However, in just a matter of weeks after this happened, the nation was again swept with uncertainty as the world continues to battle with the unprecedented outbreak of the deadly coronavirus which has, at the time of writing, brought the UK into full lockdown.
While Brexit might have been shelved by both the UK Government and various news sources for now, isn’t it true that to some extent, in the wake of the uncertainty and disruption of COVID-19 that we might just miss Brexit a little bit?
Well readers, it’s not dropped off our radar.
Following a lecture we attended at Lloyd’s of London on future trading arrangements in a hard Brexit environment, we’ve been thinking a lot about how all of this applies to those Managing General Agents (MGAs) – especially those who want to continue to write EU business and what needs to be considered for this to happen both compliantly and proactively.
Based on the expectations that the UK will eventually enter a hard Brexit operating environment with no improved trading arrangements, what are a UK MGA’s Brexit options when they underwrite EU located and EU owned business?
Deciding on how to retain both EU located and EU owned business via the correct licence arrangements is something MGAs should be considering, particularly when they’re thinking about the future of their portfolios.
One way of doing this is by setting up a standalone, fully licensed European entity before establishing a reverse branch in the UK. But let’s be clear, while this is of course an option, it is a very expensive and resource heavy one. The list of tasks MGAs would have to consider is exhaustive. For example, businesses would have to:
- Research the most appropriate jurisdiction for their business;
- Engage with the local regulator;
- Set up a new company, finance it and pay the relevant fees;
- Identify and implement the right systems; engage with the UK regulators to have a reverse branch approved;
- Engage with Lloyd’s for additional coverholder and branch approvals; and
- Amend existing Binding Authority contracts to include the extra entity and relevant parameters.
…Amongst other things.
The other aspect to consider is that businesses would need to move quickly. Although the far reaching impact of COVID-19 is yet to be determined, and key dates are likely to be reviewed, currently this licensed European entity would need to be set up by 30 December 2020 if you don’t trade with Lloyd’s or by 1 July 2020 if you do (At the time of writing – 01/04/2020).
At DA Strategy, we know the option of establishing a European entity won’t be feasible for many MGAs out there and we’ve been looking at available alternative routes for businesses to consider. The good news is that there are other structures that have been set up to which will enable UK MGAs to continue trading easily with their European partners post 1 July.
Having access to structures which have the significant key regulatory approvals required for trading, that are trusted and can be accessed both quickly and cheaply could help bolster current and future European business opportunities for UK-based MGAs.
We know it’s hard to cut though much of the disruption caused by COVID-19 and what this might mean for us in the long run, but as far as we know, Lloyd’s has not revised any Brexit timelines and we must to continue to work to the current time frames.
Please contact us for further information on trading options which will suit your business needs.
If you are looking for any support during this difficult time please get in touch for an initial discussion which can be followed by a concrete plan.
You may also like…
Manager, Kajal Pankhania, highlights the flexible support DA Strategy offers start-up MGAs looking to make an impact on the insurance industry with their MGA Design & Build services.
The principle of ‘fair value’ is here to stay and remains one of the foremost points of focus of the current FCA direction of travel for the insurance industry, says DA Strategy Associate Marcus Elwes.
DA Strategy Director Charles Rowley caught up with Mia Wallace at Insurance Business UK to talk through the evolving proposition of successful MGAs against the backdrop of the pandemic crisis, and a historic global insurance market turn.