The European Commission and the Bank of England are apparently taking different views over the fate of financial contracts following the UK's departure from the European Union. While the Commission reportedly believes that existing contracts will not be affected, the Bank of England sees increased uncertainity.
Given the present unclear direction that the negotiations will be heading, it is indeed now the time for insurers and their clients to make the necessary contingency planning. Unless the legislators can provide for a clear way forward, the enforceability of contractual obligations under existing insurance and reinsurance policies will much depend on the applicable law. While I tend to support the Commission's view that, even in case of a hard Brexit, existing obligations should remain enforceable, this requires diligent scrutiny for different scenarios and potentially timely action to implement necessary safeguards.
The European Commission said on Wednesday that existing financial contracts, such as derivatives or insurance, are unlikely to be affected by Britain’s departure from the European Union - a view the Bank of England described as “wrong headed”.
