Is a no-deal Brexit on the way?

The broken chain of Brexit
Travel insurance

As the UK continues to stumble through its Brexit negotiations, with no concessions made and the parliamentary arithmetic making compromise difficult – if not impossible – the Association of British Insurers (ABI) has offered a stark warning that a no-deal scenario would be catastrophic.

The ABI has hardly been reticient when it comes to warning of the dangers of a potential no-deal scenario, but this intervention at its recent annual dinner was the organisation’s harshest warning yet, with Director-General Huw Evans describing a no-deal Brexit as ‘an unforgivable act of economic and social self-harm that the UK would live to regret’. He called upon the UK Government to do everything in its power to avoid this outcome, even delaying if necessary: “As a last resort, if the only alternative to no deal is some form of short delay to Brexit, then delay we should.”

One major issue that Evans pointed to is the fact that in any hypothetical future arrangement in which the UK was forced to comply with rules that it had no say in, these rules could be ‘weaponised by those in the EU that want to damage the UK’. This could potentially result in, for example, UK insurers having to hold a great deal more capital than they actually need. As well as damaging competitiveness, Evans warned, this would reduce investment in the UK economy and result in people getting less from their pensions.
“As an industry,” said Evans, “we have done everything possible to prepare for no deal, including transferring an estimated 29 million insurance contracts and the establishment of nearly 40 EU subsidiaries and branches to minimise disruption to customers. But we still believe very strongly that a conscious descision to opt for no deal would be an act of economic recklessness our great country would live to regret.” 
While there has been some positive news recently – such as German lawmakers' decision to authorise German'y insurance regulator to extend passporting rights for UK insurance entities in the event of no deal, as previously reported by ITIJ – there is still much confusion. One ongoing bugbear is uncertainty surrounding the fate of the EHIC, and the effect that a no-deal scenario could potentially have on travel insurers’ policy wording in this respect. ITIJ reached out to the ABI for comment, and while a spokesperson said that ‘like most things with Brexit, the position is not clear cut’, the organisation was able to offer a measure of clarification: “For many travel policies in the market, the loss of the EHIC is unlikely to lead to a meaningful change to terms and conditions; any reference to the EHIC would simply be irrelevant and customers would still be able to make medical claims. However, for those policies where an EHIC must be in place and used, changes are likely. Pragmatically, insurers would look to make reasonable changes to policy wordings where necessary to avoid customer confusion. In either case, this does not change what policies will cover.”
ITIJ would certainly hope that all travel insurers will take a pragmatic and reasonable approach, and that the UK Government will find a constructive route forward. However, with the Brexit situation still so changeable and negotiations likely to continue down to the wire, this time next month everything could potentially look very, very different.