Following the UK's historic vote to leave the EU, numerous
questions have arisen, including whether the UK will really leave
the EU and whether Scotland and Northern Ireland (both of which
voted to remain in the EU) will have their own referendums to leave
the UK. At this early stage in the process, U.S. insurance
companies lack the information needed to make decisions. But they
have much to consider, including the following.
Domicile for European Business. Should
insurance companies immediately seek another EU country to domicile
their European business or take a wait-and-see approach? U.S.
companies that use London as their European base may find a move is
necessary to maintain unfettered access to the EU. As
English-speaking nations, Scotland and/or Northern Ireland may
become attractive options. Additionally, these two countries may
seek to enact tax and related legislation to entice companies from
London to their cities.
Solvency II. The Solvency II Directive
("Solvency II") codifies and harmonizes EU insurance
regulation and primarily concerns the amount of capital EU
insurance companies are required to hold to reduce the risk of
insolvency. Under Solvency II, the solvency regimes of countries
outside the EU are assessed to determine whether they are
"equivalent" to those of the EU. If the UK does leave the
EU, it would, absent a contrary agreement, no longer be an
equivalent country, putting it on similar footing with the United
States, which, likewise, is not equivalent.
Companies with UK parents. With the pound
losing strength, the financial stability of the entire entity could
be endangered. Enterprise risk management systems will need to be
examined and adjusted. These are just some considerations for
companies with UK parents.
Some Additional Considerations
Data privacy issues (e.g., which
standard will be followed the UK, the EU, both, or another
Will the UK—or
Ireland—remain on the National Association of Insurance
Commissioners' list qualified foreign jurisdictions?
Tax implications once the UK is no
longer part of the EU VAT system
Will the UK vary its anti-money
laundering directive and if so what will be the impact on entities
doing business in the UK?
The only certainty is that the relationship between the UK and
the EU will change at some point in various ways. For now, the best
strategy is to allow the politicians and government entities to
adjust and determine their strategies. This can really only occur
once the UK elects a new prime minister.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Settling contentious claims without prejudice to liability is an everyday occurrence for most Insurers. The vast majority of claims which are subject to litigation are settled at some point in the course of the proceedings, and the settlement is usually expressed to be without admission of liability.
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