According to the London and International Insurance Brokers' Association (LIIBA) in a letter to the prime minister, the proposals for an 'enhanced equivalence' regime for UK financial firms, based on that already available to non-EU countries, will not work for intermediaries. As there is no such equivalence framework in either the EU's Insurance Mediation Directive or its replacement, the Insurance Distribution Directive (IDD), which comes into force on 1 October 2018, there is no existing regime to be enhanced.
"Buyers of insurance must not be the unintended victims of Brexit," said LIIBA chief executive Christopher Croft, writing on LinkedIn.
"Major EU corporations could be faced with profound consequences post Brexit without access to London insurance. We need to find a way of maintaining client access to the speciality expertise in London that allows us to provide the cover that simply could not be sourced anywhere else."
"The government's white paper provides a measured foundation from which the right future trade agreement for financial services can be built. We understand in general why that focusses on the existing equivalence regimes but our own relevant directive - IDD – has no such concept. We are keen to work with the government to help find a pragmatic way forward," he said.
LIIBA's proposal is that the UK government seek an equivalence regime similar to that available to investment managers under the Market in Financial Instruments Regulation (MiFIR). MiFIR contains some provisions allowing third country investment firms to provide services to professional clients in the EU even if they do not have an EU establishment, provided that they are registered with the European Securities and Markets Authority (ESMA).
The UK government is seeking a "new economic and regulatory arrangement for financial services" to replace the single market 'passporting' rules, according to a white paper it published last month. However, the paper is light on practical detail, and any future plans for existing arrangements will be reliant on the UK and EU agreeing quite extensive enhanced equivalence during their ongoing negotiations, according to insurance law expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law.com.
"The lack of an existing equivalence regime for existing insurance-related activity across borders in the EU does mean that a loss of passporting currently leaves no similar option for intermediaries as things stand," Ashby said, commenting on the LIIBA letter.
"The documentation issued by the UK government so far does not provide the level of detail needed to understand how the proposed approach would work in practice, so it is not surprising that the industry is seeking clarification and looking to encourage the negotiation of a suitable framework, if enhanced equivalence is to be the negotiated position," he said.