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Brexit update

News article

Publication date:

22 January 2019

Last updated:

18 April 2019


Policy and Public Affairs

Last week the House of Commons rejected the Prime Minister’s negotiated Brexit Withdrawal Agreement in the largest defeat for a sitting Government in modern parliamentary politics.

The following day the Government then narrowly survived a No Confidence motion called by the Opposition. The Prime Minister returned to the House of Commons on Monday 21 January to set out her ‘Plan B’ with an accompanying Government motion, which MPs are now expected to lay amendments to over the forthcoming days. 

What the Government will now need to do in order to achieve a majority in the House of Commons for a Brexit deal will be subject to much speculation in and outside of Westminster, and despite the plausibility of a number of scenarios increasing seemingly as a result of the Government losing the vote on its Brexit plan - it is still instructive for insurance professionals to consider three main possibilities that are open:

1. UK Parliament ratifies a deal (either the existing Withdrawal Agreement or a similar negotiated settlement) between the UK and the EU before the withdrawal date of 29 March following a further vote in the UK Parliament, and triggers a ‘stand still’ transition period until 31 December 2020.

In this outcome, financial services firms would continue to benefit from passporting (allowing firms authorised in an EEA state to conduct business within other EEA states based on their ‘home’ member state authorisation) as they do today until 31 December 2020. Obligations derived from EU law would continue to apply and firms would continue with implementation plans for EU legislation that is still to come into effect before the end of December 2020.

The Government has published a more digestible ‘Explainer’ for the 565 page legally binding Withdrawal Agreement, as well as ‘Explanatory slides’ to accompany the non-binding Political Declaration on the future relationship between the UK and EU.

During the transition period the UK and EU would continue to negotiate the future relationship or trade deal of which financial services is an integral part. In the longer term, the outcome of these negotiations and the approach taken by UK and European authorities will determine the extent to which UK and EU markets and business structures change to enable firms to continue to serve European customers. 

2. The UK decides not to leave the EU on 29 March after an extension to the negotiation period, and possibly after another public vote.

Even if current UK legislation providing for exit on 29 March is overridden at Westminster, and exit under ‘Article 50’ is delayed by agreement between the UK and the 27 other member states, this will not remove the ‘no deal’ risk - where the UK leaves the EU without a negotiated settlement - which is inherent in the Article 50 process. It will be simply postponed to a later date.

The rejection of the existing Withdrawal Agreement by the UK Parliament does however raise the possibility of another public vote, whether via a general election or a second referendum (the so called ‘People’s vote’) in order to break the political deadlock at Westminster. It must be emphasised that due to time constraints that both of these options are only possible through an extension of the Article 50 negotiation process. 

3. The UK leaves the EU without a deal on 29 March, and there is no transition period.

Due to the terms set in European treaty law, EU membership "shall cease to apply" to the UK, with or without a withdrawal agreement, two years following the invocation of the ‘Article 50’ negotiation period on 29 March 2017. This has been ratified further by the UK Parliament through the terms of the EU Withdrawal Act. At the time of writing, ‘No Deal’ is the default position the UK finds itself in without a majority in Parliament for a negotiated settlement.

There is a great deal of uncertainty over what the ramifications of the abrupt loss of passporting will be for the wider financial services sector. The CII has warned of such a ‘cliff-edge’ earlier in negotiations. Due to the different approaches taken by the respective UK and EU regulators, in the short-term European Economic Area (EEA) based firms conducting business in the UK (inbound) should be distinguished from UK firms conducting business in the EEA (outbound):

  • INCOMING BUSINESS: In December 2017 the UK Government passed legislation that will establish a temporary permissions regime (TPR) to enable inbound financial services firms which passport into the UK to continue to do so for a time limited period if the passporting regime falls away abruptly when the UK leaves the EU as a result of ‘No Deal’.
  • OUTGOING BUSINESS: As there is not expected to be a reciprocal arrangement from the EU, the European Insurance and Occupational Pensions Authority (EIOPA) has emphasised that UK firms passporting into the EU must have taken the necessary measures themselves to gain authorisation in time for March 2019.

UK based firms that only do business in the UK may be affected less directly or not affected at all by ‘No Deal’. However, as with Brexit more widely, UK based firms which carry out business between the UK and the EEA - whether through a passport or directly under EU legislation - will have now implemented appropriate contingency plans to gain the necessary permissions to continue to do business in the local EEA jurisdiction of relevance post 29 March. The same will also apply to firms who need to carry on servicing customers under existing contracts.


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This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.