UK: AIG writes first Shariacompliant W&I policy as UK targets Islamic insurance
AIG announced on 19 October that it has written its first Sharia-compliant warranty and indemnity (W&I) policy out of London's M&A market. AIG developed the policy in conjunction with Cobalt Underwriting, a Shariacompliant managing general agent, which HFW were involved in establishing (as reported here: http:// www.hfw.com/HFW-advises-Capitaon-Cobalt-investment-May-2013).
Islamic finance is one area which the UK is seeking to develop ahead of Brexit, and AIG's first W&I policy follows recent moves by the UK and the insurance market as a whole to target Islamic financial services. Back in 2013, the then-Prime Minister David Cameron confirmed at the World Islamic Economic Forum that the UK would seek to establish London as a global Islamic finance centre, and a recent report found that Britain is now the leading Western centre for Islamic finance.
Although (re)insurance was the last financial services sector to offer Sharia-compliant products, it seems that the industry is making attempts to catch up. Lloyd's was a founding member of the Islamic Insurance Association of London when it was launched in 2015, and Cobalt has received approval in principle for a new Lloyd's syndicate.
It remains to be seen how Brexit will affect the UK (re)insurance market, but steps are clearly being taken to open up the market to a new source of income, which is a potentially profitable one – reports consider the global Islamic insurance market to be worth tens of trillions of US dollars.
England & Wales: IUA estimates Brexit's impact on premium written in the London market
The International Underwriting Association (IUA) has estimated that Brexit could hit £8.9 billion of premium written in the London market outside Lloyd's.
The IUA has published its London Company Market Statics Report 2017 in which it identifies two areas which it thinks will be impacted by the UK's withdrawal from the European Union: (1) company branches which passport into the UK from Europe to write international business coming into the London market; and (2) the UKregulated London market companies which passport from the UK into Europe to write European business. According to the IUA, a total of £7.383 billion is currently underwritten via branches of European-based firms which passport into the UK and £1.554 billion is earned by London market companies which passport into Europe.
Dave Matcham, the chief executive of the IUA, commented: "One of the most important outstanding Brexit questions for the London company market concerns the status of operations currently conducting business in the city as branches of either a continental European parent company or of a European subsidiary and with a parent elsewhere." As exit negotiations stand, passporting rights will be lost when the UK leaves the European Union, so alternative structures will be needed1 if no deal is reached to preserve passporting in its current or a similar form.
Footnote
1 For further information, see HFW's briefing: http://www.hfw.com/Preparing-for-Brexit-seven-thingsthat-re-insurance-businesses-can-do-now-July-2016
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