, there can be no certainty about the transition period until all terms of the Withdrawal Agreement are approved, which will only come much later (if at all) in the Brexit negotiations.
  • Failing such agreement, the UK’s “temporary permission” regime will enable firms coming into the UK from other EEA jurisdictions to carry on business here while they obtain the PRA and FCA authorisations needed for those activities. UK firms with EEA operations seem unlikely, however, to benefit from a similar concession.
  • In practice, this means that UK firms with significant EEA interests are continuing to plan, for now at least, on the assumption that there will be no transition period. Otherwise, they risk disruption to their business if the UK leaves the EU without agreeing the envisaged transition period as part of the terms for its withdrawal.

We consider the latest announcements from the PRA and the FCA. We also note the PRA’s policy statement (PS4/18) and Supervisory Statement (SS2/18) on its approach to branch authorisation and supervision, which were issued at the same time. Continue reading

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CAN A LAWYER BE AN ARBITRATOR WHERE THE REQUIREMENT IS FOR “EXPERIENCE OF INSURANCE OR REINSURANCE”?

In Allianz Insurance and Sirius International Insurance Corporation v Tonicstar Limited [2018] EWCA Civ 434, the Court of Appeal has reversed the decision of the High Court on whether a party-appointed arbitrator met the contractual requirements as to requisite experience. The dispute arose under a reinsurance contract that incorporated the “Excess Loss Clauses” of the Joint Excess Loss Committee. The arbitration clause required the arbitrators to have “experience of insurance and reinsurance”. The Court of Appeal held that that an English QC with experience of insurance and reinsurance law was sufficient to comply with this requirement.

This decision is of particular interest as such challenges to arbitrators rarely come before the courts. It highlights the importance of drafting arbitration clauses clearly, particularly where parties require their arbitrators to possess certain qualifications or experience. If insurance parties want a tribunal convened of one or more market practitioners, as opposed to lawyers with sector experience, this should be clearly expressed.

For more on this decision, see our arbitration team’s blog post here.

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