Credit risk insurance and export credit agency (ECA) guarantees play an important role in facilitating trade, whether that is in commercial supply chains, large projects or complex financial transactions. The product has, arguably, never been more important. The collapse of a number of well-known names in the UK high street in recent months has brought a renewed focus on the benefits of credit insurance. Indeed the ability to secure credit risk insurance is sometimes seen indicator of the financial health of a company. In recent years, financial institutions have also increasingly looked to credit risk insurance as a way of maximising capital relief.
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.
Sarah IronsProfessional Support Lawyer, London
+44 20 7466 2060
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  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.
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.
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.
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.
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.
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.
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